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CONTRACT FOR CONTINUUM OF CARE
33989
THIS CONTRACT FOR CONTINUUM OF CARE PROGRAM (this
"Contract ") is made and entered into, in duplicate, as of July 31, 2015 for reference
purposes only, pursuant to a minute order adopted by the City Council of the City of Long
Beach at its meeting on September 9, 2014, by and between COMPREHENSIVE CHILD
DEVELOPMENT, INC., a California nonprofit corporation ( "Organization "), whose address
is 2545 Pacific Avenue, Long Beach, California 90806, and the CITY OF LONG BEACH,
a municipal corporation (the "City ").
WHEREAS, the City has received a grant from the U.S. Department of
Housing and Urban Development ( "HUD ") called the "Continuum of Care Program" which
deals with the needs of the homeless; and
WHEREAS, Organization provides one or more of the following: transitional
housing, permanent housing, human or social services to low- income and homeless
residents; and
WHEREAS, as part of the 2014 Continuum of Care Program Grant
Agreement ( "Grant Agreement "), the City is required to enter into subcontracts with
organizations that provide housing and supportive services to the homeless and the City
has selected Organization as a sub - recipient of grant funds; and
WHEREAS, the City Council has authorized the City Manager to enter into a
contract with Organization that provides the grant funding within a maximum amount and
program accountability by the City;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties agree as follows:
Section 1. The above recitals are true and correct and the Grant
Agreement is incorporated herein by this reference. Organization shall comply fully with
the Grant Agreement.
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Section 2.
A. Organization shall provide supportive services in conjunction
with housing, outreach and assessment, transitional housing and supportive
services, and permanent housing or permanent supportive housing to meet the
long -term needs of the homeless in accordance with the Grant Agreement,
Attachment "A" entitled "Scope of Work ", Attachment "B" entitled "Budget ",
Attachment "C" entitled "Compliance with Federal Regulations ", Attachment "D"
entitled "Office of Management and Budget ( "OMB ") Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards ", also
known as the OMB Super Circular (which supersedes requirements from OMB
Circular A -110, A -122 and A -133), Attachment "E" entitled "Health Information in
Compliance with the Health Insurance Portability and Accountability Act of 1996
(HIPAA) and the Health Information Technology for Economic and Clinical Health
Act (HITECH Act) Business Associate Agreement ", Attachment "F" entitled
"Certification Regarding Debarment ", and Attachment "G" entitled "Certification
Regarding Lobbying ", all of which are attached hereto and incorporated by this
reference, and the Long Beach Continuum of Care Grants Guidelines, which have
been provided to Organization and are incorporated by this reference.
B. Organization shall be responsible for adherence to all policies,
procedures, rules and regulations as noted in sources including but not limited to
HUD Continuum of Care NOFA (Notice of Funding Availability), OMB Circulars,
Code of Federal Regulations, United States Codes, Long Beach Continuum of Care
Grants Guidelines, this Contract, the City of Long Beach Consolidated Plan, the
Grant Agreement, the Request for Proposal ( "RFP ") and Organization's proposal in
response to the RFP. In addition to and without in any way limiting the foregoing,
Organization shall comply with all laws and regulations set forth in 24 CFR Part 578.
Section 3. The term of this Contract shall be the Operational Year
11 beginning on July 1, 2015 and ending on June 30, 2016, including an additional 6 -month
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post - operational period, unless sooner terminated as provided herein.
Section 4.
A. Organization shall affirmatively and aggressively use its best
efforts to seek and obtain all possible outside funding, cash and /or in -kind match at
the rate required by 24 CFR 578, and mainstream resources available to continue
the services identified in this Contract. Further, Organization shall maintain cash
reserves equivalent to three (3) months of funding necessary to provide services
under this Contract.
B. Total disbursements made to Organization under this Contract
by the City shall not exceed Two Hundred Four Thousand Two Hundred Sixty -
Seven Dollars ($204,267) over the term of this Contract. Upon execution of this
Contract, the City shall disburse funds payable hereunder in due course of
payments following receipt from Organization of billing statements in a form
approved by the City showing expenditures and costs identified in Attachment "B ".
C. The City shall pay to Organization the amounts specified in
Attachment "B" for the categories, criteria and rates established in that Attachment.
Organization may, with the prior written approval of the Director of the City's
Department of Health and Human Services, or his designee, make adjustments
within and among the categories of expenditures in Attachment "B "; provided,
however, that such adjustment(s) shall not cause the amount of the total budget
stated in Attachment "B" to be exceeded.
D. Organization shall prepare monthly invoices and submit them
to the City within fifteen (15) days after the end of the month in which Organization
provided services. Organization shall attach cancelled checks and other
documentation supporting the charges and the amount of required matching funds
to each invoice. Failure to submit an invoice and its accompanying documentation
within the 15 -day period may result in late payment from the City. Submission of
incorrect invoices or inadequate documentation shall result in the suspension of
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payment from the City. The City reserves the right to refuse payment of an invoice
(a) received by it thirty (30) days after Organization provided the services relating to
that invoice; (b) including inallocable or ineligible expenses; or (c) for the
unauthorized expense of funds requiring written approval for budget changes or
modifications.
E. Within thirty (30) days of the date of this Contract first stated
herein, Organization shall submit to the City invoices, cancelled checks and other
documentation supporting the charges incurred and required matching funds for all
expenses incurred prior to the date of this Contract and related to this grant of funds.
F. The City closes its fiscal year during the months of August and
September; Organization acknowledges and agrees that the City's payment of
invoices will be slightly slower during that time.
G. No later than thirty (30) days after the completion of the
Operational Year during the term of this Contract, Organization shall submit to the
City a final invoice and APR certified by one of Organization's officers or by its
Executive Director. The City reserves the right to refuse payment of any outstanding
invoice if Organization fails to submit a final invoice, or certified APR within thirty
(30) days of the end of the Operational Year.
H. If the City is unable to draw down funds from HUD for
reimbursement to Organization due to failure of Organization to submit required
fiscal and programmatic documents within thirty (30) days after the end of the
Operational Year, the City cannot guarantee payment to Organization. The City will
not be obligated to pay Organization for costs incurred unless HUD releases funds
to the City. For this reason, failure of Organization to submit the final invoice and
certified APR within thirty (30) days after the end of the Operational Year may result
in loss of reimbursement of funds.
I. The City reserves the right to withhold payment of an invoice
pending satisfactory completion of an audit, as determined by the City in its sole
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discretion, or Organization's cure of a breach of this Contract, as determined by the
City in its sole discretion, after being notified of such breach by the City.
J. All reimbursement by the City is contingent upon the City's
receipt of funds from HUD. The City reserves the right to refuse payment of an
invoice until such time as it receives funds from HUD sufficient to cover the
expenses in the invoice.
Section 5.
A. Organization's records relating to the performance of this
Contract shall be kept in accordance with generally accepted accounting principles
and in the manner prescribed by the City. Organization's records shall be current
and complete. The City and HUD, and their respective representatives, shall have
the right to examine, copy, inspect, extract from, and audit financial and other
records related, directly or indirectly, to this Contract during Organization's normal
business hours to include announced and unannounced site visits during the term
of the Contract and thereafter. If examination of these financial and other records
by the City and /or HUD reveals that Organization has not used these grant funds
for the purposes and on the conditions stated in this Contract, then Organization
covenants, agrees to and shall immediately repay all or that portion of the grant
funds which were improperly used. If Organization is unable to repay all or that
portion of the grant funds, then the City will terminate all activities of Organization
under -this Contract and pursue appropriate legal action to collect the funds.
Alternatively, to the extent the City has been refusing payment of any invoices, the
City may continue to withhold such funds equal to the amount of improperly used
grant funds, regardless of whether the funds being withheld by the City were
improperly used.
B. In addition, Organization shall provide any information that the
City Auditor and other City representatives require in order to monitor and evaluate
Organization's performance hereunder. The City reserves the right to review and
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request copies of all documentation related, directly or indirectly, to the program
funded by this Contract, including by way of example but not limited to, case files,
program files, policies and procedures. Organization shall provide all reports,
documents or information requested by the City within three (3) days after receipt of
a written or oral request from a City representative, unless a longer period of time is
otherwise expressly stated by the representative.
C. Organization shall comply with HUD's Homeless Management
Information System (HMIS) requirements and ensure full participation in the City's
HMIS. Organizations that provide domestic violence and legal services have been
permitted by HUD to use a comparable database to capture required data elements
that comply with HMIS data and HUD reporting requirements.
D. If Organization spends Seven Hundred Fifty Thousand Dollars
($750,000) or more in Federal funds in an Operational Year, then Organization shall
submit an audit report to the City in accordance with OMB Super Circular no later
than thirty (30) days after receipt of the audit report from Organization's auditor or
no later than nine (9) months after the end of the Operational Year, whichever is
earlier. If Organization spends less than Seven Hundred Fifty Thousand Dollars
($750,000) in Federal grant funds in an Operational Year, submission of the audited
financial statement is required.
Section 6.
A. Organization will maintain the confidentiality of records
pertaining to any individual or family that was provided family violence prevention or
treatment services through the project.
B. The address or location of any family violence project assisted
with grant funds will not be made public, except with written authorization of the
person responsible for the operation of such project.
C. Organization will establish policies and practices that are
consistent with, and do not restrict, the exercise of rights provided by subtitle B of
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title VII of the Homeless Emergency Assistance and Rapid Transition to Housing
(HEARTH) Act and other laws relating to the provision of educational and related
services to individuals and families experiencing homelessness.
D. In the case of a project that provides housing or services to
families, Organization will designate a staff person to be responsible for ensuring
that children being served in the program are enrolled in school and connected to
appropriate services in the community, including early childhood programs such as
Head Start, part C of the Individuals with Disabilities Education Act, and programs
authorized under subtitle B of title VII of the Act.
E. Organization, it officers, and employees are not debarred or
suspended from doing business with the Federal Government.
F. Organization will provide information, such as data and reports,
as required by HUD.
Section 7.
A. In the performance of this Contract, Organization shall not
discriminate against any employee, applicant for employment or service, or
subcontractor because of race, color, religion, national origin, sex, sexual
orientation, gender identity, AIDS, HIV Status, AIDS related condition, age, disability
or handicap. Organization shall take affirmative action to assure that applicants are
employed or served, and that employees and applicants are treated during
employment or services without regard to these categories. Such action shall
include but not be limited to the following: employment, upgrading, demotion or
transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or
other forms of compensation; and selection for training, including apprenticeship.
B. Organization shall permit access by the City or any other
agency of the County, State or Federal governments to Organization's records of
employment, employment advertisements, application forms and other pertinent
data and records for the purpose of investigation to ascertain compliance with the
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fair employment practices provisions of this Contract.
Section 8.
A. In performing services hereunder, Organization is and shall act
as an independent contractor and not as an employee, representative, or agent of
the City. Organization's obligations to and authority from the City are solely as
prescribed in this Contract. Organization expressly warrants that it will not, at any
time, hold itself out or represent that Organization or any of its agents, volunteers,
subscribers, members, officers or employees are in any manner officials, employees
or agents of the City. Organization shall not have any authority to bind the City for
any purpose.
B. Organization acknowledges and agrees that (a) the City will not
withhold taxes of any kind from Organization's compensation, (b) the City will not
secure workers' compensation or pay unemployment insurance to, for or on
Organization's behalf, and (c) the City will not provide, and Organization and
Organization's employees are not entitled to any of the usual and customary rights,
benefits or privileges of City employees.
Section 9. This Contract contemplates the personal services of
Organization and Organization's employees. Organization shall not delegate its duties or
assign its rights hereunder, or any interest therein or any portion thereof, without the prior
written consent of the City. Any attempted assignment or delegation shall be void, and any
assignee or delegate shall acquire no right or interest by reason of such attempted
assignment or delegation.
Section 10. Organization shall indemnify and hold harmless the City, its
Boards, Commissions, and their officials, employees and agents (collectively in this Section
"City ") against any and all liability, claims, demands, damage, causes of action,
proceedings, penalties, loss, costs, and expenses (including attorney's fees, court costs,
and expert and witness fees) (collectively "Claims" or individually "Claim ") arising, directly
or indirectly, out of any negligent act or omission of Organization, its officers, employees,
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agents, subcontractors or anyone under Organization's control (collectively "Indemnitor "),
breach of this Contract by Organization, misrepresentation or willful misconduct by
Indemnitor, and Claims by any employee of Indemnitor relating in any way to workers'
compensation. Independent of the duty to indemnify and as a free - standing duty on the
part of Organization, Organization shall defend the City and shall continue such defense
until the Claim is resolved, whether by settlement, judgment or otherwise. Organization
shall notify the City of any Claim within ten (10) days. Likewise, the City shall notify
Organization of any Claim, shall tender the defense of the Claim to Organization, and shall
assist Organization, as may be reasonably requested, in such defense.
Section 11.
A. Organization shall procure and maintain at Organization's
expense (which expense may be submitted to the City for reimbursement from grant
funds allocated to Organization if itemized on Attachment "B ") for the duration of this
Contract the following insurance and bond against claims for injuries to persons or
damage to property that may arise from or in connection with the performance of
this Contract by Organization, its agents, representatives, employees, volunteers or
subcontractors.
(1) Commercial general liability insurance (equivalent in scope
to ISO form CG 00 01 11 85 or CG 00 01 1093) in an amount not less than
One Million Dollars ($1,000,000) per occurrence and Two Million Dollars
{$2,000,000) general aggregate. Such coverage shall include but not be
limited to broad form contractual liability, cross - liability, independent
contractors liability, and products and completed operations liability. The
City, its Boards and Commission, and their officials, employees and agents
shall be named as additional insureds by endorsement (on the City's
endorsement form or on an endorsement equivalent in scope to ISO form CG
20.10 11 85 or CG 20 26 11 85), and this insurance shall contain no special
limitations on the scope of protection given to the City, its Boards and
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Commission, and their officials, employees and agents.
(2) Workers' Compensation insurance as required by the
California Labor Code.
(3) Employer's liability insurance in an amount not less than
One Million Dollars ($1,000,000) per claim.
(4) Professional liability or errors and omissions insurance in
an amount not less than One Million Dollars ($1,000,000) per claim.
(5) Commercial automobile liability insurance (equivalent in
scope to ISO form CA 00 0106 92), covering Auto Symbol 1 (Any Auto) in an
amount not less than Five Hundred Thousand Dollars ($500,000) combined
single limit per accident.
(6) Blanket Honesty Bond in an amount equal to at least fifty
percent (50 %) of the total amount to be disbursed to Organization hereunder
or Twenty -Five Thousand Dollars ($25,000), whichever is less, to safeguard
the proper handling of funds by employees, agents or representatives of
Organization who sign as the maker of checks or drafts or in any manner
authorize the disbursement or expenditure of said funds.
If delivering services to minors, seniors, or persons with disabilities,
Organization's Commercial General Liability insurance shall not exclude coverage
for abuse and molestation. If Organization is unable to provide abuse and
molestation coverage, it can request a waiver of this coverage from the City. The
City's Risk Manager will consider waiving the requirement if Organization can
demonstrate to the satisfaction of the City's Risk Manager that Organization has no
exposure, that the coverage is unavailable, or that the coverage is unaffordable. If
a request for a waiver is desired, Organization must submit a signed document on
Organization's letterhead to the Director of the City's Department of Health and
Human Services, who will forward it to the City's Risk Manager, providing reasons
why the insurance coverage should be waived. Waivers will be considered on a
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case by case basis.
B. Any self- insurance program, self- insured retention, or
deductible must be separately approved in writing by the City's Risk Manager or
his /her designee and shall protect the City, its Boards and Commission, and their
officials, employees and agents in the same manner and to the same extent as they
would have been protected, had the policy or policies not contained retention or
deductible provisions. Each insurance policy shall be endorsed to state that
coverage shall not be reduced, non - renewed, or canceled except after thirty (30)
days prior written notice to the City, and shall be primary and not contributing to any
other insurance or self - insurance maintained by the City. Organization shall notify
the City in writing within five (5) days after any insurance required herein has been
voided by the insurer or cancelled by the insured.
C. Organization shall require that all contractors and
subcontractors that Organization uses in the performance of services under this
Contract maintain insurance in compliance with this Section unless otherwise
agreed in writing by the City's Risk Manager or his /her designee.
D. Prior to the start of performance or payment of first invoice,
Organization shall deliver to the City certificates of insurance and required
endorsements for approval as to sufficiency and form. The certificate and
endorsements for each insurance policy shall contain the original signature of a
person authorized by that insurer to bind coverage on its behalf. In addition,
Organization, shall, within thirty (30) days prior to expiration of this insurance, furnish
to the City certificates of insurance and endorsements evidencing renewal of the
insurance. The City reserves the right to require complete certified copies of all
policies of Organization and Organization's contractors and subcontractors, at any
time. Organization shall make available to the City's Risk Manager or his /her
designee during normal business hours all books, records and other information
relating to the insurance coverage required herein.
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E. Any modification or waiver of these insurance requirements
shall only be made with the approval of the City's Risk Manager or his /her designee.
Not more frequently than once a year, the City's Risk Manager or his /her designee
may require that Organization, Organization's contractors and subcontractors
change the amount, scope or types of coverages if, in his or her sole opinion, the
amount, scope, or types of coverages herein are not adequate.
F. The procuring or existence of insurance shall not be construed
or deemed as a limitation on liability relating to Organization's performance or as full
performance of or compliance with the indemnification provisions of this Contract.
Section 12.
A. Organization certifies that, if grant funds are used for
renovation or conversion of the building for which the grant funds will be used, then
the building must be maintained as a shelter for or provide supportive services to
homeless individuals for not less than ten (10) years nor more than fifteen (15) years
according to a written determination delivered to Organization by the City, and such
determination shall state when the applicable period of time shall commence and
terminate in accordance with 24 CFR Part 578.81.
B. Organization certifies that the building for which the grant funds
will be used for supportive services, assessment and /or homeless prevention
services shall be maintained as a shelter or provider of programs for homeless
individuals during the term of this Contract.
C. Organization shall comply with all requirements of the City's
Municipal Code relating to building code standards in undertaking any activities or
renovations using grant funds.
D. Organization shall not commence services until the City's
Development Services has completed an environmental review under 24 CFR Part
50, and Organization shall not commence such services until the City informs
Organization of the completion and conditions of said environmental review.
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E. Organization shall provide reports as required by the City and
HUD and as required in this Contract and applicable laws and regulations.
F. In addition to, and not in substitution for, other terms of this
Contract regarding the provision of services or the payment of operating costs for
supportive services only or housing pursuant to 24 CFR Part 578, and except as
described in Section 12.G below, Organization shall not:
(1) Represent that it is, or may be deemed to be, a religious
or denominational institution or organization or an organization operated for
religious purposes that is supervised or controlled by or in connection with a
religious or denominational institution or organization.
(2) 'In connection with costs of services hereunder, engage
in the following conduct:
(a) discriminate against any employee or applicant
for employment on the basis of religion;
(b) discriminate against any person seeking housing
or related supportive services only on the basis of religion and will not
limit such services or give preference to persons on the basis of
religion;
(c) provide religious instruction or counseling,
conduct religious worship or services, engage in religious
proselytizing, or exert other religious influence in the provision of
services or the use of facilities and furnishings;
(3) In the portion of the facility used for housing or
supportive services only assisted in whole or in part under this Contract or in
which services are provided that are assisted under this Contract, contain
sectarian religious symbols or decorations.
G. Organizations that are religious or faith -based are eligible, on
the same basis as any other organization, to participate in the Continuum of Care
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Homeless Assistance program. However, an organization that participates in a
HUD funded program shall comply with the following provisions if it is deemed to be
a religious or faith -based organization.
(1) Organization may not engage in inherently religious
activities, such as worship, religious instruction, or prose lytization, as part of
the programs or services funded under this Contract.
If Organization conducts such activities, the activities must be
offered separately, in time or location, from the programs or services funded
under this Contract, and participation must be voluntary for the beneficiaries
of the HUD funded programs or services.
(2) A religious or faith -based organization will retain its
independence from Federal, State, and local governments, and may continue
to carry out its mission, including the definition, practice, and expression of
its religious beliefs, provided that it does not use direct HUD funds to support
any inherently religious activities, such as worship, religious instruction, or
proselytization.
A religious or faith -based organization may use space in their
facilities to provide HUD funded services, without removing religious art,
icons, scriptures, or other religious symbols.
A religious or faith -based organization retains its authority over
its internal governance, and it may retain religious terms in its organization's
name, select its board members on a religious basis, and include religious
references in its organization's mission statements and other governing
documents.
(3) A religious or faith -based organization shall not, in
providing program assistance, discriminate against a program beneficiary or
prospective program beneficiary on the basis of religion or religious belief.
(4) HUD funds may not be used for the acquisition,
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construction or rehabilitation of structures to the extent that those structures
are used for inherently religious activities.
HUD funds may be used for the acquisition, construction, or
rehabilitation of structures only to the extent that those structures are used
for conducting eligible activities under this Section. Where a structure is used
for both eligible and inherently religious activities, HUD funds may not exceed
the cost of those portions of the acquisition, construction, or rehabilitation that
are attributable to eligible activities in accordance with the cost accounting
requirements applicable to HUD funds herein. Sanctuaries, chapels, or other
rooms that a HUD funded religious congregation uses as its principal place
of worship, however, are ineligible for HUD funded improvements.
Disposition of real property after the term of the grant, or any change in use
of the property during the term of the grant, is subject to government -wide
regulations governing real property dispositions.
H. Organization shall provide homeless individuals and /or families
with assistance in obtaining:
(1) Appropriate supportive services, including transitional
housing, permanent housing, physical health treatment, mental health
treatment, counseling, supervision and other services essential for achieving
independent living; and
(2) Other Federal, State, and local private _ assistance
available for such individuals, including mainstream resources.
I. Organization certifies that it will comply with all documents,
policies, procedures, rules, regulations and codes identified in Sections 2 and 12 of
this Contract and such other requirements as from time to time may be promulgated
by HUD.
J. Organization shall execute a Certification Regarding
Debarment in the form shown on Attachment T ".
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K. Organization shall execute a Certification Regarding Lobbying
in the form shown on Attachment "G ".
Section 13. Organization certifies that it has established a Drug -Free
Awareness Program in compliance with Government Code Section 8355, that it has given
a copy of said Program to each employee who performs services hereunder, that
compliance with the Program is a condition of employment, and that it has published a
statement notifying employees that unlawful manufacture, distribution, dispensation,
possession or use of a controlled substance is prohibited and action will be taken for
violation.
Section 14. The City shall facilitate the submission of all reports required by
HUD based on information submitted by Organization to the City. The City shall act as the
primary contact for Organization to HUD for services provided under this Contract. The
City shall facilitate directly to HUD the submission of any information related to all financial
and programmatic matters in this Contract, including but not limited to reimbursements of
grant funds, requests for changes to Organization's budget, requests for changes to
Organization's application for grant funds and requests for changes to Organization's
Technical Submission.
Section 15. All notices given hereunder this Contract shall be in writing and
personally delivered or deposited in the U.S. Postal Service, certified mail, return receipt
requested, to the City at 2525 Grand Avenue, Long Beach, California 90815 Attn:
Homeless Services Officer, and to Organization at the address first stated above. Notice
shall be deemed given on the date personal delivery is made or the date shown on the
return receipt, whichever is earlier. Notice of change of address shall be given in the same
manner as stated for other notices.
Section 16. The City Manager or his /her designee is authorized to
administer this Contract and all related matters, and any decision of the City Manager or
his /her designee in connection with this Contract shall be final.
Section 17. Organization shall have the right to terminate this Contract at
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any time for any reason by giving ninety (90) days prior notice of termination to the City,
and the City shall have the right to terminate all or any part of this Contract at any time for
any reason or no reason by giving five (5) days prior notice to Organization. If either party
terminates this Contract, all funds held by Organization under this Contract which have not
been spent on the date of termination shall be returned to the City.
Section 18. This Contract, including all exhibits and attachments hereto,
constitutes the entire understanding of the parties and supersedes all other agreements,
oral or written, with respect to the subject matter herein.
Section 19. This Contract shall not be amended, nor any provision or
breach hereof waived, except in writing by the parties that expressly refers to this Contract.
Section 20. The acceptance of any service or payment of any money by the
City shall not operate as a waiver of any provision of this Contract, or of any right to
damages or indemnity stated herein. The waiver of any breach of this Contract shall not
constitute a waiver of any other or subsequent breach of this Contract.
Section 21. This Contract shall be governed by and construed pursuant to
the laws of the State of California, without regard to conflicts of law principles.
Section 22. In the event of any conflict or ambiguity between this Contract
and one or more attachments, the provisions of this Contract shall govern.
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IN WITNESS WHEREOr, the parties have signed this document with all the
formalities required by law as of the date first stated above.
2015
By—
Name
Title
"Organization"
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CHARLES PARKIN,-,,,,City Attorney
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City of Long Beach
2014 Continuum of Care (CoC) Program
Scope of Work
Cabrillo
Agency: Comprehensive Child Development, Inc. Program name: Childcare
HUD Grant: CA0624U9D061407 CLB Contract: PENDING
Program Objective: The Cabrillo Child Care Center is located at the Villages at Cabrillo in Long
Beach, CA and it's part of the Long Beach continuum of Care. The center provides childcare for
approximately 53 children of low- income families including homeless families. Most of our clients are
comprised of single mothers with children; some of them come from domestic violence situations. We
have also historically served families of veterans. Parents experiencing homelessness are often
overwhelmed with the complexity of daily existence. They need safe, affordable care and education for
their young children so they can focus on obtaining permanent housing, attending job training and
seeking or maintaining employment. They need support to be able to tap into available resources and
increase their possibilities of reaching self - sufficiency and ultimately securing permanent housing for
their families. High quality early childhood education and care is available for 32 children of HUD
eligible families provided by caring, trained staff while parents strive to put their lives back together, find
permanent housing, attend training and seek and /or maintain employment. CCD's Center provides a
nurturing stable environment for children and parents whose lives have been so damaged by chaos and
uncertainty. CCD collaborates with City of Long Beach Multi- Service Center and all other agencies at
the Villages at Cabrillo to ensure the highest degree of support for our families.
HMIS participation is required for all agencies funded by the Department of Housing and Urban
Development (HUD) and Continuum of Care for Homeless Services in Long Beach. Services cannot be
denied based on non - participation in HMIS. Some clients, namely with Domestic Violence history,
signed waiver forms declining the entry of personal information into the HMIS. All records are kept in
hard files and a copy of these records will be made available, upon request. Records are kept secure
and will not be shared with partner agencies unless a Consent Authorizing Release and Share of
Information statement is signed.
Additional HEARTH Act and Long Beach Continuum of Care (CoC) Compliance Requirements
The agency will participate in community outreach and engagement activities and link participants to th
broader base of CoC programs and services, The agency will participate in the Long Beach Col
Centralized and Coordinated Assessment System through the Multi- Service Center which coordinate
intake, assessment, and provision of referral services.
Project Outcomes /Performance Measures
Universe # Target # Target %
Linkage to community -based childcare or
mainstream programs (government benefits o
1 such as GR, SSI, SSDI, TANF, Food Stamps, 32 22 69 /o
etc.) upon exit from the program.
Note: Universe number reflects project participant chart PIT
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EXHIBIT 1a
Vol. 77 Tuesday
No. 147 July 31, 2012
Part II
Department of Housing and Urban
Development
24 CFR Part 578
Homeless Emergency Assistance and Rapid Transition to Housing:
Continuum of Care Program; Interim. Final Rule
ATTACHMENT
PAGE ..... ...... ®F .. A �?... PAGES
45422 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 578
[Docket No. FR- 5476 -1 -01]
RIN 2506 -AC29
Homeless Emergency Assistance and
Rapid Transition to Housing:
Continuum of Care Program
AGENCY: Office of the Assistant
Secretary for Community Planning and
Development, HUD.
ACTION: Interim rule.
SUMMARY: The Homeless Emergency
Assistance and Rapid Transition to
Housing Act of 2009 (HEARTH Act),
enacted into law on May 20, 2009,
consolidates three of the separate
homeless assistance programs
administered by HUD under the
McKinney -Vento Homeless Assistance
Act into a single grant program, and
revises the Emergency Shelter Grants
program and renames it the Emergency
Solutions Grants program. The HEARTH
Act also codifies in law the Continuum
of Care planning process, a longstanding
part of HUD's application process to
assist homeless persons by providing
greater coordination in responding to
their needs. The HEARTH Act also
directs HUD to promulgate regulations
for these new programs and processes.
This interim rule focuses on
regulatory implementation of the
Continuum of Care program, including
the Continuum of Care planning
process, The existing homeless
assistance programs that comprise the
Continuum of Care program are the
following: the Supportive Housing
program, the Shelter Plus Care program,
and the Moderate Rehabilitation /Single
Room Occupancy (SRO) program. This
rule establishes the regulations for the
Continuum of Care program, and,
through the establishment of such
regulations, the funding made available
for the Continuum of Care program in
the statute appropriating Fiscal Year
(FY) 2012 funding for HUD can more
quickly be disbursed, consistent with
the HEARTH Act requirements, and
avoid any disruption in current
Continuum of Care activities.
DATES: Effective Date: August 30, 2012.
Comment Due Date, October 1, 2012.
ADDRESSES: Interested persons are
invited to submit comments regarding
this rule to the Regulations Division,
Office of General Counsel, 451 7th
Street SW., Room 10276, Department of
Housing and Urban Development,
Washington, DC 20410 -0500.
Communications must refer to the above
docket number and title. There are two
methods for submitting public
comments. All submissions must refer
to the above docket number and title.
1, Submission of Comments by Mail.
Comments may be submitted by mail to
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street SW., Room 10276,
Washington, DC 20410 -0500.
2. Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly
encourages commenters to submit
comments electronically, Electronic
submission of comments allows the
commenter maximum time to prepare
and submit a comment, ensures timely
receipt by HUD, and enables HUD to
make them immediately available to the
public. Comments submitted
electronically through the
www.regulations.gov Web site can be
viewed by other commenters and
interested members of the public,
Commenters should follow the
instructions provided on that site to
submit comments electronically.
Note: To receive consideration as public
comments, comments must be submitted
through one of the two methods specified
above. Again, all submissions must refer to
the docket number and title of the rule.
No Facsimile Comments, Facsimile
(FAX) comments are not acceptable.
Public Inspection of Public
Comments. All properly submitted
comments and communications
submitted to HUD will be available for
public inspection and copying between
8 a.m, and 5 p.m, weekdays at the above
address. Due to security measures at the
HUD Headquarters building, an advance
appointment to review the public
comments must be scheduled by calling
the Regulations Division at 202 -708-
3055 (this is not a toll -free number).
Individuals with speech or hearing
impairments may access this number
through TTY by calling the Federal
Relay Service at 800 - 877 -8339. Copies
of all comments submitted are available
for inspection and downloading at
www. reg u 1 a ti on s . go v.
FOR FURTHER INFORMATION CONTACT: Ann
Marie Oliva, Director, Office of Special
Needs Assistance Programs, Office of
Community Planning and Development,
Department of Housing and Urban
Development, 451 7th Street SW.,
Washington, DC 20410 -7000; telephone
number 202- 708 -4300 (this is not a toll -
free number). Hearing- and speech -
impaired persons may access this
number through TTY by calling the
Federal Relay Service at 800 - 877 -8339
(this is a toll -fiee number).
SUPPLEMENTARY INFORMATION:
Executive Summary
Purpose of and Legal Authority for This
Interim Rule
This interim rule implements the
Continuum of Care program authorized
by the Homeless Emergency Assistance
and Rapid Transition to Housing Act of
2009 (HEARTH Act). Section 1504 of
the HEARTH Act directs HUD to
establish regulations for this program,
(See 42 U.S.C. 11301.) The purpose of
the Continuum of Care program is to
promote communitywide commitment
to the goal of ending homelessness;
provide funding for efforts by nonprofit
providers, and State and local
governments to quickly rehouse
homeless individuals and families while
minimizing the trauma and dislocation
caused to homeless individuals,
families, and communities by
homelessness; promote access to and
effective utilization of mainstream
programs by homeless individuals and
families; and optimize self- sufficiency
among individuals and families
experiencing homelessness.
The HEARTH Act streamlines HUD's
homeless grant programs by
consolidating the Supportive Housing,
Shelter Plus Care, and Single Room
Occupancy grant programs into one
grant program: The Continuum of Care
program. Local continuums of care,
which are community -based homeless
assistance program planning networks,
will apply for Continuum of Care grants.
By consolidating homeless assistance
grant programs and creating the
Continuum of Care planning process,
the HEARTH Act intended to increase
the efficiency and effectiveness of
coordinated, community -based systems
that provide housing and services to the
homeless. Through this interim final
rule, HUD will implement the
Continuum of Care program by
establishing the framework for
establishing a local continuum of care
and the process for applying for
Continuum of Care grants.
Summary of Major Provisions
The major provisions of this
rulemaking relate to how to establish
and operate a Continuum of Care, how
to apply for funds under the program,
and how to use the funds for projects
approved by HUD. These provisions are
summarized below.
1. General Provisions (Subpart A):
The Continuum of Care program
includes transitional housing,
permanent supportive housing for
ATTACHMENT ...... L........
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Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations 45423
disabled persons, permanent housing,
supportive services, and Homeless
Management Information Systems
(HMIS). To implement the program,
HUD had to define several key terms. In
particular, HUD distinguishes between
"Continuum of Care," "applicant," and
"collaborative applicant." A
"Continuum of Care" is a geographically
based group of representatives that
carries out the planning responsibilities
of the Continuum of Care program, as
set out in this regulation. These
representatives come from organizations
that provide services to the homeless, or
represent the interests of the homeless
or formerly homeless. A Continuum of
Care then designates certain
"applicants" as the entities responsible
for carrying out the projects that the
Continuum has identified through its
planning responsibilities. A
"Continuum of Care" also designates
one particular applicant to be a
"collaborative applicant." The
collaborative applicant is the only entity
that can apply for a grant from HUD on
behalf of the Continuum that the
collaborative applicant represents.
2. Establishing and Operating a
Continuum of Care (Subpart B): In order
to be eligible for funds under the
Continuum of Care program,
representatives from relevant
organizations within a geographic area
must establish a Continuum of Care.
The three major duties of a Continuum
of Care are to: (1) Operate the
Continuum of Care, (2) designate an
HMIS for the Continuum of Care, and
(3) plan for the Continuum of Care. HUD
has delineated certain operational
requirements of each Continuum to help
measure a Continuum's overall
performance at reducing homelessness,
in addition to tracking of performance
on a project -by- project basis. In
addition, each Continuum is responsible
for establishing and operating a
centralized or coordinated assessment
system that will provide a
comprehensive assessment of the needs
of individuals and families for housing
and services. HUD has also defined the
minimum planning requirements for a
Continuum so that it coordinates and
implements a system that meets the
needs of the homeless population
within its geographic area. Continuums
are also responsible for preparing and
overseeing an application for funds.
Continuums will have to establish the
funding priorities for its geographic area
when submitting an application.
3. Application and Grant Award
Process (Subpart C): The Continuum of
Care grant award process begins with a
determination of a Continuum's
maximum award amount. As directed
by statute, HUD has developed a
formula for determining award amounts
that includes the following factors: A
Continuum's Preliminary Pro Rata Need
(PPRN) amount; renewal demand; any
additional increases in amounts for
leasing, rental assistance, and operating
costs based on Fair Market Rents,
planning and Unified Funding Agency
cost funds, and amounts available for
bonus dollars. HUD has established
selection criteria for determining which
applications will receive funding under
the Continuum of Care program.
Recipients awarded Continuum of Care
funds must satisfy several conditions
prior to executing their grant
agreements. All grants submitted for
renewal must also submit an annual
performance report. For those
applicants not awarded funding, the
process also provides an appeals
process.
4. Program Components and Eligible
Costs (Subpart D): Continuum of Care
funds may be used for projects under
five program components: Permanent
housing, transitional housing,
supportive services only, HMIS, and, in
some limited cases, homelessness
prevention. The rule further clarifies
how the following activities are
considered eligible costs under the
Continuum of Care program: Continuum
of Care planning activities, Unified
Funding Agency costs, acquisition,
rehabilitation, new construction,
leasing, rental assistance, supportive
services, operating costs, HMIS, project
administrative costs, relocation costs,
and indirect costs.
5. High - Performing Communities
(Subpart E): HUD will annually, subject
to the availability of appropriate data,
select those Continuums of Care that
best meet application requirements to be
designated a high - performing
community (HPC). An HPC may use
grant funds to provide housing
relocation and stabilization services,
and short- and /or medium -term rental
assistance to individuals and families at
risk of homelessness. This is the only
time that Continuum of Care funds may
be used to serve individuals and
families at risk of homelessness.
6. Program Requirements (Subpart F):
All recipients of Continuum of Care
funding must comply with the program
regulations and the requirements of the
Notice of Funding Availability that HUD
will issue each year. Notably, the
HEARTH Act requires that all eligible
funding costs, except leasing, must be
matched with no less than 25 percent
cash or in -kind match by the
Continuum. Other program
requirements of recipients include:
Abiding by housing quality standards
and suitable dwelling size, assessing
supportive services on an ongoing basis,
initiating and completing approved
activities and projects within certain
timelines, and providing a formal
process for termination of assistance to
participants who violate program
requirements or conditions of
occupancy.
7. Grant Administration (Subpart G):
To effectively administer the grants,
HUD will provide technical assistance
to those who apply for Continuum of
Care funds, as well as those who are
selected for Continuum of Care funds.
After having been selected for funding,
grant recipients must satisfy certain
recordkeeping requirements so that
HUD can assess compliance with the
program requirements. For any
amendments to grants after the funds
have been awarded, HUD has
established a separate amendment
procedure. As appropriate, HUD has
also established sanctions to strengthen
its enforcement procedures.
Benefits and Costs
This interim rule is intended to help
respond to and work toward the goal of
eliminating homelessness. This interim
rule provides greater clarity and
guidance about planning and
performance review to the more than
430 existing Continuums of Care that
span all 50 states and 6 United States
territories. As reported in HUD's Annual
Homelessness Assessment Report to
Congress, there were approximately 1.59
million homeless persons who entered
emergency shelters or transitional
housing in FY 2010. HUD serves
roughly half that many persons, nearly
800,000 annually, through its three
programs that will be consolidated into
the Continuum of Care program under
the McKinney -Vento Act as amended by
the HEARTH Act (i.e., Shelter Plus Care,
Supportive Housing Program, Single
Room Occupancy). The changes
initiated by this interim rule will
encourage Continuums of Care to
establish formal policies and review
procedures, including evaluation of the
effectiveness of their projects, by
emphasizing performance measurement
and developing performance targets for
homeless populations. HUD is confident
that this systematic review by
Continuums of Care will lead to better
use of limited resources and more
efficient service models, with the end
result of preventing and ending
homelessness.
The Consolidated and Further
Continuing Appropriations Act, 2012
(Pub. L. 112 -55) appropriated
$1,593,000,000 for the Continuum of
Care and Rural Housing Stability
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45424 Federal Register/Vol, 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
Assistance programs. Upon publication
of this rule, those FY 2012 funds will be
available for distribution, as governed
by these Continuum of Care regulations.
I, Background — HEARTH Act
On May 20, 2009, the President
signed into law "An Act to Prevent
Mortgage Foreclosures and Enhance
Mortgage Credit Availability," which
became Public Law 111 -22. This law
implements a variety of measures
directed toward keeping individuals
and families from losing their homes.
Division B of this law is the HEARTH
Act, which consolidates and amends
three separate homeless assistance
programs carried out under title IV of
the McKinney - Vento Homeless
Assistance Act (42 U.S.C. 11371 et seq.)
(McKinney - Vento Act) into a single
grant program that is designed to
improve administrative efficiency and
enhance response coordination and
effectiveness in addressing the needs of
homeless persons. The HEARTH Act
codifies in law and enhances the
Continuum of Care planning process,
the coordinated response to addressing
the needs of the homeless, which was
established administratively by HUD in
1995. The single Continuum of Care
program established by the HEARTH
Act consolidates the following
programs: The Supportive Housing
program, the Shelter Plus Care program,
and the Moderate Rehabilitation /Single
Room Occupancy program. The
Emergency Shelter Grants program is
renamed the Emergency Solutions
Grants program and is revised to
broaden existing emergency shelter and
homelessness prevention activities and
to add short- and medium -term rental
assistance and services to rapidly
rehouse homeless people. The HEARTH
Act also creates the Rural Housing
Stability program to replace the Rural
Homelessness Grant program.
HUD commenced the process to
implement the HEARTH Act with
rulemaking that focused on the
definition of "homeless." HUD
published a proposed rule, entitled
"Defining Homeless" on April 20, 2010
(75 FR 20541), which was followed by
a final rule that was published on
December 5, 2011 (76 FR 75994). The
Defining Homeless rule clarified and
elaborated upon the new McKinney -
Vento Act definitions for "homeless"
and "homeless individual with a
disability." In addition, the Defining
Homeless rule included recordkeeping
requirements related to the "homeless"
definition. On December 5, 2011, HUD
also published an interim rule for the
Emergency Solutions Grants program
(76 FR 75954). This interim rule
established the program requirements
for the Emergency Solutions Grants
program and contained corresponding
amendments to the Consolidated Plan
regulations. On December 9, 2011, HUD
continued the process to implement the
HEARTH Act, with the publication of
the proposed rule titled "Homeless
Management Information Systems
Requirements" (76 FR 76917), which
provides for uniform technical
requirements for Homeless Management
Information Systems (HMIS), for proper
data collection and maintenance of the
database, and ensures the
confidentiality of the information in the
database. Today's publication of the
interim rule for the Continuum of Care
program continues HUD's
implementation of the HEARTH Act.
This rule establishes the regulatory
framework for the Continuum of Care
program and the Continuum of Care
Planning process, including
requirements applicable to the
establishment of a Continuum of Care.
Prior to the amendment of the
McKinney - Vento Act by the HEARTH
Act, HUD's competitively awarded
homeless assistance grant funds were
awarded to organizations that
participate in local homeless assistance
program planning networks referred to
as a Continuum of Care, a system
administratively established by HUD in
1995. A Continuum of Care is designed
to address the critical problem of
homelessness through a coordinated
community -based process of identifying
needs and building a system of housing
and services to address those needs. The
approach is predicated on the
understanding that homelessness is not
caused merely by a lack of shelter, but
involves a variety of underlying, unmet
needs — physical, economic, and social.
The HEARTH Act not only codified in
law the planning system known as
Continuum of Care, but consolidated the
three existing competitive homeless
assistance grant programs (Supportive
Housing, Shelter Plus Care, and Single
Room Occupancy) into the single grant
program known as the Continuum of
Care program. The consolidation of the
three existing homeless assistance
programs into the Continuum of Care
grant program and the codification in
law of the Continuum of Care planning
process are intended to increase the
efficiency and effectiveness of the
coordination of the provision of housing
and services to address the needs of the
homeless. The regulations established
by this rule are directed to carrying out
this congressional intent.
II. Overview of Interim Rule
As amended by the HEARTH Act,
Subpart C of the McKinney - Vento
Homeless Assistance Act establishes the
Continuum of Care program. The
purpose of the program is to promote
communitywide commitment to the
goal of ending homelessness; provide
funding for efforts by nonprofit
providers, and State and local
governments to quickly rehouse
homeless individuals and families while
minimizing the trauma and dislocation
caused to homeless individuals,
families, and communities by
homelessness; promote access to and
effective utilization of mainstream
programs by homeless individuals and
families; and optimize self - sufficiency
among individuals and families
experiencing homelessness.
This interim rule establishes the
Continuum of Care as the planning body
responsible for meeting the goals of the
Continuum of Care program.
Additionally, in order to meet the
purpose of the HEARTH Act,
established in section 1002(b), and the
goals of "Opening Doors: Federal
Strategic Plan to Prevent and End
Homelessness," the Continuum of Care
must be involved in the coordination of
other funding streams and resources —
federal, local, or private —of targeted
homeless programs and other
mainstream resources. In many
communities, the Continuum of Care is
the coordinating body, while in other
communities it is a local Interagency
Council on Homelessness (both would
be acceptable forms of coordination
under this interim rule). As noted
earlier, HUD published on December 9,
2011, a proposed rule to establish HMIS
regulations in accordance with the
HEARTH Act. However, while the
HEARTH Act directed that regulations
be established for HMIS, HMIS is not
new to many HUD grantees. Until
regulations for HMIS are promulgated in
final, grantees should continue to follow
HUD's existing HMIS instructions and
guidance.
The following provides an overview
of the proposed rule.
General Provisions (Subpart A)
Purpose and scope. The Continuum of
Care program is designed to promote
community -wide goals to end
homelessness; provide funding to
quickly rehouse homeless individuals
(including unaccompanied youth) and
families while minimizing trauma and
dislocation to those persons; promote
access to, and effective utilization of,
mainstream programs; and optimize
self - sufficiency among individuals and
Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations 45425
families experiencing homelessness.
The program is composed of transitional
housing, permanent supportive housing
for disabled persons, permanent
housing, supportive services, and HMIS.
Definitions. The interim rule adopts
the definitions of "developmental
disability," "homeless," "homeless
individual," and "homeless person"
established by the December 5, 2011
Defining Homeless final rule. Public
comments have already been solicited
and additional public comment is not
solicited through this rule. The
December 5, 2011, final rule was
preceded by an April 20, 2010,
proposed rule, which sought public
comment on these definitions. The final
definitions of these terms took into
consideration the public comments
received on the proposed definitions as
set out in the April 20, 2010, proposed
rule. This interim rule adopts the
definition of "at risk of homelessness"
established by the December 5, 2011,
the Emergency Solutions Grants
program interim rule. The interim rule
sought public comment on this
definition, and additional public
comment is not being sought through
this rule.
HUD received valuable public
comment on the definition of
"chronically homeless," through the
public comment process on the
Emergency Solutions Grants program
interim rule. Based on public comment,
this rule for the Continuum of Care
program is not adopting the full
definition of "chronically homeless"
that was included in the conforming
amendments to the Consolidated Plan
that were published as a part of the
Emergency Solutions Grants program
rule. Commenters raised concerns with
the meaning of the phrase "where each
homeless occasion was at least 15
days." The concerns raised about this
phrase, used for the first time in a
definition of "chronically homeless,"
has caused HUD to reconsider
proceeding to apply a definition that
includes this phrase, without further
consideration and opportunity for
comment. In this rule, HUD therefore
amends the definition of "chronically
homeless" in the Consolidated Plan
regulations to strike this phrase. The
removal of this phrase returns the
definition to one with which service
providers are familiar. The following
highlights key definitions used in the
Continuum of Care program regulations,
and HUD solicits comment on these
definitions.
Applicant is defined to mean an
entity that has been designated by the
Continuum of Care as eligible to apply
for assistance on behalf of that
Continuum. HUD highlights that the Act
does not contain different definitions for
"applicant" and "collaborative
applicant." HUD distinguishes between
the applicant(s) designated to apply for
and carry out projects (the "applicant ")
and the collaborative applicant
designated to apply for a grant on behalf
of the Continuum of Care (the
"collaborative applicant "). Please see
below for more information on the
definition of a collaborative applicant,
which is the only entity that may apply
for and receive Continuum of Care
planning funds.
Centralized or coordinated
assessment system is defined to mean a
centralized or coordinated process
designed to coordinate program
participant intake, assessment, and
provision of referrals. A centralized or
coordinated assessment system covers
the geographic area, is easily accessed
by individuals and families seeking
housing or services, is well advertised,
and includes a comprehensive and
standardized assessment tool. This
definition establishes basic minimum
requirements for the Continuum's
centralized or coordinated assessment
system.
Collaborative applicant is defined to
mean an eligible applicant that has been
designated by the Continuum of Care to
apply for a grant for Continuum of Care
planning funds on behalf of the
Continuum. As discussed above, the
"applicant" is the entity(ies) designated
to apply for and carry out projects on
behalf of the Continuum. In contrast to
the definition of "applicant" above, the
collaborative applicant applies for a
grant to carry out the planning activities
on behalf of the Continuum of Care. The
interim rule simplifies the statutory
language in order to make the
Continuum of Care planning process
clear.
HUD highlights that its definition of
collaborative applicant does not track
the statutory definition, which is found
in section 401 of the McKinney -Vento
Act. As will be discussed in further
detail later in this preamble, the concept
of collaborative applicant, its duties and
functions, as provided in the statute, is
provided for in this rule. However, HUD
uses the term Continuum of Care to refer
to the organizations that carry out the
duties and responsibilities assigned to
the collaborative applicant, with the
exception of applying to HUD for grant
funds. The clarification is necessary in
this rule because Continuums of Care
are not required to be legal entities, but
HUD can enter into contractual
agreements with legal entities only.
Continuum of Care and Continuum
are defined to mean the group that is
organized to carry out the
responsibilities required under this part
and that is composed of representatives
of organizations including nonprofit
homeless providers, victim service
providers, faith -based organizations,
governments, businesses, advocates,
public housing agencies, school
districts, social service providers,
mental health agencies, hospitals,
universities, affordable housing
developers, law enforcement,
organizations that serve homeless and
formerly homeless veterans, and
homeless and formerly homeless
persons. These organizations consist of
the relevant parties in the geographic
area. Continuums are expected to
include representation to the extent that
the type of organization exists within
the geographic area that the Continuum
represents and is available to participate
in the Continuum. For example, if a
Continuum of Care did not have a
university within its geographic
boundaries, then HUD would not expect
the Continuum to have representation
from a university within the
Continuum.
These organizations carry out the
responsibilities and duties established
under Subpart B of this interim rule.
The Continuum of Care, as noted above,
carries out the statutory duties and
responsibilities of a collaborative
applicant. HUD established the
Continuum of Care in 1995. Local
grantees and stakeholders are familiar
with the Continuum of Care as the
coordinating body for homeless services
and homelessness prevention activities
across the geographic area.
Consequently, HUD is maintaining the
Continuum of Care terminology, and the
rule provides for the duties and
responsibilities of a collaborative
applicant to be carried out under the
name Continuum of Care.
High - performing community is
defined to mean the geographic area
under the jurisdiction of a Continuum of
Care that has been designated as a high -
performing community by HUD. Section
424 of the McKinney -Vento Act
provides that HUD shall designate, on
an annual basis, which collaborative
applicants represent high- performing
communities. Consistent with HUD's
substitution of the term "Continuum of
Care" for "collaborative applicant," the
definition of "high- performing
community" in this interim rule
provides for designation of Continuums
of Care that represent geographic areas
designated as high - performing
communities. The standards for
becoming a high - performing community
can be found in § 578.65 of this interim
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rule and will be discussed later in this
preamble.
Private nonprofit organization is
based on the statutory definition for
"private nonprofit organization." The
term "private nonprofit organization" is
defined in section 424 of the McKinney -
Vento Act as follows: "The term `private
nonprofit organization' means an
organization: '(A) No part of the net
earnings of which inures to the benefit
of any member, founder, contributor, or
individual; (B) that has a voluntary
board; (C) that has an accounting
system, or has designated a fiscal agent
in accordance with requirements
established by the Secretary; and (D)
that practices nondiscrimination in the
provision of assistance. "' In HUD's
regulatory definition of "private
nonprofit organization," HUD clarifies
that the organization's accounting
system must be functioning and
operated in accordance with generally
accepted accounting principles. HUD
has included this language to make
certain that accounting systems are
workable and abide by definite, accurate
standards. As reflected in the statutory
definition of "private nonprofit
organization," HUD may establish
requirements for the designation of a
fiscal agent. HUD has determined that
the fiscal agent, such as a Unified
Funding Agency, a term that is also
defined in section 424 of the McKinney -
Vento Act, must maintain a functioning
accounting system for the organization
in accordance with generally accepted
accounting principles.
Permanent housing is consistent with
the statutory definition of "permanent
housing" in section 401 of the
McKinney - Vento Act, but does not track
the statutory language. HUD's regulatory
definition of "permanent housing"
states: "The term 'permanent housing'
means community -based housing
without a designated length of stay, and
includes both permanent supportive
housing and rapid re- housing."
Additionally, in the regulatory
definition of "permanent housing,"
HUD clarifies that to be permanent
housing, "the program participant must
be the tenant on a lease for a term of at
least one year that is renewable and is
terminable only for cause. The lease
must be renewable for terms that are a
minimum of one month long. HUD has
determined that requiring a lease for a
term of at least one year that is
renewable and terminable only for
cause, assists program participants in
obtaining stability in housing, even
when the rental assistance is temporary.
These requirements are consistent with
Section 8 requirements.
Specific request for comment. HUD
specifically requests comment on
requiring a lease for a term of at least
one year to be considered permanent
housing.
Project is consistent with the statutory
definition of "project" in section 401 of
the McKinney - Vento Act, but does not
track the statutory language. Section 401
defines "project" as, with respect to
activities carried out under subtitle C,
eligible activities described in section
423(a), undertaken pursuant to a
specific endeavor, such as serving a
particular population or providing a
particular resource. In HUD's definition
of "project" in this interim rule, the
eligible activities described in section
423(a) of the McKinney - Vento Act have
been identified. In the regulatory text,
HUD has clarified that it is a group of
one or more of these eligible costs that
are identified as a project in an
application to HUD for Continuum of
Care funds.
Recipient is defined to mean an
applicant that signs a grant agreement
with HUD. HUD's definition of
"recipient" is consistent with the
statutory definition of "recipient," but
does not track the statutory language.
Section 424 of the McKinney - Vento Act
defines "recipient" as "an eligible entity
who —(A) submits an application for a
grant under section 422 that is approved
by the Secretary; (B) receives the grant
directly from the Secretary to support
approved projects described in the
application; and (C)(i) serves as a project
sponsor for the projects; or (ii) awards
the funds to project sponsors to carry
out the projects." All of the activities
specified by the statutory definition are
in the rule: (A) and (B) are contained in
the definition and (C) is covered in the
sections of the rule dealing with what a
recipient can do with grant funds.
Safe haven is based on the definition
of safe haven in the McKinney - Vento
Act prior to amendment by the
HEARTH Act. Although no longer used
in statute, HUD's position is that the
term remains relevant for
implementation of the Continuum of
Care program and, therefore, HUD
proposes to include the term in the
Continuum of Care program regulations.
The term "safe haven" is used for
purposes of determining whether a
person is chronically homeless. The
housing must serve hard -to -reach
homeless persons with severe mental
illness who came from the streets and
have been unwilling or unable to
participate in supportive services. In
addition, the housing must provide
24 -hour residence for eligible persons
for an unspecified period, have an
overnight capacity limited to 25 or
fewer persons, and provide low- demand
services and referrals for the residents.
Subrecipient is defined to mean a
private nonprofit organization, State or
local government, or instrumentality of
a State or local government that receives
a subgrant from the recipient to operate
a project. The definition of
"subrecipient" is consistent with the
definition of "project sponsor" found in
section 401 of the McKinney - Vento Act,
but does not track the statutory
language. To be consistent with the
Emergency Solutions Grants program
regulation, and also to ensure that the
relationship between the recipient and
subrecipient is clear, HUD is using the
term subrecipient, instead of project
sponsor, throughout this regulation.
Transitional housing is based on the
definition of "transitional housing" in
section 401 of the McKinney - Vento Act,
as follows: "The term 'transitional
housing' means housing, the purpose of
which is to facilitate the movement of
individuals and families experiencing
homelessness to permanent housing
within 24 months or such longer period
as the Secretary determines necessary."
The definition has been expanded to
distinguish this type of housing from
emergency shelter. This distinction is
necessitated by the McKinney - Vento
Act's explicit distinction between what
activities can or cannot be funded under
the Continuum of Care program. The
regulatory definition clarifies that, to be
transitional housing, program
participants must have signed a lease or
occupancy agreement that is for a term
of at least one month and that ends in
24 months and cannot be extended.
Unified Funding Agency (UFA) means
an eligible applicant selected by the
Continuum of Care to apply for a grant
for the entire Continuum, which has the
capacity to carry out the duties
delegated to a UFA in this rule, which
is approved by HUD and to which HUD
awards a grant. HUD's regulatory
definition of UFA departs slightly from
the statutory definition. The statutory
definition refers to the collaborative
applicant. The differences between the
statutory definition and HUD's
regulatory definition reflect HUD's
substitution of Continuum of Care for
collaborative applicant.
Establishing and Operating the
Continuum of Care (Subpart B)
In general. The statutory authority for
the Continuum of Care program is
section 422 of the McKinney - Vento Act.
As stated under section 1002 of the
HEARTH Act, one of the main purposes
of the HEARTH Act is to codify the
Continuum of Care planning process.
Consequently, under this interim rule,
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HUD focuses on the rules and
responsibilities of those involved in the
Continuum of Care planning process
and describes how applications and
grant funds will be processed.
As discussed earlier in the preamble,
HUD's interim rule provides for the
duties and functions of the collaborative
applicant found in section 401 of the
McKinney -Vento Act to be designated to
the Continuum of Care, with the
exception of applying to HUD for grant
funds. HUD chose this approach
because the Continuum might not be a
legal entity, and therefore cannot enter
into enforceable contractual agreements,
but is the appropriate body for
establishing and implementing
decisions that affect the entire
geographic area covered by the
Continuum, including decisions related
to funding. This approach allows the
Continuum to retain its duties related to
planning and prioritizing need
(otherwise designated by statute to the
collaborative applicant), while the
authority to sign a grant agreement with
HUD is designated to an eligible
applicant that can enter into a
contractual agreement. All of the duties
assigned to the Continuum are based on
the comparable duties of section 402(f)
of the McKinney -Vento Act.
Subpart B of the interim rule
identifies how Continuums of Care are
established, as well as the required
duties and functions of the Continuum
of Care.
Establishing the Continuum of Care.
In order to be eligible for funds under
the Continuum of Care program,
representatives from relevant
organizations within a geographic area
must establish a Continuum of Care. As
discussed earlier in this preamble, this
body is responsible for carrying out the
duties identified in this interim
regulation. Representatives from
relevant organizations include nonprofit
homeless assistance providers, victim
service providers, faith -based
organizations, governments, businesses,
advocates, public housing agencies,
school districts, social service providers,
mental health agencies, hospitals,
universities, affordable housing
developers, law enforcement, and
organizations that serve veterans and
homeless and formerly homeless
individuals. Where these organizations
are located within the geographic area
served by the Continuum of Care, HUD
expects a representative of the
organization to be a part of the
Continuum of Care.
Specific request for comment. HUD
specifically requests comments on
requiring Continuums of Care to have a
board that makes the decisions for the
Continuum. HUD requires two
characteristics for all board
compositions. These characteristics are
that the Board must be representative of
the subpopulations of homeless persons
that exist within the geographic area,
and include a homeless or formerly
homeless person. Continuums will have
2 years from the effective date of the
interim rule to establish a board that
meets the criteria established in this
section. No board member may
participate or influence discussions or
decisions concerning the award of a
grant or other financial benefits for an
organization that the member
represents.
HUD is considering four additional
characteristics for all board
compositions for incorporation in the
final rule. HUD did not implement them
at this stage in order to seek public
comment prior to implementing them as
requirements. HUD proposes that all
boards must have a chair or co- chairs;
be composed of an uneven number,
serving staggered terms; include
members from the public and private
sectors; and include a member from at
least one Emergency Solutions Grants
program (ESG) recipient's agency
located within the Continuum's
geographic area. HUD is requesting
comment on all of these proposed
requirements; however, HUD
specifically requests comments from
Continuums of Care and ESG recipients
on the requirement that the Board
include an ESG recipient as part of its
membership. HUD invites ESG
recipients and Continuums to share
challenges that will be encountered
when implementing this requirement.
Ensuring that ESG recipients are
represented on the Board is important to
HUD; therefore, in communities where
ESG recipients and /or Continuums do
not feel this requirement is feasible,
HUD asks commenters to provide
suggestions for how ESG recipients can
be involved in the Continuum at one of
the core decision - making levels.
Responsibilities of the Continuum of
Care. The interim rule establishes three
major duties for which the Continuum
of Care is responsible; To operate the
Continuum of Care, to designate an
HMIS for the Continuum of Care, and to
plan for the Continuum of Care.
This section of the interim rule
establishes requirements within these
three major duties.
Operating the Continuum of Care. The
interim rule provides that the
Continuum of Care must abide by
certain operational requirements. These
requirements will ensure the effective
management of the Continuum of Care
process and ensure that the process is
inclusive and fair. HUD has established
eight duties required of the Continuum
necessary to effectively operate the
Continuum of Care. HUD has
established the specific minimum
standards for operating and managing a
Continuum of Care for two main
reasons. First, the selection criteria
established under section 427 of the
McKinney -Vento Act require HUD to
measure the Continuum of Care's
performance in reducing homelessness
by looking at the overall performance of
the Continuum, as opposed to
measuring performance project -by-
project as was done prior to the
enactment of the HEARTH Act. This
Continuum of Care performance
approach results in cooperation and
coordination among providers. Second,
because Continuums of Care will have
grants of up to 3 percent of Final Pro
Rata Need (FPRN) to be used for eligible
Continuum of Care planning costs, HUD
is requiring more formal decision -
making and operating standards for the
Continuum of Care. This requirement
ensures that the Continuums have
appropriate funding to support planning
costs.
One of the duties established in this
interim rule is the requirement that the
Continuum establish and operate a
centralized or coordinated assessment
system that provides an initial,
comprehensive assessment of the needs
of individuals and families for housing
and services. As detailed in the
Emergency Solutions Grants program
interim rule published on December 5,
2011, through the administration of the
Rapid Re- Housing for Families
Demonstration program and the
Homelessness Prevention and Rapid Re-
Housing program, as well as best
practices identified in communities,
HUD has learned that centralized or
coordinated assessment systems are
important in ensuring the success of
homeless assistance and homeless
prevention programs in communities. In
particular, such assessment systems
help communities systematically assess
the needs of program participants and
effectively match each individual or
family with the most appropriate
resources available to address that
individual or family's particular needs.
Therefore, HUD has required, through
this interim rule, each Continuum of
Care to develop and implement a
centralized or coordinated assessment
system for its geographic area. Such a
system must be designed locally in
response to local needs and conditions.
For example, rural areas will have
significantly different systems than
urban ones. While the common thread
between typical models is the use of a
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common assessment tool, the form,
detail, and use of that tool will vary
from one community to the next. Some
examples of centralized or coordinated
assessment systems include: A central
location or locations within a
geographic area where individuals and
families must be present to receive
homeless services; a 211 or other hotline
system that screens and directly
connects callers to appropriate homeless
housing /service providers in the area; a
"no wrong door" approach in which a
homeless family or individual can show
up at any homeless service provider in
the geographic area but is assessed using
the same tool and methodology so that
referrals are consistently completed
across the Continuum of Care; a
specialized team of case workers that
provides assessment services to
providers within the Continuum of
Care; or in larger geographic areas, a
regional approach in which "hubs" are
created within smaller geographic areas.
HUD intends to develop technical
assistance materials on a range of
centralized and coordinated assessment
types, including those most appropriate
for rural areas.
HUD recognizes that imposing a
requirement for a centralized or
coordinated assessment system may
have certain costs and risks. Among the
risks that HUD wishes specifically to
address are the risks facing individuals
and families fleeing domestic violence,
dating violence, sexual assault, and
stalking. In developing the baseline
requirements for a centralized or
coordinated intake system, HUD is
considering whether victim service
providers should be exempt from
participating in a local centralized or
coordinated assessment process, or
whether victim service providers should
have the option to participate or not.
Specific request for comment. HUD
specifically seeks comment from
Continuum of Care - funded victim
service providers on this question. As
set forth in this interim rule, each
Continuum of Care is to develop a
specific policy on how its particular
system will address the needs of
individuals and families who are
fleeing, or attempting to flee, domestic
violence, dating violence, sexual
assault, or stalking, but who are seeking
shelter or services from non - victim
service providers. These policies could
include reserving private areas at an
assessment location for evaluations of
individuals or families who are fleeing,
or attempting to flee, domestic violence,
dating violence, sexual assault, or
stalking; a separate "track" within the
assessment framework that is
specifically designed for domestic
violence victims; or the location of
victim service providers with
centralized assessment teams.
HUD invites suggestions for ensuring
that the requirements it imposes
regarding centralized or coordinated
assessment systems will best help
communities use their resources
effectively and best meet the needs of all
families and individuals who need
assistance. Questions that HUD asks
commenters to specifically address are:
What barriers to accessing housing/
services might a centralized or
coordinated intake system pose to
victims of domestic violence? How can
those barriers be eliminated? What
specific measures should be
implemented to ensure safety and
confidentiality for individuals and
families who are fleeing or attempting to
flee domestic violence situations? How
should those additional standards be
implemented to ensure that victims of
domestic violence have immediate
access to housing and services without
increasing the burden on those victims?
For communities that already have
centralized or coordinated assessment
systems in place, are victims of
domestic violence and /or domestic
violence service providers integrated
into that system? Under either scenario
(they are integrated into an assessment
process or they are not integrated into
it), how does your community ensure
the safety and confidentiality of this
population, as well as access to
homeless housing and services? What
HUD - sponsored training would be
helpful to assist communities in
completing the initial assessment of
victims of domestic violence in a safe
and confidential manner?
In addition to comments addressing
the needs of victims of domestic
violence, dating violence, sexual
assault, and stalking, HUD invites
general comments on the use of a
centralized or coordinated assessment
system, particularly from those in
communities that have already
implemented one of these systems who
can share both what has worked well
and how these systems could be
improved. HUD specifically seeks
comment on any additional risks that a
centralized or coordinated assessment
system may create for victims of
domestic violence, dating violence,
sexual assault, or stalking who are
seeking emergency shelter services due
to immediate danger, regardless of
whether they are seeking services
through a victim service provider or
nonvictim service provider.
Another duty set forth in this part, is
the requirement to establish and
consistently follow written standards
when administering assistance under
this part. These requirements,
established in consultation with
recipients of Emergency Solutions
Grants program funds within the
geographic area, are intended to
coordinate service delivery across the
geographic area and assist Continuums
of Care and their recipients in
evaluating the eligibility of individuals
and families consistently and
administering assistance fairly and
methodically. The written standards can
be found in § 578.7(a)(9) of this interim
rule.
Designating and operating an HMIS.
The Continuum of Care is responsible
for designating an HMIS and an eligible
applicant to manage the HMIS,
consistent with the requirements, which
will be codified in 24 CFR part 580.
This duty is listed under section
402(f)(2) of the McKinney -Vento Act. In
addition, the Continuum is responsible
for reviewing, revising, and approving a
privacy plan, security plan, and data
quality plan for the HMIS and ensuring
consistent participation of recipients
and subrecipients in the HMIS.
Continuum of Care planning. The
Continuum is responsible for
coordinating and implementing a
system for its geographic area to meet
the needs of the homeless population
and subpopulations within the
geographic area. The interim rule
defines the minimum requirements for
this systematic approach under
§ 578.7(c)(1), such as emergency
shelters, rapid rehousing, transitional
housing, permanent supportive housing,
and prevention strategies. Because there
are not sufficient resources available
through the Continuum of Care program
to prevent and end homelessness,
coordination and integration of other
funding streams, including the
Emergency Solutions Grants program
and mainstream resources, is integral to
carrying out the Continuum of Care
System.
HUD has determined that since the
Continuum of Care will be the larger
planning organization, the Continuum
of Care must develop and follow a
Continuum of Care plan that adheres,
not only to the requirements being
established by this interim rule, but to
the requirements and directions of the
most recently issued notice of funding
availability (NOFA).
While these planning duties are not
explicitly provided in section 402(f) of
the Act, HUD has included them to
facilitate and clarify the Continuum of
Care planning process. Consistent with
the goals of the HEARTH Act, HUD
strives, through this interim rule, to
provide a comprehensive, well-
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coordinated and clear planning process,
which involves the creation of the
Continuum of Care and the duties the
Continuum of Care will have to fulfill.
Other planning duties for Continuums
established in this section of the interim
rule are planning for and conducting at
least a biennial - point -in -time count of
homeless persons within the geographic
area, conducting an annual gaps
analysis of the homeless needs and
services available within the geographic
area, providing information necessary to
complete the Consolidated Plan(s)
within the geographic area, and
consulting with State and local
government Emergency Solutions
Grants program recipients within the
Continuum of Care on the plan for
allocating Emergency Solutions Grants
program funds and reporting on and
evaluating the performance of
Emergency Solutions Grants program
recipients and subrecipients.
Preparing an application for funds. A
major function of the Continuum of Care
is preparing and overseeing an
application for funds under this part.
This section of the interim rule
establishes the duties of the Continuum
of Care related to the preparation of the
application. This section of the interim
rule establishes that the Continuum is
responsible for designing, operating,
and following a collaborative process for
the development of applications, as well
as approving the submission of
applications, in response to a NOFA
published by HUD.
The Continuum must also establish
priorities for funding projects within the
geographic area and determine the
number of applications being submitted
for funding. As previously noted in this
preamble, since the Continuum of Care
might not be a legal entity, and therefore
may not be able to enter into a
contractual agreement with HUD, the
Continuum must select one or more
eligible applicants to submit an
application for funding to HUD on its
behalf. If the Continuum of Care is an
eligible applicant, the Continuum of
Care may submit an application. If the
Continuum selects more than one
application, the Continuum must select
one eligible applicant to be the
collaborative applicant. That applicant
will collect and combine the required
application information from all of the
other eligible applicants and for all
projects within the geographic area that
the Continuum has designated. If only
one application is submitted by the
collaborative applicant, the
collaborative applicant will collect and
combine the required application
information from all projects within the
geographic area that the Continuum has
designated for funding. The
collaborative applicant will always be
the only applicant that can apply for
Continuum of Care planning costs. In
the case that there is one application for
projects, the recipient of the funds is
required to have signed agreements with
its subrecipients as set forth in
§ 578.23(c), and is required to monitor
and sanction subrecipients in
compliance with § 578.107.
Whether the Continuum of Care
submits the application or designates an
eligible applicant to submit the
application for funding, the Continuum
of Care retains all of its duties.
Unified Funding Agencies. To be
designated as the Unified Funding
Agency (UFA) for the Continuum of
Care, the Continuum must select the
collaborative applicant to apply to HUD
to be designated as the UFA for the
Continuum. The interim rule establishes
the criteria HUD will use when
determining whether to designate the
collaborative applicant as a UFA. These
standards were developed to ensure that
collaborative applicants have the
capacity to manage the grant and carry
out the duties in 578.11(b), and are
described below.
The duties of the UFA established in
§ 5 78. 11 are consistent with the duties
set forth in section 402(g) of the Act.
Even if the Continuum designates a
UFA to submit the application for
funding, the Continuum of Care retains
all of its duties.
Remedial actions. Section 402(c) of
the McKinney - Vento Act gives HUD the
authority to ensure the fair distribution
of grant amounts for this program, such
as designating another body as a
collaborative applicant, replacing the
Continuum of Care for the geographic
area, or permitting other eligible entities
to apply directly for grants. Section
578.13 of this interim rule addresses the
remedial actions that may be taken.
Overview of the Application and Grant
Award Process (Subpart Q
Eligible applicants. Under this interim
rule, eligible applicants consist of
nonprofit organizations, State and local
governments, and instrumentalities of
local governments. An eligible applicant
must have been designated by the
Continuum of Care to submit an
application for grant funds under this
part. The Continuum's designation must
state whether the Continuum is
designating more than one applicant to
apply for funds, and if it is, which
applicant is being designated the
collaborative applicant. A Continuum of
Care that is designating only one
applicant for funds must designate that
applicant to be the collaborative
applicant. For - profit entities are not
eligible to apply for grants or to be
subrecipients of grant funds.
Section 401(10) of the McKinney -
Vento Act identifies that collaborative
applicants may be legal entities, and a
legal entity may include a consortium of
instrumentalities of a State or local
government that has constituted itself as
an entity. HUD has not included a
consortium in the list of eligible
applicants. As noted earlier in this
preamble, a Continuum of Care is
defined to mean a group that is
composed of representatives of
organizations across the entire
geographic area claimed by the
Continuum of Care. A Continuum is
able to combine more than one
metropolitan city or county into the
geographic area that the Continuum
represents. In essence, the Continuum of
Care acts as a consortium, and it is
therefore HUD's position that the
inclusion of consortiums in the interim
rule would be redundant.
Determining the Continuum's
maximum award amount. The total
amount for which a Continuum of Care
is eligible to apply and be awarded is
determined through a four -step process,
including the following factors: A
Continuum's PPRN amount; renewal
demand; any additional increases in
amounts for leasing, rental assistance,
and operating costs based on Fair
Market Rents (FMRs); planning and
UFA cost funds; and the amounts
available for bonus dollars.
Using the formula that will be
discussed below, HUD will first
determine a Continuum of Care's PPRN
amount, as authorized under section
427(b)(2)(B) of the McKinney - Vento Act.
This amount is the sum of the PPRN
amounts for each metropolitan city,
urban county, non -urban county, and
insular area claimed by the Continuum
of Care as part of its geographic area,
excluding any counties applying for, or
receiving funds under the Rural
Housing Stability Assistance program,
the regulations for which will be
established in 24 CFR part 579. The
PPRN for each of these areas is based
upon the "need formula" under
§ 579.17(a)(2) and (3). Under the
McKinney - Vento Act, HUD is required
to publish, by regulation, the formula
used to establish grant amounts. The
need formula under § 579.17(a)(2) and
(3) satisfies this requirement, and HUD
specifically seeks comment on this '
formula. HUD will announce the PPRN
amounts prior to the publication of the
NOFA on its Web site.
To establish the amount on which the
need formula is run, HUD will deduct
an amount, which will be published in
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the NOFA, to be set aside to provide a
bonus, and the amount necessary to
fund Continuum of Care planning
activities and UFA costs from the total
funds made available for the program
each fiscal year. On this amount, HUD
will use the following process to
establish an area's PPRN. First, 2
percent of the total funds available shall
be allocated among the four insular
areas (American Samoa, Guam, the
Commonwealth of the Northern
Marianas, and the Virgin Islands) based
upon the percentage each area received
in the previous fiscal year under section
106 of the Housing and Community
Development Act of 1974. Second, 75
percent of the remaining funds made
available shall be allocated to
metropolitan cities and urban counties
that have been funded under the
Emergency Solutions Grants program
(formerly known as the Emergency
Shelter Grants program) every year since
2004. Third, the remaining funds made
available shall be allocated to
Community Development Block Grant
(CDBG) metropolitan cities and urban
counties that have not been funded
under the Emergency Solutions Grants
program every year since 2004 and all
other counties in the United States and
Puerto Rico.
Recognizing that in some federal
fiscal years, the amount available for the
formula may be less than the amount
required to renew all existing projects
eligible for renewal in that year for at
least one year, HUD has included a
method for distributing the reduction of
funds proportionally across all
Continuums of Care in § 578.17(a)(4) of
this interim rule. HUD will publish the
total dollar amount that each
Continuum will be required to deduct
from renewal projects Continuum -wide,
and Continuums will have the authority
to determine how to administer the cuts
to projects across the Continuum.
Specific request for comment. HUD
specifically requests comment on the
method established in § 578.17(a)(4) to
reduce the total amount required to
renew all projects eligible for renewal in
that one year, for at least one year, for
each Continuum of Care when funding
is not sufficient to renew all projects
nationwide for at least one year.
The second step in determining a
Continuum's maximum award amount
is establishing a Continuum of Care's
"renewal demand." The Continuum's
renewal demand is the sum of the
annual renewal amounts of all projects
eligible within the Continuum of Care's
geographic area to apply for renewal in
that federal fiscal year's competition
before any adjustments to rental
assistance, leasing, and operating line
items based on changes to the FMRs in
the geographic area.
Third, HUD will determine the
Continuum of Care's Final Pro Rata
Need (FPRN), which is the higher of;
(1) PPRN, or (2) renewal demand for the
Continuum of Care. The FPRN
establishes the base for the maximum
award amount for the Continuum of
Care.
Fourth, HUD will determine the
maximum award amount. The
maximum award amount for the
Continuum of Care is the FPRN amount
plus any additional eligible amounts for
Continuum planning; establishing fiscal
controls for the Continuum; updates to
leasing, operating, and rental assistance
line items based on changes to FMR;
and the availability of any bonus
funding during the competition.
Application process. Each fiscal year,
HUD will issue a NOFA. All
applications, including applications for
grant funds, and requests for
designation as a UFA or HPC, must be
submitted to HUD in accordance with
the requirements of the NOFA and
contain such information as the NOFA
specifies. Applications may request up
to the maximum award amount for
Continuums of Care.
An applicant that is a State or a unit
of general local government must have
a HUD - approved, consolidated plan in
accordance with HUD's Consolidated
Plan regulations in 24 CFR part 91. The
applicant must submit a certification
that the application for funding is
consistent with the HUD - approved
consolidated plan(s) in the project's
jurisdiction(s). Applicants that are not
States of units of general local
government must submit a certification
that the application for funding is
consistent with the jurisdiction's HUD -
approved consolidated plan. The
certification must be made by the unit
of general local government or the State,
in accordance with HUD's regulations in
24 CFR part 91, subpart F. The required
certification must be submitted by the
funding application submission
deadline announced in the NOFA.
An applicant may provide assistance
under this program only in accordance
with HUD subsidy layering
requirements in section 102 of the
Housing and Urban Development
Reform Act of 1989 (42 U.S.C. 3545). In
this interim rule, HUD clarifies that the
applicant must submit information in its
application on other sources of funding
the applicant has received, or
reasonably expects to receive, for a
proposed project or activities.
Awarding funds. HUD will review
applications in accordance with the
guidelines and procedures specified in
the NOFA and award funds to recipients
through a national competition based on
selection criteria as defined in section
427 of the McKinney - Vento Act. HUD
will announce the awards and notify
selected applicants of any conditions
imposed on the awards.
Grant agreements. A recipient of a
conditionally awarded grant must
satisfy all requirements for obligation of
funds; otherwise, HUD will withdraw
its offer of the award. These conditions
include establishing site control,
providing proof of match, complying
with environmental review under
§ 578.31, and documenting financial
feasibility within the deadlines under
§ 578.21(a)(3). HUD has included in the
interim rule the deadlines for conditions
that may be extended and the reasons
for which HUD will consider an
extension.
The interim rule requires that site
control be established by each recipient
receiving funds for acquisition,
rehabilitation funding, new
construction, or operating costs, or for
providing supportive services. HUD has
determined that the time to establish
site control is 12 months for projects not
receiving new construction, acquisition,
or rehabilitation funding, as stated
under section 426(a) of the McKinney -
Vento Act, not 9 months as stated under
section 422(d) of the McKinney - Vento
Act, for projects receiving operating and
supportive service funds. HUD's
determination on the time needed to
establish site control is based on
previous program policy, and the longer
time frame takes into consideration the
reality of the housing market. Projects
receiving acquisition, rehabilitation, or
new construction funding must provide
evidence of site control no later than 24
months after the announcement of grant
awards, as provided under section
422(d) of the McKinney - Vento Act.
The interim rule requires that HUD
perform an environmental review for
each property as required under HUD's
environmental regulations in 24 CFR
part 50. All recipients of Continuum of
Care program funding under this part
must supply all available, relevant
information necessary to HUD, and
carry out mitigating measures required
by HUD. The recipient, its project
partners, and its project partner's
contractors may not perform any eligible
activity for a project under this part, or
commit or expend HUD or local funds
for such activities until HUD has
performed an environmental review and
the recipient has received HUD
approval of the property agreements.
Executing grant agreements. If a
Continuum designates more than one
applicant for the geographic area, HUD
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will enter into a grant agreement with
each designated recipient for which an
award is announced. If a Continuum
designates only one recipient for the
geographic area, HUD may enter into
one grant agreement with that recipient
for new awards, if any; and one grant
agreement for renewals and Continuum
of Care planning costs and UFA costs,
if any. These two grant agreements will
cover the entire geographic area, and a
default by the recipient under one of
these agreements will also constitute a
default under the other. If the
Continuum is a UFA, HUD will enter
into one grant agreement with the UFA
for new awards, if any; and one for
renewal and Continuum of Care
planning costs and UFA costs, if any.
Similarly, these two grant agreements
will cover the entire geographic area
and a default by the recipient under one
of those agreements will also constitute
a default under the other.
HUD requires the recipient to enter
into the agreement described in
§ 578.23(c). Under this agreement, the
grant recipient must agree to ensure that
the operation of the project will be in
accordance with the McKinney -Veto Act
and the requirements under this part. In
addition, the recipient must monitor
and report the progress of the projects
to the Continuum of Care and to HUD.
The recipient must ensure that
individuals and families experiencing
homelessness are involved in the
operation of the project, maintain
confidentiality of program participants,
and monitor and report matching funds
to HUD, among other requirements. The
recipient must also agree to use the
centralized or coordinated assessment
system established by the Continuum of
Care, unless the recipient or
subrecipient is a victim service
provider. Victim service providers may
choose not to use the centralized or
coordinated assessment system
provided that all victim service
providers in the area use a centralized
or coordinated assessment system that
meets HUD's minimum requirements.
HUD has provided this optional
exception because it understands the
unique role that victim service
providers have within the Continuum of
Care.
Renewals. The interim rule provides
that HUD may fund, through the
Continuum of Care program, all projects
that were previously eligible under the
McKinney - Vento Act prior to the
enactment of the HEARTH Act. These
projects may be renewed to continue
ongoing leasing, operations, supportive
services, rental assistance, HMIS, and
administration beyond the initial
funding period even if those projects
would not be eligible under the
Continuum of Care program. For
projects that would no longer be eligible
under the Continuum of Care program
(e.g., safe havens), but which are serving
homeless persons; HUD wants to ensure
that housing is maintained and that
persons do not become homeless
because funding is withdrawn.
HUD may renew projects that were
submitted on time and in such manner
as required by HUD, but did not have
a total score that would allow the
project to be competitively funded. HUD
may choose to exercise this option to
ensure that homeless or formerly
homeless persons do not lose their
housing. The interim rule provides,
based on the language in section 421(e)
of the McKinney - Vento Act, that HUD
may renew the project, upon a finding
that the project meets the purposes of
the Continuum of Care program, for up
to one year and under such conditions
as HUD deems appropriate.
Annual Performance Report. The
interim rule also provides that HUD
may terminate the renewal of any grant'
and require the recipient to repay the
renewal grant if the recipient fails to
submit a HUD Annual Performance
Report (APR) within 90 days of the end
of the program year or if the recipient
submits an APR that HUD deems
unacceptable or shows noncompliance
with the requirements of the grant and
this part. Section 578.103(e) of the
Continuum of Care program regulations
further clarifies that recipients receiving
grant funds for acquisition,
rehabilitation, or new construction are
expected to submit APRs for 15 years
from the date of initial occupancy or the
date of initial service provision, unless
HUD provides an exception. The
recipient's submission of the APR helps
HUD review whether the recipient is
carrying out the project in the manner
proposed in the application. Recipients
agree to submit an APR as a condition
of their grant agreement. This
requirement allows HUD to ensure that
recipients submit APRs on grant
agreements that have expired as a
condition of receiving approval for a
new grant agreement for the renewal
project.
Appeals. The interim rule provides
certain appeal options for applicants
that were not awarded funding.
Under section 422(g) of the
McKinney - Vento Act, if more than one
collaborative applicant submits an
application covering the same
geographic area, HUD must award funds
to the application that scores the highest
score based on the selection criteria set
forth in section 427 of the Act.
Consistent with HUD's use of the term
Continuum of Care in the interim rule
where the statute uses collaborative
applicant, as explained earlier in the
preamble, the interim rule stipulates
that if more than one Continuum of Care
claims the same geographic area, then
HUD will award funds to the
Continuum applicant(s) whose
application(s) has the highest total score
and that no projects from the lower
scoring Continuum of Care will be
funded (and that any projects submitted
with both applications will not be
funded). To appeal HUD's decision to
fund the competing Continuum of Care,
the applicant(s) from the lower - scoring
Continuum of Care must file the written
appeal in such form and manner as
HUD may require within 45 days of the
date of HUD's announcement of award.
If an applicant has had a certification
of consistency with a consolidated plan
withheld, that applicant may appeal
such a decision to HUD. HUD has
established a procedure to process the
appeals and no later than 45 days after
the date of receipt of an appeal, HUD
will make a decision.
Section 422(h) of the McKinney - Vento
Act provides the authority for a solo
applicant to submit an application to
HUD and be awarded a grant by HUD
if it meets the criteria under section 427
of the McKinney - Vento Act. The interim
rule clarifies that a solo applicant must
submit its application to HUD by the
deadline established in the NOFA to be
considered for funding. The statute also
requires that HUD establish an appeal
process for organizations that attempted
to participate in the Continuum of
Care's process and believe they were
denied the right to reasonable
participation, as reviewed in the context
of the local Continuum's process. An
organization may submit a solo
application to HUD and appeal the
Continuum's decision not to include it
in the Continuum's application. If HUD
finds that the solo applicant was not
permitted to participate in the
Continuum of Care process in a
reasonable manner, then HUD may
award the grant to that solo applicant
and may direct the Continuum to take
remedial steps to ensure reasonable
participation in the future. HUD may
also reduce the award to the
Continuum's app licant(s).
Section 422(h)(1) of the McKinney -
Vento Act requires that "HUD establish
a timely appeal procedure for grant
amounts awarded or denied under this
subtitle to a collaborative application."
The interim rule sets an appeal process
for denied or decreased funding under
§ 578.35(c). Applicants that are denied
funds by HUD, or that requested more
funds than HUD awarded, may appeal
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by filing a written appeal within 45 days
of the date of HUD's announcement of
the award. HUD will notify applicant of
its decision on the appeal within 60
days of the date of HUD's receipt of the
written appeal.
Program Components and Eligible Costs
(Subpart D)
Program components. The interim
rule provides that Continuum of Care
funds may be used for projects under
five program components: Permanent
housing, transitional housing,
supportive services only, HMIS, and, in
some cases, homelessness prevention.
Administrative costs are eligible under
all components. Where possible, the
components set forth in the Continuum
of Care program are consistent with the
components set forth under the
Emergency Solutions Grants program.
This will ease the administrative burden
on recipients of both programs and will
ensure that reporting requirements and
data quality benchmarks are
consistently established and applied to
like projects. One significant distinction
between the Emergency Solutions
Grants program and this part can be
found in the eligible activities and
administration requirements for
assistance provided under the rapid
rehousing component in this interim
rule. The significant differences
between this component in the
Emergency Solutions Grants program
and this part are discussed below.
The interim rule sets forth the costs
eligible for each program component in
§ 578.37(a). The eligible costs for
contributing data to the HMIS
designated by the Continuum of Care
are also eligible under all components.
Consistent with the definition of
permanent housing in section 401 of the
McKinney -Vento Act and § 578.3 of this
interim rule, the permanent housing
component is community -based housing
without a designated length of stay that
permits formerly homeless individuals
and families to live as independently as
possible. The interim rule clarifies that
Continuum of Care funds may be spent
on two types of permanent housing:
Permanent supportive housing for
persons with disabilities (PSH) and
rapid rehousing that provides temporary
assistance (i.e., rental assistance and /or
supportive services) to program
participants in a unit that the program
participant retains after the assistance
ends.
Although the McKinney -Vento Act
authorizes permanent housing without
supportive services, the interim rule
does not. Based on its experience with
the Supportive Housing and Shelter
Plus Care programs, HUD has
determined that programs should
require at least case management for
some initial period after exiting
homelessness. HUD has imposed the
requirement that rapid rehousing
include, at a minimum, monthly case
management meetings with program
participants (except where prohibited
by the Violence Against Women Act
(VAWA) and the Family Violence
Prevention and Services Act (FVPSA))
and allows for a full range of supportive
services to be provided for up to 6
months after the rental assistance stops.
Many other HUD programs, such as
Section 8 and HOME, provide housing
without supportive services to low -
income individuals and families.
With respect to rapid rehousing, the
interim rule provides that funds under
this part may be used to provide
supportive services and short -term
and /or medium -term rental assistance.
While the time frames under which a
program participant may receive short -
term or medium -term rental assistance
set forth in this part match the time
frames set forth in the Emergency
Solutions Grants program, the
supportive services available to program
participants receiving rapid rehousing
assistance under the Continuum of Care
program are not limited to housing
relocation and stabilization services as
they are in the Emergency Solutions
Grants program. Program participants
receiving rapid rehousing under this
part may receive any of the supportive
services set forth in § 578.53 during
their participation in the program. The
Continuum of Care, however, does have
the discretion to develop written
policies and procedures that limit the
services available to program
participants that better align the services
available to program participants with
those set forth in the Emergency
Solutions Grants program.
Specific request for comment. While
HUD's experience with the Supportive
Housing and Shelter Plus Care programs
is the basis for HUD's determination to
require case management for some
initial period after exiting homelessness,
HUD specifically welcomes comment on
other experiences with monthly case
management.
The interim rule provides that the
HMIS component is for funds that are
used by HMIS Leads only. Eligible costs
include leasing a structure in which the
HMIS is operated, operating funds to
operate a structure in which the HMIS
is operated, and HMIS costs related to
establishing, operating, and customizing
a Continuum of Care's HMIS.
As set forth in Section 424(c) of the
McKinney -Veto Act, Continuum of Care
funds may be used only for the
homelessness prevention component by
recipients in Continuums of Care that
have been designated HPCs by HUD.
Eligible activities are housing relocation
and stabilization services, and short -
and/or medium -term rental assistance,
as set forth in 24 CFR 576.103,
necessary to prevent an individual or
family from becoming homeless.
Planning activities. Under this interim
rule, HUD lists eligible planning costs
for the Continuum of Care under
§ 578.39(b) and (c). HUD will allow no
more than 3 percent of the FPRN, or a
maximum amount to be established by
the NOFA, to be used for certain costs.
These costs must be related to designing
a collaborative process for an
application to HUD, evaluating the
outcomes of funded projects under the
Continuum of Care and Emergency
Solutions Grants programs, and
participating in the consolidated plan(s)
for the geographic area(s). Under section
423 of the McKinney -Vento Act, a
collaborative applicant may use no more
than 3 percent of total funds made
available to pay for administrative costs
related to Continuum of Care planning.
HUD is defining "of the total funds
made available" to mean FPRN, the
higher of PPRN or renewal demand, in
the interim rule. HUD has determined
that FPRN strikes the correct balance, as
it is the higher of PPRN or renewal
demand. This will help Continuums of
Care (CoQ balance: (1) Having sufficient
planning dollars to be successful in its
duties and compete for new money
(which would be the PPRN), and (2)
being able to monitor and evaluate
actual projects in operation (and plan
for renewal demand). The
administrative funds related to CoC
planning made available will be added
to a CoC's FPRN to establish the CoCs
maximum award amount.
Unified Funding Agency Costs. Under
this interim rule, HUD lists eligible UFA
costs in § 578.41(b) and (c). Similar to
the cap on planning costs for CoC, HUD
will allow no more than 3 percent of the
FPRN, or a maximum amount to be
established by the NOFA, whichever is
less, to be used for UFA costs. This
amount is in addition to the amount
made available for CoC planning costs.
UFA costs include costs associated with
ensuring that all financial transactions
carried out under the Continuum of
Care program are conducted and records
maintained in accordance with
generally accepted accounting
principles, including arranging for an
annual survey, audit, or evaluation of
the financial records of each project
carried out by a subrecipient funded by
a grant received through the Continuum
of Care program. The funds made
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available to UFAs related to establishing
fiscal controls will be added to a CoC's
FPRN to establish the CoC maximum
award amount.
Leasing. Under this interim rule, grant
funds may be used to pay the costs of
leasing a structure or structures, or
portions of structures, to provide
housing or supportive services. The
interim rule further clarifies that leasing
means that the lease is between the
recipient of funds and the landlord.
HUD recognizes that some grantees
receiving funds through the Supportive
Housing Program may have been using
their leasing funds in a manner
consistent with the rental assistance
requirements established in § 578.51;
therefore, since the Continuum of Care
program authorizes both leasing and
rental assistance, the rule provides for
an allowance for projects originally
approved to carry out leasing to renew
and request funds for rental assistance,
so long as the rental assistance meets'
the requirements in § 578.51. The rule
provides that a recipient of a grant
awarded under the McKinney -Vento
Act, prior to enactment of the HEARTH
Act, must apply for leasing if the lease
is between the recipient and the
landlord, notwithstanding that the grant
was awarded prior to the HEARTH Act
amendments to the McKinney -Vento
Act.
The interim rule provides that leasing
funds may not be used to lease units or
structures owned by the recipient,
subrecipient, their parent
organization (s), any other related
organization(s), or organizations that are
members of a partnership where the
partnership owns the structure, unless
HUD authorizes an exception for good
cause. The interim rule establishes
minimum requirements that a request
for an exception must include. These
exceptions are based on HUD's
experience in administering the
Homelessness Prevention and Rapid Re-
Housing Program (HPRP).
The interim rule establishes that
projects for leasing may require that
program participants pay an occupancy
charge (or in the case of a sublease, rent)
of no more than 30 percent of their
income. Income must be calculated in
accordance with HUD's regulations in
24 CFR 5.609 and 24 CFR 5.611(a).
However, the interim rule clarifies that
projects may not charge program fees.
Rental assistance. Under this interim
rule, rental assistance is an eligible cost
for permanent and transitional housing,
and this rule clarifies that the rental
assistance may be short -term, up to 3
months of rent; medium -term, for 3 to
24 months of rent; and long -term, for
longer than 24 months of rent. This
section provides that rental assistance
may include tenant - based, project -
based, or sponsor -based rental
assistance. This section also provides
that project -based rental assistance may
include rental assistance to preserve
existing permanent supportive housing
for homeless individuals and families.
Given that the availability of affordable
rental housing has been shown to be a
key factor in reducing homelessness, the
availability of funding for short -term,
medium -term, and long -term rental
assistance under both the Emergency
Solutions Grants program and the
Continuum of Care program is not
inefficient use of program funds, but
rather effective use of funding for an
activity that lowers the number of
homeless person
As noted in the s. above discussion of
rental housing available for funding
under the Continuum of Care program,
one eligible form of rental assistance is
tenant - based, which allows the program
participant to retain rental assistance for
another unit. The interim rule limits
this retention to within the Continuum
of Care boundaries. HUD has
determined that Continuum of Care
program funds must be used within the
Continuum's geographic boundaries. If
program participants move outside of
the Continuum, the Continuum may pay
moving costs, security deposits, and the
first month of rent for another unit;
however, the Continuum would have to
organize assistance with the relevant
Continuum of Care for the program
participant if rental assistance is to
continue. The program participant may
be transferred to a rental assistance
program in a different Continuum
without having to become homeless
again. The recipient may also limit the
movement of the assistance to a smaller
area if this is necessary to coordinate
service delivery.
Under this interim rule, the only
exception to the limitation for retention
of tenant -based rental assistance is for
program participants who are victims of
domestic violence, dating violence,
sexual assault, or stalking. Under the
definition of "tenant- based" in the
McKinney -Vento Act (section 401(28) of
the McKinney -Vento Act), these
participants must have complied with
all other obligations of the program and
reasonably believe that he or she is
imminently threatened by harm from
further violence if he or she remains in
the assisted dwelling unit.
In the interim rule, HUD has clarified
that the imminent threat of harm must
be from further domestic violence,
dating violence, sexual assault, or
stalking, which would include threats
from a third party, such as a friend or
family member of the perpetrator of the
violence. HUD requires that the program
participant provide appropriate
documentation of the original incident
of domestic violence, dating violence,
sexual assault, or stalking, and any
evidence of the current imminent threat
of harm. Examples of appropriate
documentation of the original incident
of domestic violence, dating violence,
sexual assault, or stalking include
written observation by the housing or
service provider; a letter or other
documentation from a victim service
provider, social worker, legal assistance
provider, pastoral counselor, mental
health provider, or other professional
from whom the victim has sought
assistance; or medical or dental, court,
or law enforcement records.
Documentation of reasonable belief of
further domestic violence, dating
violence, sexual assault, or stalking
includes written observation by the
housing or service provider; a letter or
other written documentation from a
victim service provider, social worker,
legal assistance provider, pastoral
counselor, mental health provider, or
other professional from whom the
victim has requested assistance; a
current restraining order, recent court
order, or other court records; or law
enforcement reports or records. The
housing or service provider may also
consider other documentation such as
emails, voicemails, text messages, social
media posts, and other communication.
Because of the particular safety
concerns surrounding victims of
domestic violence, the interim rule
provides that acceptable evidence for
both the original violence and the
reasonable belief include an oral
statement. This oral statement does not
need to be verified, but it must be
documented by a written certification
by the individual or head of household.
This provision is specific to victims of
domestic violence, dating violence,
sexual assault, and stalking who are
receiving tenant -based rental assistance
in permanent housing. This interim rule
contains other policies for moving
program participants receiving any type
of assistance under this interim rule,
including tenant -based rental assistance,
within the Continuum of Care
geographic area, or smaller geographic
area required by the provider to
coordinate service delivery. Moving
program participants outside of the
geographic area where providers can
coordinate service - delivery is
administratively difficult for providers
and makes it difficult to monitor that
program participants have access to, and
are receiving, appropriate supportive
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services; therefore, moves outside of the
geographic area where the provider can
effectively deliver and monitor service
coordination are allowed only under
exceptional circumstances. HUD has
established these provisions to provide
an exception and to address the
challenges that are associated with such
a move.
Based on HUD's experience in
administering the Shelter Plus Care
program, the interim rule includes
provisions to clarify when rental
payments may continue to be made to
a landlord when the program
participant no longer resides in the unit.
For vacated units, the interim rule
provides that assistance may continue
for a maximum of 30 days from the end
of the month in which the unit was
vacated, unless the unit is occupied by
another eligible person. A person
staying in an institution for less than 90
days is not considered as having vacated
the unit. Finally, the recipient may use
grant funds, in an amount not to exceed
one month's rent, to pay for any damage
to housing due to the action of the
program participant, one -time, per
program participant, per unit. This
assistance can be provided only at the
time the program participant exits the
housing unit.
Supportive services. Grant funds may
be used to pay eligible costs of
supportive services for the special needs
of program participants. All eligible
costs are eligible to the same extent for
program participants who are
unaccompanied homeless youth;
persons living with Human
Immunodeficiency Virus (HIV)/
Acquired Immune Deficiency Syndrome
(AIDS) (HIV /AIDS); and victims of
domestic violence, dating violence,
sexual assault, or stalking. Any cost that
is not described as an eligible cost under
this interim rule is not an eligible cost
of providing supportive services.
Eligible costs consist of assistance with
moving costs, case management, child
care, education services, employment
assistance and job training, housing
search and counseling services, legal
services, life skills training, mental
health services, outpatient health
services, outreach services, substance
abuse treatment services, transportation,
and utility deposits.
The definition of "supportive
services" in section 401(27) of the
McKinney -Vento Act includes the
provision of mental health services,
trauma counseling, and victim services,
HUD has determined that victim
services are eligible as supportive
services, and are included as eligible
program costs in this interim rule.
Providers are allowed to provide
services specifically to victims of
domestic violence,, dating violence,
sexual assault, and stalking. The eligible
costs for providing victim services are
listed as eligible costs in the supportive
services funding category. Rather than
create a new eligible line item in the
project budget, HUD has determined
that these costs can be included in the
funding categories already established,
Indirect costs. Indirect costs are
allowed as part of eligible program
costs. Programs using indirect cost
allocations must be consistent with
Office of Management and Budget
(OMB) Circulars A -87 and A -122, as
applicable. OMB Circular A -87 and the
regulations at 2 CFR part 225 pertain to
"Cost Principles for State, Local, and
Indian Tribal Governments." OMB
Circular A -122 and the regulations
codified at 24 CFR part 230 pertain to
"Cost Principles for Non -Profit
Organizations."
Other costs. In addition to the eligible
costs described in this preamble, the
regulation addresses the following other
eligible costs: acquisition, rehabilitation,
new construction, operating costs,
HMIS, project administrative costs, and
relocation costs.
High - Performing Communities (Subpart
E)
Section 424 of the McKinney -Vento
Act establishes the authority for the
establishment of and requirements for
HPCs. Applications must be submitted
by the collaborative applicant at such
time and in such manner as HUD may
require and contain such information as
HUD determines necessary under
§ 578.17(b). Applications will be posted
on the HUD Web site (www.hud.gov) for
public comments. In addition to HUD's
review of the applications, interested
members of the public will be able to
provide comment to HUD regarding the
applications.
Requirements. The Continuum of Care
must use HMIS data (HUD will publish
data standards and measurement
protocols) to determine that the
standards for qualifying as a HPC are
met. An applicant must submit a report
showing how the Continuum of Care
program funds were expended in the
prior year, and provide information that
the Continuum meets the standards for
HPCs.
Standards. In order to qualify as an
HPC, a Continuum of Care must
demonstrate through reliable data that it
meets all of the required standards. The
interim rule clarifies which standards
will be measured with reliable data from
a Continuum's HMIS and which
standards will be measured through
reliable data from other sources and
presented in a narrative form or other
format prescribed by HUD.
Continuums must use the HMIS to
demonstrate the following measures: (1)
That the mean length of homelessness
must be less than 20 days for the
Continuum's geographic area, or the
Continuum's mean length of episodes
for individuals and families in similar
circumstances was reduced by at least
10 percent from the preceding year; (2)
that less than 5 percent of individuals
and families that leave homelessness
become homeless again any time within
the next 2 years, or the percentage of
individuals and families in similar
circumstances who became homeless
again within 2 years after leaving
homelessness was decreased by at least
20 percent from the preceding year; and
(3) for Continuums of Care that served
homeless families with youth defined as
homeless under other federal statutes,
that 95 percent of those families did not
become homeless again within a 2 -year
period following termination of
assistance and that 85 percent of those
families achieved independent living in
permanent housing for at least 2 years
following the termination of assistance.
The McKinney -Vento Act requires
that HUD set forth standards for
preventing homelessness among the
subset of those at the highest risk of
becoming homeless among those
homeless families and youth defined as
homeless under other federal statutes,
the third measure above, one of which
includes achieving independent living
in permanent housing among this
population. HUD has set forth the
standards of 95 percent and 85 percent.
HUD recognizes that these standards are
high, but standards are comparable to
the other standards in the Act, which
are high. It is HUD's position that HPCs
should be addressing the needs of those
homeless individuals within their
communities prior to receiving
designation of a HPC and being allowed
to spend funds in accordance with
§ 578.71.
The final standard that the
Continuum must use its HMIS data to
demonstrate is provided under section
424(d)(4) of the Act. The statute requires
each homeless individual or family who
sought homeless assistance to be
included in the data system used by that
community. HUD has defined this as
bed - coverage and service - volume
coverage rates of at least 80 percent. The
documentation that each homeless
individual or family who sought
homeless assistance be included in the
HMIS is not measurable by HUD. This
type of standard would be entirely
reliant upon self- reporting.
Additionally, individuals and families
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have the right to decline having their
data entered into the HMIS. HUD uses
bed - coverage rates and service - volume
coverage rates as a proxy for measuring
the rate of inclusion of persons who are
present for services or housing in the
HMIS. This is a measurable standard,
and HUD defines the calculation in the
HMIS rule; therefore, the measurement
will be consistent between Continuums.
Continuums must use reliable data
from other sources and presented in a
narrative form or other format
prescribed by HUD to measure two
standards; Community action and
renewing HPC status. Section 424(d)(4)
of the McKinney -Vento Act establishes
another standard for HPCs, which is
"community action." This statutory
section provides that communities that
compose the geographic area must have
actively encouraged homeless
individuals and families to participate
in housing and services available in the
geographic area and included each
homeless individual or family who
sought homeless assistance services in
the data system used by that community
for determining compliance. HUD has
defined "communities that compose the
geographic area" to mean the entire
geographic area of the Continuum. This
definition will also provide consistency
of measurement since most of HUD's
measurements are across the entire
Continuum of Care geographic area.
HUD has further defined "actively
encourage" within this standard as a
comprehensive outreach plan, including
specific steps for identifying homeless
persons and referring them to
appropriate housing and services in that
geographic area. The measurement of
the last part of this standard, "each
homeless individual or family who
sought homeless assistance services in
the data system used by that
community," will be measured using
reliable data from an HMIS and has
been discussed earlier in this preamble.
HUD has determined this will provide
clarity and ensure consistent
measurement across Continuums.
The interim rule provides that a
Continuum of Care that was an HPC in
the prior year and used Continuum
funds for activities described under
§ 578.71 must demonstrate that these
activities were effective at reducing the
number of persons who became
homeless in that community, to be
renewed as a HPC.
Selection. HUD will select up to 10
Continuums of Care each year that best
meet the application requirements and
the standards set forth in § 578.65.
Consistent with section 424 of the
McKinney -Vento Act, the interim rule
provides a HPC designation for the
grants awarded in the same competition
in which the designation is applied for
and made. The designation will be for
a period of one year.
Eligible activities. Recipients and
subrecipients in Continuums that have
been designated an HPC may use grant
funds to provide housing relocation and
stabilization services and short- and /or
medium -term rental assistance to
individuals and families at risk of
homelessness as set for in the
Emergency Solutions Grants program.
All eligible activities discussed in this
section must be effective at stabilizing
individuals and families in their current
housing, or quickly moving such
individuals and families to other
permanent housing. This is the only
time that Continuum of Care funds may
be used to serve nonhomeless
individuals and families. Recipients and
subrecipients using grant funds on these
eligible activities must follow the
written standards established by the
Continuum of Care in § 578.7(a)(9)(v),
and the recordkeeping requirements set
for the Emergency Solutions Grants
program rule.
Program Requirements (Subpart F)
All recipients of Continuum of Care
funding must comply with the program
regulations and the requirements of the
NOFA issued annually by HUD.
Matching. The HEARTH Act allows
for a new, simplified match
requirement. All eligible funding costs
except leasing must be matched with no
less than a 25 percent cash or in -kind
match. The interim rule clarifies that the
match must be provided for the entire
grant, except that recipients that are
UFAs or are the sole recipient for the
Continuum may provide the match on a
Continuum -wide basis.
For in -kind match, the
governmentwide grant requirements of
HUD's regulations in 24 CFR 84,23 (for
private nonprofit organizations) and
85.24 (for governments) apply. The
regulations in 24 CFR parts 84 and 85
establish uniform administrative
requirements for HUD grants. The
requirements of 24 CFR part 84 apply to
subrecipients that are private nonprofit
organizations. The requirements of 24
CFR part 85 apply to the recipient and
subrecipients that are units of general
purpose local government. The match
requirement in 24 CFR 84.23 and in 24
CFR 85.24 applies to administration
funds, as well as Continuum of Care
planning costs and UFA's financial
management costs. All match must be
spent on eligible activities as required
under subpart D of this interim rule,
except that recipients and'subrecipients
in HPCs may use match on eligible
activities described under § 578.71.
General operations. Recipients of
grant funds must provide housing or
services that comply with all applicable
State and local housing codes, licensing
requirements, and any other
requirements in the project's
jurisdiction. In addition, this interim
rule clarifies that recipients must abide
by housing quality standards and
suitable dwelling size. Recipients must
also assess supportive services on an
ongoing basis, have residential
supervision, and provide for
participation of homeless individuals as
required under section 426(g) of the
McKinney -Vento Act.
Specific request for comment. With
respect to housing quality standards,
HUD includes in this rule the
longstanding requirement from the
Shelter Plus Care program that
recipients or subrecipients, prior to
providing assistance on behalf of a
program participant, must physically
inspect each unit to assure that the unit
meets housing quality standards. This
requirement is designed to ensure that
program participants are placed in
housing that is suitable for living.
Additionally, these requirements are
consistent with HUD's physical
inspection requirements in its other
mainstream rental assistance programs.
Notwithstanding that this is a
longstanding requirement, HUD
welcomes comment on alternatives to
inspection of each unit that may be less
burdensome but ensure that the housing
provided to a program participant is
decent, safe, and sanitary.
Under Section 578.75, General
Operations, subsection (h), entitled
"Supportive Service Agreements,"
states that recipients and subrecipients
may require program participants to
take part in supportive services so long
as they are not disability- related
services, provided through the project as
a condition of continued participation
in the program. Examples of disability -
related services include, but are not
limited to, mental health services,
outpatient health services, and
provision of medication, which are
provided to a person with a disability to
address a condition caused by the
disability.
This provision further states that if
the purpose of the project is to provide
substance abuse treatment services,
recipients and subrecipients may
require program participants to take part
in such services as a condition of
continued participation in the program.
For example, if a Continuum of Care
recipient operates a transitional housing
program with substance abuse treatment
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services, the recipient may require
program participants to participate in
those services. By contrast, in a program
that offers services but whose purpose is
not substance abuse treatment, a
recipient may not require a person who
is an alcoholic, for example, to sign a
supportive service agreement at initial
occupancy stating that he or she will
participate in substance abuse treatment
services as a condition of occupancy.
All program participants must, however,
meet all terms and conditions of
tenancy, including lease requirements.
If, as a result of a person's behavior
stemming from substance use, a person
violates the terms of the lease, a
recipient may consider requiring
participation in services or any other
action necessary in order for such a
person to successfully meet the
requirements of tenancy.
Finally, the interim rule clarifies that
in units where the qualifying member of
the household has died, or has been
incarcerated or institutionalized for
more than 90 days, assistance may
continue until the expiration of the
lease in effect at the time of the
qualifying member's death,
incarceration, or institutionalization.
Displacement, relocation, and
acquisition. All recipients must ensure
that they have taken all reasonable steps
to minimize the displacement of
persons as a result of projects assisted
under this part. This section of the
interim rule is substantially revised
from the previous programs to increase
clarity and comprehension of the
directions to recipients and
subrecipients in the use of grant funds.
Timeliness standards. Recipients
must initiate approved activities and
projects promptly. Recipients of funds
for rehabilitation and new construction
must begin construction activities
within 9 months of the signing of the
grant, and such activities must be
completed within 24 months. HUD is
providing these requirements to assist
communities in meeting the obligation
and expenditure deadline historically
imposed by the annual HUD
appropriations act. HUD may reduce a
grant term to a term of one year if
implementation delays reduce the
amount of funds that can be used during
the original grant term.
Limitation on use of funds. Recipients
of funds provided under this part must
abide by any limitations that apply to
the use of such funds, such as use of
funds for explicitly religious activities,
The limitation on use of funds also
addresses limitation on uses where
religious activities may be concerned. It
is HUD's position that faith -based
organizations are able to compete for
HUD funds and participate in HUD
programs on an equal footing with other
organizations; that no group of
applicants competing for HUD funds
should be subject, as a matter of
discretion, to greater or fewer
requirements than other organizations
solely because of their religious
character or affiliation, or, alternatively,
the absence of religious character or
affiliation. HUD's general principles
regarding the equal participation of such
organizations in its programs are
codified at 24 CFR 5.109. Program -
specific requirements governing faith -
based activities are codified in the
regulations for the individual HUD
programs. (See, for example, 24 CFR
574.300(c), 24 CFR 582.115(c), and 24
CFR 583.150(b).)
HUD's equal participation regulations
were prompted by Executive Order
13279, Equal Protection of the Laws for
Faith -Based and Community
Organizations, issued by President Bush
on December 12, 2002, and published in
the Federal Register on December 16,
2002 (67 FR 77141). Executive Order
13279 set forth principles and
policymaking criteria to guide federal
agencies in ensuring the equal
protection of the laws for faith -based
and community organizations.
Executive Order 13279 was amended by
Executive Order 13559 (Fundamental
Principles and Policymaking Criteria for
Partnerships With Faith -Based and
Other Neighborhood Organizations),
issued by President Obama on
November 17, 2010, and published in
the Federal Register on November 22,
2010 (75 FR 71319).
Executive Order 13559 expands on
the equal participation principles
provided in Executive Order 13279 to
strengthen the capacity of faith -based
and other neighborhood organizations to
deliver services effectively and ensure
the equal treatment of program
beneficiaries. Executive Order 13559
reiterates a key principle underlying
participation of faith -based
organizations in federally funded
activities and that is that faith -based
organizations be eligible to compete for
federal financial assistance used to
support social service programs and to
participate fully in social service
programs supported with federal
financial assistance without impairing
their independence, autonomy,
expression outside the programs in
question, or religious character.
With respect to program beneficiaries,
the Executive Order states that
organizations, in providing services
supported in whole or in part with
federal financial assistance, and in their
outreach activities related to such
services, should not be allowed to
discriminate against current or
prospective program beneficiaries on
the basis of religion, a religious belief,
a refusal to hold a religious belief, or a
refusal to attend or participate in a
religious practice. The Executive Order
directs that organizations that engage in
explicitly religious activities (including
activities that involve overt religious
content such as worship, religious
instruction, or proselytization) must
perform such activities and offer such
services outside of programs that are
supported with direct federal financial
assistance (including through prime
awards or subawards), separately in
time or location from any such programs
or services supported with direct federal
financial assistance, and participation in
any such explicitly religious activities
must be voluntary for the beneficiaries
of the social service program supported
with such federal financial assistance.
For purposes of greater clarity and
comprehensibility, the Executive Order
uses the term "explicitly religious" in
lieu of "inherently religious." The
Executive Order further directs that if a
beneficiary or prospective beneficiary of
a social service program supported by
federal financial assistance objects to
the religious character of an
organization that provides services
under the program, that organization
shall, within a reasonable time after the
date of the objection, refer the
beneficiary to an alternative provider.
Executive Order 13559 provides for
the establishment of an Interagency
Working Group on Faith -Based and
Other Neighborhood Partnerships
(Working Group) to review and evaluate
existing regulations, guidance
documents, and policies, and directs the
OMB to issue guidance to agencies on
uniform implementation following
receipt of the Working Group's report.
On April 27, 2012, the Working Group
issued its report, recommending a
model set of regulations and guidance
for agencies to adopt.'
HUD intends to wait for OMB
guidance before initiating any
rulemaking directed to broader changes
to HUD's existing faith -based
regulations, to ensure consistency with
faith -based regulations of other federal
agencies. However, HUD has revised its
regulatory provisions governing faith -
based activities to incorporate the
principles of Executive Order 13559
pertaining to equal treatment of program
beneficiaries and to adopt terminology,
such as "explicitly religious" and "overt
1 The report is available at: http: //
www.whiteh ouse.gov /sites /default /files /uploads/
fin al fai th based workinggroupre port, p d f.
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religious content," that offers greater
clarity to the limitations placed on faith -
based organizations when using federal
funds for their supportive services.
Additionally, HUD is putting in place
through this rulemaking the provision of
Executive Order 13559 that directs the
referral to alternative providers.
Executive Order 13559 provides that if
a beneficiary or prospective beneficiary
of a social service program supported by
federal financial assistance objects to
the religious character of an
organization that provides services
under the program, that organization
shall, within a reasonable time frame
after the date of the objection, refer the
beneficiary to an alternative provider.
While HUD will benefit from OMB
guidance on other provisions of the
Executive Order, specifically those
which the Working Group is charged to
provide recommendations, the
"referral" provision of the Executive
Order is one that HUD believes it can
immediately put in place. HUD may,
following receipt of public comment
and further consideration of this issue,
revise how recipients and subrecipients
document the referral to other providers
when beneficiaries may assert
objections to the original provider. For
now, HUD is requiring that any
objections and any referrals be
documented in accordance with the
recordkeeping provisions of § 578.013.
This section of the interim rule also
contains limitations on the types of
eligible assistance that may not be
combined in a single structure or
housing unit. As the Continuum of Care
substantially increases the types of
assistance that may be combined in a
project from previous programs, HUD
has established standards in this section
to provide recipients with clarity about
the types of activities that may not be
carried out in a single structure or
housing unit.
Termination of assistance. The
interim rule provides that a recipient
may terminate assistance td a
participant who violates program
requirements or conditions of
occupancy. The recipient must provide
a formal process that recognizes the due
process of law. Recipients may resume
assistance to a participant whose
assistance has been terminated.
Recipients that are providing
permanent supportive housing for hard -
to -house populations of homeless
persons must exercise judgment and
examine all circumstances in
determining whether termination is
appropriate. Under this interim rule,
HUD has determined that a participant's
assistance should be terminated only in
the most severe cases. HUD is carrying
over this requirement from the Shelter
Plus Care program.
Fair Housing and Equal Opportunity
requirements. The Continuum of Care,
as well as its members and
subrecipients, are required to comply
with applicable civil rights laws.
Section 578.93, addressing
nondiscrimination and equal
opportunity requirements, is provided
to offer greater direction to recipients
and subrecipients on the use of grant
funds. Section 578.93(a) states that the
nondiscrimination and equal
opportunity requirements set forth in 24
CFR 5.105(a) apply. This includes, but
is not limited to, the Fair Housing Act,
Title VI of the Civil Rights Act of 1964,
Section 504 of the Rehabilitation Act of
1973 (Section 504), and title II of the
Americans with Disabilities Act,
Section 578.93(b) explains when
recipients and subrecipients may
exclusively serve a particular
subpopulation in transitional or
permanent housing. As part of these
requirements, recipients must also
administer programs and activities
receiving federal financial assistance in
the most integrated setting appropriate
to the needs of qualified individuals
with disabilities. This "integration
mandate" requires that HUD - funded
programs or activities enable
individuals with disabilities to interact
with nondisabled persons to the fullest
extent possible. In reviewing requests
for funding through the Continuum of
Care NOFA, HUD will be considering
each recipient's proposals to provide
integrated housing to individuals with
disabilities.
There are certain situations in which
a recipient or subrecipient may limit
housing to a specific subpopulation, so
long as admission does not discriminate
against any protected class, as well as
instances where recipients or
subrecipients may limit admission or
provide a preference to certain
subpopulations of homeless persons and
families who need the specialized
services provided in the housing. For
example, § 578.93(b)(2) states that the
housing may be limited to homeless
veterans, so long as admission is not
denied based on any membership in a
protected class; e.g., homeless veterans
with families must be admitted.
Similarly, housing may be limited to
domestic violence victims and their
families or persons who are at risk of
institutionalization, so long as
admission is not denied based on any
membership in a protected class.
Section 578.93(b)(3) states that
housing may be limited to families with
children.
Section 578.93(b)(1) states that, in
consideration of personal privacy,
housing may only be limited to a single
sex when such housing consists of a
single structure with shared bedrooms
or bathing facilities such that the
considerations of personal privacy and
the physical limitations of the
configuration of the housing make it
appropriate for the housing to be limited
to one sex.
Further, §§ 578.93(b)(4) and (5) clearly
outline instances when sex offenders or
violent offenders may be excluded from
housing, and when projects providing
sober housing may exclude persons.
HUD's Section 504 regulations permit
housing funded under a particular
program to be reserved for persons with
a specific disability when a federal
statute or executive order specifically
authorizes such a limitation. Section
578.93(b)(6) states that if the housing is
assisted with funds under a federal
program that is limited by federal
statute or executive order to a specific
subpopulation, the housing may be
limited to that subpopulation.
Section 578.93(b)(7) provides
clarification to recipients of funds under
this part as to when a project can limit
admission to a specific subpopulation of
homeless individuals and families based
on the service package offered in the
project. To help recipients better
understand these requirements, the
following paragraphs provide a detailed
explanation of the regulatory provision,
along with a few examples.
Section 578.93(b)(7) states that
recipients may limit admission to or
provide a preference for the housing to
subpopulations of homeless persons and
families who need the specialized
supportive services that are provided in
the housing. The regulation contains the
following examples: Substance abuse
addiction treatment, domestic violence
services, or a high- intensity package
designed to meet the needs of hard -to-
reach homeless persons. However,
§ 578.93(b)(7) further states that while
the housing may offer services for a
particular type of disability, no
otherwise eligible individual with a
disability, or family that includes an
individual with a disability, who may
benefit from the services provided may
be excluded on the grounds that they do
not have a particular disability. Below
are general examples to offer guidance
on this subsection. Please note that
these examples are nonexhaustive, but
emphasize that the proper focus is on
the services available as part of the
Continuum of Care project as opposed
to a person's category or subcategory of
disability. While these general
principles are offered to help clarify this
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section, a change in the factual scenario
may change the analysis.
One clarifying example is as follows.
A private, nonprofit organization or a
local government applies for and
receives a new grant under this part to
provide project -based rental assistance
and services, including case
management, intensive therapy
provided by a psychiatrist, and
medication management. The recipient
or subrecipient may establish a
preference for individuals who are
chronically homeless. When filling an
opening in the housing, the recipient or
subrecipient may target chronically
homeless individuals or families, but if
there are no such individuals or families
either on a waiting list or applying for
entrance to the program, the recipient or
subrecipient cannot deny occupancy to
individuals or families who apply for
entrance into the program and who may
benefit from the services provided.
When filling a vacancy in the housing,
the recipient or subrecipient, if
presented with two otherwise eligible
persons, one who is chronically
homeless and one who is not, may give
a preference to the chronically homeless
individual.
By comparison, § 578.93(b)(6)
addresses situations where Continuum
of Care funds are combined with HUD
funding for housing that may be
restricted to a specific disability. For
example, if Continuum of Care funds for
a specific project are combined with
construction or rehabilitation funding
for housing from the Housing
Opportunities for People With AIDS
program, the program may limit
eligibility for the project to persons with
HIV /AIDS and their families. An
individual or a family that includes an
individual with a disability may be
denied occupancy if the individual or at
least one member of the family does not
have HIV /AIDS.
In another example, a private,
nonprofit organization applies for and
receives Continuum of Care funds from
a local governmental entity to
rehabilitate a five -unit building, and
provides services including assistance
with daily living and mental health
services. While the nonprofit
organization intends to target and
advertise the project as offering services
for persons with developmental
disabilities, an individual with a severe
psychiatric disability who does not have
a developmental disability but who can
benefit from these services cannot be
denied.
Section 578.93(e) incorporates the
"preventing involuntary family
separation" requirement set forth in
Section 404 of the McKinney -Veto Act
into this interim rule. This provision
clarifies, especially for projects where
the current policy is to deny the
admittance of a boy under the age of 18,
that denying admittance to a project
based on age and gender is no longer
permissible. HUD encourages
Continuums of Care to use their
centralized or coordinated assessment
systems to find appropriate shelter or
housing for families with male children
under the age of 18.
Specific request for comment. HUD
specifically seeks comments from
Continuum of Care - funded recipients on
this requirement. HUD invites
comments about the difficulty that
recipients are going to experience, if
any, in implementing this requirement.
In addition to comments about the
difficulties, HUD invites communities
that have already implemented this .
requirement locally to describe their
methods for use in HUD's technical
assistance materials and for posting on
the HUD Homeless Resource Exchange.
Other standards. In addition to the
program requirements described in this
preamble, the interim rule sets forth
other program requirements by which
all recipients of grant funds must abide.
These include a limitation on the use of
grant funds to serve persons defined as
homeless under other federal laws,
conflicts of interest standards, and
standards for identifying uses of
program income.
Additionally, recipients are required
to follow other federal requirements
contained in this interim rule under
§ 578.99. These include compliance
with such federal requirements as the
Coastal Barriers Resources Act, OMB
Circulars, HUD's Lead -Based Paint
regulations, and audit requirements.
The wording of these requirements has
been substantially revised from previous
programs, with the objective being to
increase clarity and comprehension of
the directions to recipients and
subrecipients in the use of grant funds.
Administration (Subpart G)
Technical assistance. The purpose of
technical assistance under the
Continuum of Care program is to
increase the effectiveness with which
Continuums of Care, eligible applicants,
recipients, subrecipients, and UFAs
implement and administer their
Continuum of Care planning process.
Technical assistance will also improve
the capacity to prepare applications,
and prevent the separation of families in
projects funded under the Emergency
Solutions Grants, Continuum of Care,
and Rural Housing Stability Assistance
programs. Under this interim rule,
technical assistance means the transfer
of skills and knowledge to entities that
may need, but do not possess, such
skills and knowledge. The assistance
may include written information, such
as papers, manuals, guides, and
brochures; person -to- person exchanges;
and training and related costs.
Therefore, as needed, HUD may
advertise and competitively select
providers to deliver technical
assistance. HUD may enter into
contracts, grants, or cooperative
agreements to implement the technical
assistance. HUD may also enter into
agreements with other federal agencies
when awarding technical assistance
funds.
Recordkeeping requirements. Grant
recipients under the Supportive
Housing Program and the Shelter Plus
Care program have always been required
to show compliance with regulations
through appropriate records. However,
the existing regulations are not specific
about the records to be maintained. The
interim rule for the Continuum of Care
program elaborates upon the
recordkeeping requirements to provide
sufficient notice and clarify the
documentation that HUD requires for
assessing compliance with the program
requirements. The recordkeeping
requirements for documenting homeless
status were published in the December
5, 2011, Defining Homeless final rule.
Because these recordkeeping
requirements already went through a 60-
day comment period, HUD is not
seeking further comment on these
requirements. Additionally,
recordkeeping requirements with
similar levels of specificity apply to
documentation of "at risk of
homelessness" and these requirements
can be found in § 576.500(c) of the
Emergency Solutions Grants program
interim rule published on December 5,
2011. Because the documentation
requirements pertaining to "at risk of
homelessness" were already subject to a
60 -day public comment period, HUD is
not seeking additional comment on
these requirements. Further
requirements are modeled after the
recordkeeping requirements for the
HOME Investment Partnerships Program
(24 CFR 92.508) and other HUD
regulations.
Included along with these changes are
new or expanded requirements
regarding confidentiality, rights of
access to records, record retention
periods, and reporting requirements.
Most significantly, to protect the safety
and privacy of all program participants,
the Continuum of Care rule broadens
the program's confidentiality
requirements. The McKinney -Vento Act
requires only procedures to ensure the
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confidentiality of records pertaining to
any individual provided family violence
prevention or treatment services under
this program. The interim rule requires
written procedures to ensure the
security and confidentiality of all
records containing personally
identifying information of any
individual or family who applies for
and /or receives Continuum of Care
assistance.
Grant and project changes, The
interim rule provides that recipients of
grants may not make any significant
changes to use of grant funds without
prior HUD approval, evidenced by a
grant amendment signed by HUD and
the recipient. The interim rule provides
separate standards for determining
when a grant amendment is required for
Continuums having only one recipient,
including UFAs, and Continuums
having more than one recipient.
Additionally, the interim rule provides
contingencies that must be met before
HUD will approve the grant
amendment. These contingencies are
necessary to ensure that recipients meet
the capacity requirements established in
the NOFA and to ensure that eligible
persons within the geographic area are
better served and, since the Continuum
of Care program is a competitive
program, that the priorities established
under the'NOFA continue to be met.
Any changes to an approved grant or
project that do not require a grant
amendment, as set forth in this section,
must be fully documented in the
recipient's or subrecipient's records.
Sanctions. The interim rule
establishes sanctions based on existing
regulations and strengthens the
enforcement procedures and array of
remedial actions and sanctions for
recipients and subrecipients of
Continuum of Care funds. These,
revisions draw from the requirements at
24 CFR 85.43 and other HUD program
regulations.
Close -out. The interim rule provides
that grants must be closed out at the end
of their grant term if recipients are not
seeking renewal. Section 578.109 of this
interim rule specifies the actions that
must be taken after the closeout,
including grantee submission of
financial, final performance, or other
reports required by HUD within 90 days
of the end of the grant term. Any unused
funds must be deobligated and returned
to HUD.
The interim rule stipulates, for grants
seeking renewal, that failure to submit
final performance reports, or other
reports required by HUD within 90
days, may cause renewal funds to be
withdrawn and grant funds expended
on the renewal grant to be repaid.
III. Regulations for HUD Homeless
Assistance Programs Existing Prior to
Enactment of HEARTH Act
Because grants are still being
administered under the Shelter Plus
Care program and the Supportive
Housing program, the regulations for
these programs in 24 CFR parts 582, and
583, respectively, will remain in the
Code of Federal Regulations for the time
being. When no more, or very few,
grants remain under these programs,
HUD will remove the regulations in
these parts by a separate rule (if no
grants exist) or will replace them with
a savings clause, which will continue to
govern grant agreements executed prior
to the effective date of the HEARTH Act
regulations.
IV. Conforming Regulations
In addition to establishing the new
regulations for the Continuum of Care
program, HUD is amending the
following regulations, which reference
the Shelter Plus Care Program and the
Supportive Housing Program, to include
reference to the Continuum of Care
program, These regulations are the
regulations pertaining to: (1) Family
Income and Family Payment;
Occupancy Requirements for Section 8
and Public Housing, Other HUD -
Assisted Housing Serving Persons with
Disabilities, and Section 8 Project -Based
Assistance, the regulations for which are
in 24 CFR part 5, subpart F, specifically,
.§ 5.601 (Purpose and Applicability),
paragraphs (d) and (e) of this section;
§ 5.603 (Definitions), specifically the
definition of "Responsible Entity;"
§ 5.617 (Self- Sufficiency Incentives for
Persons with Disabilities — Disallowance
of Increase in Annual Income),
paragraph (a) of this section; (2)
Environmental Review Responsibilities
for Entities Assuming HUD
Environmental Responsibilities, the
regulations for which are in 24 CFR part
58, specifically § 58.1 (Purpose and
Applicability), paragraph (b)(3) of this
section; and (3) the Consolidated
Submissions for Community Planning
and Development Programs, the
regulations for which are in 24 CFR part
91, specifically, § 91.2 (Applicability),
paragraph (b) of this section,
V. Justification for Interim Rulemaking
In accordance with its regulations on
rulemaking at 24 CFR part 10, HUD
generally publishes its rules for advance
public comment.2 Notice and public
2 The Administrative Procedure Act (5 U.S.C.
Subchapter II) (APA), which governs federal
rulemaking, provides in section 553(a) that matters
involving a military or foreign affairs function of the
United States or a matter relating to federal agency
procedures may be omitted, however, if
HUD determines that, in a particular
case or class of cases, notice and public
comment procedure are "impracticable,
unnecessary, or contrary to the public
interest," (See 24 CFR 10.1.)
In this case, HUD has determined that
it would be contrary to the public
interest to delay promulgation of the
regulations for the Continuum of Care
program.3 Congress has provided
funding for this new program in the
Consolidated and Further Continuing
Appropriations Act, 2012 (Pub. L. 112-
55, approved November 18, 2011) (FY
2012 Appropriations Act). The FY 2012
Appropriations Act, under the account
for Homeless Assistance Grants,
appropriates not less than $1.593 billion
for the Continuum of Care and Rural
Housing Stability programs, While
many federal programs, including HUD
programs, received a reduction in
funding in the FY 2012 Appropriations
Act, Congress increased funding for
HUD's homeless assistance grants,
including the Continuum of Care
program. Additionally, the Conference
Report accompanying the FY 2012
Appropriations Act (House Report 112-
284) states in relevant part, as follows:
"The conferees express concern that
HUD continued to implement pre -
HEARTH grant programs in FY 2011,
due to a lack of regulations. The '
conferees direct HUD to publish at least
interim guidelines for the Emergency
Solutions Grants and Continuum of Care
programs this fiscal year and to
implement the new grant programs as
soon as possible so that the updated
policies and practices in HEARTH can
begin to govern the delivery of homeless
assistance funding." (See Conf. Rpt, at
page 319, Emphasis added.) Given this
congressional direction, HUD is issuing
this rule providing for regulations for
the Continuum of Care program as an
interim rule. Having interim regulations
in place will allow HUD to move
forward in making FY 2012 funds
available to grantees, and avoid a
significant delay that would result from
issuance, first, of a proposed rule. As
management or personnel or to public property,
loans, grants, benefits, or contracts are exempt from
the advance notice and public comment
requirement of sections 553(b) and (c) of the APA.
In its regulations in 24 CFR 10.1, HUD has waived
the exemption for advance notice and public
comment for matters that relate to public property,
loans, grants, benefits, or contracts, and has
committed to undertake notice and comment
rulemaking for these matters.
3 Although HUD's regulation in 24 CFR 10.1
provide that HUD will involve public participation
in its rulemaking, this regulation also provides that
notice and public procedure will be omitted if HUD
determines in a particular case or class of cases that
notice and public procedure are impracticable,
unnecessary, or contrary to the public interest,
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has been discussed in this preamble, the
foundation for the Continuum of Care
regulations is the criteria and
requirements provided in NOFAs for the
Continuum of Care Homeless Assistance
Grants Competition program, which
HUD has funded for more than 10 years.
Through the Continuum of Care
Homeless Assistance Grants
Competition program, HUD provided
funding for the Supportive Housing
program, the Shelter Plus Care program,
and the Section 8 Moderate
Rehabilitation Single Room Occupancy
program. The HEARTH Act
consolidated these three competitive
programs into the statutorily established
Continuum of Care program, which was
established as a single grant program.
Interim regulations will provide
certainty with respect to funding
requirements and eligible expenditures
for FY 2012, and the public comment
solicited through this interim rule will
help inform the public procedures that
HUD is contemplating in its regulations
in 24 CFR part 10, and this public
comment, in turn, will inform the final
rule that will follow this interim rule
and govern the funding years following
FY 2012.
For the reasons stated above, HUD is
issuing this rule to take immediate
effect, but welcomes all comments on
this interim rule and all comments will
be taken into consideration in the
development of the final rule.
VI. Findings and Certifications
Regulatory Review— Executive Orders
12866 and 13563
Under Executive Order 12866
(Regulatory Planning and Review), a
determination must be made whether a
regulatory action is significant and,
therefore, subject to review by the Office
of Management and Budget (OMB) in
accordance with the requirements of the
order. Executive Order 13563
(Improving Regulations and Regulatory
Review) directs executive agencies to
analyze regulations that are "outmoded,
ineffective, insufficient, or excessively
burdensome, and to modify, streamline,
expand, or repeal them in accordance
with what has been learned." Executive
Order 13563 also directs that, where
relevant, feasible, and consistent with
regulatory objectives, and to the extent
permitted by law, agencies are to
identify and consider regulatory
approaches that reduce burdens and
maintain flexibility and freedom of
choice for the public. This rule was
determined to be a "significant
regulatory action," as defined in section
3(f) of Executive Order 12866 (although
not an economically significant
regulatory action, as provided under
section 3(f)(1) of the Executive Order).
As has been discussed in this
preamble, this interim rule establishes
the regulations for the Continuum of
Care program, which is the HEARTH
Act's codification of HUD's long-
standing Continuum of Care planning
process. The HEARTH Act not only
codified in law the planning system
known as Continuum of Care, but
consolidated the three existing
competitive homeless assistance grant
programs (Supportive Housing, Shelter
Plus Care, and Single Room Occupancy)
into the single grant program known as
the Continuum of Care program. As
discussed in the preceding section of
the preamble, HUD funded these three
programs for more than 10 years
through a NOFA, which was titled the
Continuum of Care Homeless Assistance
Grants Competition Program. However,
the funding of the three competitive
grant programs, although done through
a single NOFA, delineated the different
statutes and regulations that governed
each of the three programs (see, for
example, HUD's 2008 Continuum of
Care NOFA at 73 FR 398450,
specifically page 39845). In
consolidating these three competitive
programs into a single grant program,
the HEARTH Act achieves the
administrative efficiency that HUD
strived to achieve to the extent possible,
through its administrative establishment
of the Continuum of Care planning
process. To the extent permitted by the
HEARTH Act and where feasible, the
regulations build -in flexibility for
grantees, based on experience in
administering the Continuum of Care
program to date. Given the transition
from administrative operation of the
Continuum of Care program to statutory
operation of the Continuum of Care
program, this interim rule would also
have no discernible impact upon the
economy.
The docket file is available for public
inspection in the Regulations Division,
Office of the General Counsel, Room
10276, 451 7th Street SW., Washington,
DC 20410 -0500. Due to security
measures at the HUD Headquarters
building, please schedule an
appointment to review the docket file by
calling the Regulations Division at 202-
708 -3055 (this is not a toll -free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Relay Service at 800 - 877 -8339.
Environmental Impact
A Finding of No Significant Impact
( FONSI) with respect to the
environment has been made in
accordance with HUD regulations at 24
CFR part 50, which implement section
102(2)(C) of the National Environmental
Policy Act of 1969 (42 U.S.C.
4332(2)(C)). The Finding of No
Significant Impact is available for public
inspection between the hours of 8 a.m.
and 5 p.m. weekdays in the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 7th Street SW., Room
10276, Washington, DC 20410 -0500.
Due to security measures at the HUD
Headquarters building, please schedule
an appointment to review the FONSI by
calling the Regulations Division at 202-
708 -3055 (this is not a toll -free
number). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Relay Service at 800 - 877 -8339.
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act
of 1995 (2 U.S.C. 1531 -1538) (UMRA)
establishes requirements for federal
agencies to assess the effects of their
regulatory actions on State, local, and
tribal governments and on the private
sector. This interim rule does not
impose a federal mandate on any State,
local, or tribal government, or on the
private sector, within the meaning of
UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) generally requires an
agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. This rule
solely addresses the allocation and use
of grant funds under the new
McKinney -Vento Act homeless
assistance programs, as consolidated
and amended by the HEARTH Act. As
discussed in the preamble, the majority
of the regulatory provisions proposed by
this rule track the regulatory provisions
of the Continuum of Care program, with
which prospective recipients of the
Supportive Housing program and the
Shelter Plus Care program are familiar.
Accordingly, the program requirements
should raise minimal issues because
applicants and grantees are familiar
with these requirements, and in
response to HUD's solicitations to them
on the burden of the requirements for
the Supportive Housing program and
the Shelter Plus Care program, grantees
have not advised that such requirements
are burdensome. Therefore, HUD has
determined that this rule would not
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Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations 45441
have a significant economic impact on
a substantial number of small entities.
Notwithstanding HUD's
determination that this rule will not
have a significant effect on a substantial
number of small entities, HUD
specifically invites comments regarding
any less burdensome alternatives to this
rule that will meet HUD's objectives as
described in this preamble.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
"Federalism ") prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial direct compliance costs on
State and local governments and is not
required by statute, or the rule preempts
State law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order. This
final rule does not have federalism
implications and does not impose
substantial direct compliance costs on
State and local governments nor
preempts State law within the meaning
of the Executive Order.
Paperwork Reduction Act
The information collection
requirements contained in this interim
REPORTING AND RECORDKEEPING BURDEN
rule have been submitted to the Office
of Management and Budget (OMB)
under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 - 3520). In
accordance with the Paperwork
Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number.
The burden of the information
collections in this interim rule is
estimated as follows:
Information collection
Number of
respondents
Response
frequency
(average)
Total annual
responses
Burden hours
per response
Total annual
hours
§578.5(a) Establishing the CoC ........... ...............................
450
1
450
8.0
3,600
§578.5(b) Establishing the Board ......... ...............................
450
1
450
5.0
2,250
§578.7(a)(1) Hold CoC Meetings .......... ...............................
450
2
900
4.0
3,600
§ 578,7(a)(2) Invitation for New Members ................ I...........
450
1
450
1.0
450
§ 578.7(a)(4) Appoint committees ......... ...............................
450
2
900
0,5
450
§ 578.7(a)(5) Governance charter ......... ...............................
450
1
450
7.0
3,150
§ 578.7(a)(6) and (7) Monitor performance and evaluation
450
4
450
9.0
4,050
§578.7(a)(8) Centralized or coordinated assessment sys-
tem..................................................... ...............................
450
1
450
8.0
3,600
§578.7(a)(9) Written standards ............ ...............................
450
1
450
5.0
2,250
§578.7(b) Designate HMIS ................... ...............................
450
1
450
10.0
4,500
§578.9 Application for funds ................ ...............................
450
1
450
180.0
81,000
§ 578.11(c) Develop CoC plan .............. ...............................
450
1
450
9.0
4,050
§ 578.21(c) Satisfying conditions .......... ...............................
8,000
1
8,000
4.0
32,000
§578.23 Executing grant agreements .. ...............................
8,000
1
8,000
1.0
8,000
§578.35(b) Appeal -solo ...................... ...............................
10
1
10
4.0
40
§ 578.35(c) Appeal- denied or decreased funding .............
15
1
15
1.0
15
§578.35(d) Appeal- competing CoC ... ...............................
10
1
10
5.0
50
§578.35(e) Appeal- Consolidated Plan certification ..........
5
1
5
2.0
10
§ 578.49(a)- Leasing exceptions .......... ...............................
5
1
5
1.5
7.5
§ 578.65 HPC Standards ...................... ...............................
20
1
20
10.0
200
§578.75(a)(1) State and local requirements- appropriate
service provision ................................ ...............................
7,000
1
7,000
0.5
3,500
§578.75(a)(1) State and local requirements- housing
codes................................................. ...............................
20
1
20
3.0
60
§578.75(b) Housing quality standards . ...............................
72,800
2
145,600
1.0
145,600
§578.75(b) Suitable dwelling size ........ ...............................
72,800
2
145,600
0.08
11,648
§ 578.75(c) Meals .................................. ...............................
70,720
1
70,720
0.5
35,360
§ 578.75(e) Ongoing assessment of supportive services ....
8,000
1
8,000
1.5
12,000
§578.75(f) Residential supervision ....... ...............................
6,600
3
19,800
0.75
14,850
§578.75(g) Participation of homeless individuals ...............
11,500
1
11,500
1.0
11,500
§ 578.75(h) Supportive service agreements ........................
3,000
100
30,000
0.5
15,000
§578.77(a) Signed leases /occupancy agreements .............
104,000
2
208,000
1.0
208,000
§578.77(b) Calculating occupancy charges ........................
1,840
200
368,000
0.75
276,000
§578.77(c) Calculating rent .................. ...............................
2,000
200
400,000
0.75
300,000
§ 578.81(a) Use restriction .................... ...............................
20
1
20
0.5
10
§578.91(a) Termination of assistance .. ...............................
400
1
400
4.00
1,600
§578,91(b) Due process for termination of assistance .......
4,500
1
4,500
3.0
13,500
§ 578.95(d)- Conflict -of- Interest exceptions ........................
10
1
10
3.0
30
§578.103(a)(3) Documenting homelessness ......................
300,000
1
300,000
0.25
75,000
§578.103(a)(4) Documenting at risk of homelessness .......
10,000
1
10,000
0.25
2,500
§ 578.103(a)(5) Documenting imminent threat of harm .......
200
1
200
0.5
100
§578.103(a)(7) Documenting program participant records
350,000
6
2,100,000
0.25
525,000
§578,103(a)(7) Documenting case management ...............
8,000
12
96,000
1.0
96,000
§578,103(a)(13) Documenting faith -based activities ..........
8,000
1
8,000
1.0
8,000
§578.103(b) Confidentiality procedures ..............................
11,500
1
11,500
1.0
11,500
§578.105(a) Grant/project changes -UFAs ........................
20
2
40
2.0
80
§578.105(b) Grant/project changes - multiple project appli-
cants.................................................. ...............................
800
1
800
2.0
1,600
........................
........................
........................
........................
1,921,710.5
Total............................................... ...............................
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45442 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
In accordance with 5 CFR
1320.8(d)(1), HUD is soliciting
comments from members of the public
and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions HUD, including whether the
information will have practical utility;
(2) Evaluate the accuracy of HUD's
estimate of the burden of the proposed
collection of information;
(3) Enhance the quality, utility, and
clarity of the information to be
collected; and
(4) Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated collection
techniques or other forms of information
technology; e.g., permitting electronic
submission of responses.
Interested persons are invited to
submit comments regarding the
information collection requirements in
this rule. Comments must refer to the
proposal by name and docket number
(FR- 5476 -I -01) and be sent to: HUD
Desk Officer, Office of Management and
Budget, New Executive Office Building,
Washington, DC 20503, Fax: (202) 395-
6947, and Reports Liaison Officer,
Office of the Assistant Secretary for
Community Planning and Development,
Department of Housing and Urban
Development, 451 Seventh Street SW.,
Room 7233, Washington, DC 20410-
7000.
Interested persons may submit
comments regarding the information
collection requirements electronically
through the Federal eRulemaking Portal
at http: / /www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
http://www.regulations.gov Web site can
be viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
List of Subjects in 24 CFR Part 578
Community facilities, Continuum of
Care, Emergency solutions grants, Grant
programs- housing and community
development, Grant program - social
programs, Homeless, Rural housing,
Reporting and recordkeeping
requirements, Supportive housing
programs- housing and community
development, Supportive services.
Accordingly, for the reasons described
in the preamble, HUD adds part 578 to
subchapter C of chapter V of subtitle B
of 24 CFR to read as follows:
PART 578 - CONTINUUM OF CARE
PROGRAM
Subpart A- General Provisions
Sec.
578.1 Purpose and scope.
578.3 Definitions,
Subpart 13-Establishing and Operating a
Continuum of Care
578.5 Establishing the Continuum of Care.
578.7 Responsibilities of the Continuum of
Care.
578.9 Preparing an application for funds.
578.11 Unified Funding Agency.
578.13 Remedial action.
Subpart C- Application and Grant Award
Process
578.15 Eligible applicants.
578.17 Overview of application and grant
award process.
578.19 Application process.
578.21 Awarding funds.
578.23 Executing grant agreements.
578.25 Site control.
578.27 Consolidated plan.
578.29 Subsidy layering.
578.31 Environmental review,
578.33 Renewals,
578.35 Appeal.
Subpart D- Program Components and
Eligible Costs
578.37
Program components and uses of
assistance,
578,39
Continuum of Care planning
activities.
578.41
Unified Funding Agency costs.
578.43
Acquisition.
578.45
Rehabilitation.
578.47
New construction.
578.49
Leasing.
578.51
Rental assistance.
578.53
Supportive services.
578.55
Operating costs.
578.57
Homeless Management Information
System.
578.59 Project administrative costs.
578.61 Relocation costs.
578.63 Indirect costs.
Subpart E- High - Performing Communities
578.65 Standards.
578.67 Publication of application,
578.69 Cooperation among entities.
578.71 HPC- eligible activities.
Subpart F- Program Requirements
578.73 Matching requirements.
578.75 General operations.
578.77 Calculating occupancy charges and
rent.
578.79 Limitation on transitional housing.
578.81 Term of commitment, repayment of
grants, and prevention of undue benefits.
578.83 Displacement, relocation, and
acquisition.
578,85 Timeliness standards.
578.87 Limitation on use of funds.
578.89 Limitation on use of grant funds to
serve persons defined as homeless under
other federal laws.
578.91 Termination of assistance to
program participants.
578.93 Fair Housing and Equal
Opportunity.
578.95 Conflicts of interest.
578.97 Program income.
578.99 Applicability of other federal
requirements.
Subpart G -Grant Administration
578.101 Technical assistance.
578.103 Recordkeeping requirements.
578.105 Grant and project changes.
578.107 Sanctions.
578.109 Closeout.
Authority: 42 U.S.C. 11371 et seq., 42
U.S.C. 3535(d),
Subpart A- General Provisions
§ 578.1 Purpose and scope.
(a) The Continuum of Care program is
authorized by subtitle C of title IV of the
McKinney -Vento Homeless Assistance
Act (42 U.S.C. 11381 - 11389).
(b) The program is designed to:
(1) Promote communitywide
commitment to the goal of ending
homelessness;
(2) Provide funding for efforts by
nonprofit providers, States, and local
governments to quickly rehouse
homeless individuals (including
unaccompanied youth) and families,
while minimizing the trauma and
dislocation caused to homeless
individuals, families, and communities
by homelessness;
(3) Promote access to and effective
utilization of mainstream programs by
homeless individuals and families; and
(4) Optimize self- sufficiency among
individuals and families experiencing
homelessness.
§578.3 Definitions.
As used in this part:
Act means the McKinney -Vento
Homeless Assistance Act as amended
(42 U.S.C. 11371 et seq.).
Annual renewal amount means the
amount that a grant can be awarded on
an annual basis when renewed. It
includes funds only for those eligible
activities (operating, supportive
services, leasing, rental assistance,
HMIS, and administration) that were
funded in the original grant (or the
original grant as amended), less the
unrenewable activities (acquisition, new
construction, rehabilitation, and any
administrative costs related to these
activities).
Applicant means an eligible applicant
that has been designated by the
Continuum of Care to apply for
assistance under this part on behalf of
that Continuum.
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Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations 45443
At risk of homelessness. (1) An
individual or family who:
(i) Has an annual income below 30
percent of median family income for the
area, as determined by HUD;
(ii) Does not have sufficient resources
or support networks, e.g., family,
friends, faith -based or other social
networks, immediately available to
prevent them from moving to an
emergency shelter or another place
described in paragraph (1) of the
"Homeless" definition in this section;
and
(iii) Meets one of the following
conditions:
(A) Has moved because of economic
reasons two or more times during the 60
days immediately preceding the
application for homelessness prevention
assistance;
(B) Is living in the home of another
because of economic hardship;
(C) Has been notified in writing that
their right to occupy their current
housing or living situation will be
terminated within 21 days of the date of
ap lication for assistance;
D) Lives in a hotel or motel and the
cost of the hotel or motel stay is not paid
by charitable organizations or by
federal, State, or local government
programs for low- income individuals;
(E) Lives in a single -room occupancy
or efficiency apartment unit in which
there reside more than two persons, or
lives in a larger housing unit in which
there reside more than 1.5 people per
room, as defined by the U.S. Census
Bureau;
(F) Is exiting a publicly funded
institution, or system of care (such as a
health -care facility, a mental health
facility, foster care or other youth
facility, or correction program or
institution); or
(G) Otherwise lives in housing that
has characteristics associated with
instability and an increased risk of
homelessness, as identified in the
recipient's approved consolidated plan;
(2) A child or youth who does not
qualify as "homeless" under this
section, but qualifies as "homeless"
under section 387(3) of the Runaway
and Homeless Youth Act (42 U.S.C.
5732a(3)), section 637(11) of the Head
Start Act (42 U.S.C. 9832(11)), section
41403(6) of the Violence Against
Women Act of 1994 (42 U.S.C. 14043e-
2(6)), section 330(h)(5)(A) of the Public
Health Service Act (42 U.S.C.
254b(h)(5)(A)), section 3(m) of the Food
and Nutrition Act of 2008 (7 U.S.C.
2012(m)), or section 17(b)(15) of the
Child Nutrition Act of 1966 (42 U.S.C.
1786(b)(15)); or
(3) A child or youth who does not
qualify as "homeless" under this
section, but qualifies as "homeless"
under section 725(2) of the McKinney -
Vento Homeless Assistance Act (42
U.S.C. 11434a(2)), and the parent(s) or
guardian(s) of that child or youth if
living with her or him.
Centralized or coordinated
assessment system means a centralized
or coordinated process designed to
coordinate program participant intake
assessment and provision of referrals. A
centralized or coordinated assessment
system covers the geographic area, is
easily accessed by individuals and
families seeking housing or services, is
well advertized, and includes a
comprehensive and standardized
assessment tool.
Chronically homeless. (1) An
individual who:
(i) Is homeless and lives in a place not
meant for human habitation, a safe
haven, or in an emergency shelter; and
(ii) Has been homeless and living or
residing in a place not meant for human
habitation, a safe haven, or in an
emergency shelter continuously for at
least one year or on at least four separate
occasions in the last 3 years; and
(iii) Can be diagnosed with one or
more of the following conditions:
substance use disorder, serious mental
illness, developmental disability (as
defined in section 102 of the
Developmental Disabilities Assistance
Bill of Rights Act of 2000 (42 U.S.C.
15002)), post - traumatic stress disorder,
cognitive impairments resulting from
brain injury, or chronic physical illness
or disability;
(2) An individual who has been
residing in an institutional care facility,
including a jail, substance abuse or
mental health treatment facility,
hospital, or other similar facility, for
fewer than 90 days and met all of the
criteria in paragraph (1) of this
definition, before entering that facility;
or
(3) A family with an adult head of
household (or if there is no adult in the
family, a minor head of household) who
meets all of the criteria in paragraph (1)
of this definition, including a family
whose composition has fluctuated while
the head of household has been
homeless.
Collaborative applicant means the
eligible applicant that has been
designated by the Continuum of Care to
apply for a grant for Continuum of Care
planning funds under this part on behalf
of the Continuum.
Consolidated plan means the HUD -
approved plan developed in accordance
with 24 CFR 91.
Continuum of Care and Continuum
means the group organized to carry out
the responsibilities required under this
part and that is composed of
representatives of organizations,
including nonprofit homeless providers,
victim service providers, faith -based
organizations, governments, businesses,
advocates, public housing agencies,
school districts, social service providers,
mental health agencies, hospitals,
universities, affordable housing
developers, law enforcement,
organizations that serve homeless and
formerly homeless veterans, and
homeless and formerly homeless
persons to the extent these groups are
represented within the geographic area
and are available to participate.
Developmental disability means, as
defined in section 102 of the
Developmental Disabilities Assistance
and Bill of Rights Act of 2000 (42 U.S.C.
15002):
(1) A severe, chronic disability of an
individual that -
(i) Is attributable to a mental or
physical impairment or combination of
mental and physical impairments;
(ii) Is manifested before the individual
attains age 22;
(iii) Is likely to continue indefinitely;
(iv) Results in substantial functional
limitations in three or more of the
following areas of major life activity:
(A) Self -care;
(B) Receptive and expressive
language;
(C) Learning;
(D) Mobility;
(E) Self- direction;
(F) Capacity for independent living;
(G) Economic self - sufficiency.
(v) Reflects the individual's need for
a combination and sequence of special,
interdisciplinary, or generic services,
individualized supports, or other forms
of assistance that are of lifelong or
extended duration and are individually
planned and coordinated.
(2) An individual from birth to age 9,
inclusive, who has a substantial
developmental delay or specific
congenital or acquired condition, may
be considered to have a developmental
disability without meeting three or more
of the criteria described in paragraphs
(1)(i) through (v) of the definition of
"developmental disability" in this
section if the individual, without
services and supports, has a high
probability of meeting these criteria
later in life.
Eligible applicant means a private
nonprofit organization, State, local
government, or instrumentality of State
and local government.
Emergency shelter is defined in 24
CFR part 576.
Emergency Solutions Grants (ESG)
means the grants provided under 24
CFR part 576.
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45444 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
Fair Market Rent (FMR) means the
Fair Market Rents published in the
Federal Register annually by HUD.
High - performing community (HPC)
means a Continuum of Care that meets
the standards in subpart E of this part
and has been designated as a high -
performing community by HUD.
Homeless means:
(1) An individual or family who lacks
a fixed, regular, and adequate nighttime
residence, meaning:
(i) An individual or family with a
primary nighttime residence that is a
public or private place not designed for
or ordinarily used as a regular sleeping
accommodation for human beings,
including a car, park, abandoned
building, bus or train station, airport, or
camping ground;
(ii) An individual or family living in
a supervised publicly or privately
operated shelter designated to provide
temporary living arrangements
(including congregate shelters,
transitional housing, and hotels and
motels paid for by charitable
organizations or by federal, State, or
local government programs for 10w_
income individuals); or
(iii) An individual who is exiting an
institution where he or she resided for
90 days or less and who resided in an
emergency shelter or place not meant
for human habitation immediately
before entering that institution;
(2) An individual or family who will
imminently lose their primary nighttime
residence, provided that:
(i) The primary nighttime residence
will be lost within 14 days of the date
of application for homeless assistance;
(ii) No subsequent residence has been
identified; and
(iii) The individual or family lacks the
resources or support networks, e.g.,
family, friends, faith -based or other
social networks, needed to obtain other
permanent housing;
(3) Unaccompanied youth under 25
years of age, or families with children
and youth, who do not otherwise
qualify as homeless under this
definition, but who:
(i) Are defined as homeless under
section 387 of the Runaway and
Homeless Youth Act (42 U.S.C. 5732a),
section 637 of the Head Start Act (42
U.S.C. 9832), section 41403 of the
Violence Against Women Act of 1994
(42 U.S.C. 14043e -2), section 330(h) of
the Public Health Service Act (42 U.S.C.
254b(h)), section 3 of the Food and
Nutrition Act of 2008 (7 U.S.C. 2012),
section 17(b) of the Child Nutrition Act
of 1966 (42 U.S.C. 1786(b)), or section
725 of the McKinney -Vento Homeless
Assistance Act (42 U.S.C. 11434a);
(ii) Have not had a lease, ownership
interest, or occupancy agreement in
permanent housing at any time during
the 60 days immediately preceding the
date of application for homeless
assistance;
(iii) Have experienced persistent
instability as measured by two moves or
more during the 60 -day period
immediately preceding the date of
applying for homeless assistance; and
(iv) Can be expected to continue in
such status for an extended period of
time because of chronic disabilities;
chronic physical health or mental health
conditions; substance addiction;
histories of domestic violence or
childhood abuse (including neglect); the
presence of a child or youth with a
disability; or two or more barriers to
employment, which include the lack of
a high school degree or General
Education Development (GED),
illiteracy, low English proficiency, a
history of incarceration or detention for
criminal activity, and a history of
unstable employment; or
(4) Any individual or family who:
(i) Is fleeing, or is attempting to flee,
domestic violence, dating violence,
sexual assault, stalking, or other
dangerous or life - threatening conditions
that relate to violence against the
individual or a family member,
including a child, that has either taken
place within the individual's or family's
primary nighttime residence or has
made the individual or family afraid to
return to their primary nighttime
residence;
(ii) Has no other residence; and
(iii) Lacks the resources or support
networks, e.g., family, friends, and faith -
based or other social networks, to obtain
other permanent housing.
Homeless Management Information
System (HMIS) means the information
system designated by the Continuum of
Care to comply with the HMIS
requirements prescribed by HUD.
HMIS Lead means the entity
designated by the Continuum of Care in
accordance with this part to operate the
Continuum's HMIS on its behalf.
Permanent housing means
community -based housing without a
designated length of stay, and includes
both permanent supportive housing and
rapid rehousing. To be permanent
housing, the program participant must
be the tenant on a lease for a term of at
least one year, which is renewable for
terms that are a minimum of one month
long, and is terminable only for cause.
Permanent supportive housing means
permanent housing in which supportive
services are provided to assist homeless
persons with a disability to live
independently.
Point -in -time count means a count of
sheltered and unsheltered homeless
persons carried out on one night in the
last 10 calendar days of January or at
such other time as required by HUD.
Private nonprofit organization means
an organization:
(1) No part of the net earnings of
which inure to the benefit of any
member, founder, contributor, or
individual;
(2) That has a voluntary board;
(3) That has a functioning accounting
system that is operated in accordance
with generally accepted accounting
principles, or has designated a fiscal
agent that will maintain a functioning
accounting system for the organization
in accordance with generally accepted
accounting principles; and
(4) That practices nondiscrimination
in the provision of assistance.
A private nonprofit organization does
not include governmental organizations,
such as public housing agencies.
Program participant means an
individual (including an
unaccompanied youth) or family who is
assisted with Continuum of Care
program funds.
Project means a group of eligible
activities, such as HMIS costs, identified
as a project in an application to HUD for
Continuum of Care funds and includes
a structure (or structures) that is (are)
acquired, rehabilitated, constructed, or
leased with assistance provided under
this part or with respect to which HUD
provides rental assistance or annual
payments for operating costs, or
supportive services under this subtitle.
Recipient means an applicant that
signs a grant agreement with HUD.
Safe haven means, for the purpose of
defining chronically homeless,
supportive housing that meets the
following:
(1) Serves hard to reach homeless
persons with severe mental illness who
came from the streets and have been
unwilling or unable to participate in
supportive services;
(2) Provides 24 -hour residence for
eligible persons for an unspecified
period;
(3) Has an overnight capacity limited
to 25 or fewer persons; and
(4) Provides low- demand services and
referrals for the residents.
State means each of the 50 States, the
District of Columbia, the
Commonwealth of Puerto Rico,
American Samoa, Guam, the
Commonwealth of the Northern
Marianas, and the Virgin Islands.
Subrecipient means a private
nonprofit organization, State, local
government, or instrumentality of State
or local government that receives a
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subgrant from the recipient to carry out
a project.
Transitional housing means housing,
where all program participants have
signed a lease or occupancy agreement,
the purpose of which is to facilitate the
movement of homeless individuals and
families into permanent housing within
24 months or such longer period as
HUD determines necessary. The
program participant must have a lease
or occupancy agreement for a term of at
least one month that ends in 24 months
and cannot be extended.
Unified Funding Agency (UFA) meam
an eligible applicant selected by the
Continuum of Care to apply for a grant
for the entire Continuum, which has the
capacity to carry out the duties in
§ 578,11(b), which is approved by HUD
and to which HUD awards a grant.
Victim service provider means a
private nonprofit organization whose
primary mission is to provide services
to victims of domestic violence, dating
violence, sexual assault, or stalking.
This term includes rape crisis centers,
battered women's shelters, domestic
violence transitional housing programs,
and other programs.
Subpart B— Establishing and
Operating a Continuum of Care
§578.5 Establishing the Continuum of
Care.
(a) The Continuum of Care.
Representatives from relevant
organizations within a geographic area
shall establish a Continuum of Care for
the geographic area to carry out the
duties of this part. Relevant
organizations include nonprofit
homeless assistance providers, victim
service providers, faith -based
organizations, governments, businesses,
advocates, public housing agencies,
school districts, social service providers,
mental health agencies, hospitals,
universities, affordable housing
developers, law enforcement, and
organizations that serve veterans and
homeless and formerly homeless
individuals.
(b) The board. The Continuum of Care
must establish a board to act on behalf
of the Continuum using the process
established as a requirement by
§ 578.7(a)(3) and must comply with the
conflict -of- interest requirements at
§ 578.95(b). The board must:
(1) Be representative of the relevant
organizations and of projects serving
homeless subpopulations; and
(2) Include at least one homeless or
formerly homeless individual.
(c) Transition. Continuums of Care
shall have 2 years after August 30, 2012
to comply with the requirements of
paragraph (b) of this section.
§578.7 Responsibilities of the Continuum
of Care.
(a) Operate the Continuum of Care.
The Continuum of Care must:
(1) Hold meetings of the full
membership, with published agendas, at
least semi - annually;
(2) Make an invitation for new
members to join publicly available
within the geographic at least annually;
(3) Adopt and follow a written
process to select a board to act on behalf
of the Continuum of Care. The process
must be reviewed, updated, and
approved by the Continuum at least
once every 5 years;
(4) Appoint additional committees,
subcommittees, or workgroups;
(5) In consultation with the
collaborative applicant and the HMIS
Lead, develop, follow, and update
annually a governance charter, which
will include all procedures and policies
needed to comply with subpart B of this
part and with HMIS requirements as
prescribed by HUD; and a code of
conduct and recusal process for the
board, its chair(s), and any person acting
on behalf of the board;
(6) Consult with recipients and
subrecipients to establish performance
targets appropriate for population and
program type, monitor recipient and
subrecipient performance, evaluate
outcomes, and take action against poor
performers;
(7) Evaluate outcomes of projects
funded under the Emergency Solutions
Grants program and the Continuum of
Care program, and report to HUD;
(8) In consultation with recipients of
Emergency Solutions Grants program
funds within the geographic area,
establish and operate either a
centralized or coordinated assessment
system that provides an initial,
comprehensive assessment of the needs
of individuals and families for housing
and services. The Continuum must
develop a specific policy to guide the
operation of the centralized or
coordinated assessment system on how
its system will address the needs of
individuals and families who are
fleeing, or attempting to flee, domestic
violence, dating violence, sexual
assault, or stalking, but who are seeking
shelter or services from nonvictim
service providers. This system must
comply with any requirements
established by HUD by Notice.
(9) In consultation with recipients of
Emergency Solutions Grants program
funds within the geographic area,
establish and consistently follow
written standards for providing
Continuum of Care assistance. At a
minimum, these written standards must
include:
(i) Policies and procedures for
evaluating individuals' and families'
eligibility for assistance under this part;
(ii) Policies and procedures for
determining and prioritizing which
eligible individuals and families will
receive transitional housing assistance;
(iii) Policies and procedures for
determining and prioritizing which
eligible individuals and families will
receive rapid rehousing assistance;
(iv) Standards for determining what
percentage or amount of rent each
program participant must pay while
receiving rapid rehousing assistance;
(v) Policies and procedures for
determining and prioritizing which
eligible individuals and families will
receive permanent supportive housing
assistance; and
(vi) Where the Continuum is
designated a high - performing
community, as described in subpart G of
this part, policies and procedures set
forth in 24 CFR 576.400(e)(3)(vi),
(e)(3)(vii), (e)(3)(viii), and (e)(3)(ix):
(b) Designating and operating an
HMIS. The Continuum of Care must:
(1) Designate a single Homeless
Management Information System
(HMIS) for the geographic area;
(2) Designate an eligible applicant to
manage the Continuum's HMIS, which
will be known as the HMIS Lead;
(3) Review, revise, and approve a
privacy plan, security plan, and data
quality plan for the HMIS.
(4) Ensure consistent participation of
recipients and subrecipients in the
HMIS; and
(5) Ensure the HMIS is administered
in compliance with requirements
prescribed by HUD.
(c) Continuum of Care planning. The
Continuum must develop a plan that
includes:
(1) Coordinating the implementation
of a housing and service system within
its geographic area that meets the needs
of the homeless individuals (including
unaccompanied youth) and families. At
a minimum, such system encompasses
the following:
(i) Outreach, engagement, and
assessment;
(ii) Shelter, housing, and supportive
services;
(iii) Prevention strategies.
(2) Planning for and conducting, at
least biennially, a point -in -time count of
homeless persons within the geographic
area that meets the following
requirements:
(i) Homeless persons who are living in
a place not designed or ordinarily used
as a regular sleeping accommodation for
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humans must be counted as unsheltered
homeless persons.
(ii) Persons living in emergency
shelters and transitional housing
projects must be counted as sheltered
homeless persons.
(iii) Other requirements established
by HUD by Notice.
(3) Conducting an annual gaps
analysis of the homeless needs and
services available within the geographic
area;
(4) Providing information required to
complete the Consolidated Plan(s)
within the Continuum's geographic
area;
(5) Consulting with State and local
government Emergency Solutions
Grants program recipients within the
Continuum's geographic area on the
plan for allocating Emergency Solutions
Grants program funds and reporting on
and evaluating the performance of
Emergency Solutions Grants program
recipients and subrecipients,
§578.9 Preparing an application for funds.
(a) The Continuum must:
(1) Design, operate, and follow a
collaborative process for the
development of applications and
approve the submission of applications
in response to a NOFA published by
HUD under § 578.19 of this subpart;
(2) Establish priorities for funding
projects in the geographic area;
(3) Determine if one application for
funding will be submitted for all
projects within the geographic area or if
more than one application will be
submitted for the projects within the
geographic area;
(i) If more than one application will
be submitted, designate an eligible
applicant to be the collaborative
applicant that will collect and combine
the required application information
from all applicants and for all projects
within the geographic area that the
Continuum has selected funding. The
collaborative applicant will also apply
for Continuum of Care planning
activities. If the Continuum is an
eligible applicant, it may designate
itself,
(ii) If only one application will be
submitted, that applicant will be the
collaborative applicant and will collect
and combine the required application
information from all projects within the
geographic area that the Continuum has
selected for funding and apply for
Continuum of Care planning activities;
(b) The Continuum retains all of its
responsibilities, even if it designates one
or more eligible applicants other than
itself to apply for funds on behalf of the
Continuum. This includes approving
the Continuum of Care application.
§578.11 Unified Funding Agency.
(a) Becoming a Unified Funding
Agency. To become designated as the
Unified Funding Agency (UFA) for a
Continuum, a collaborative applicant
must be selected by the Continuum to
apply to HUD to be designated as the
UFA for the Continuum.
(b) Criteria for designating a UFA.
HUD will consider these criteria when
deciding whether to designate a
collaborative applicant a UFA:
(1) The Continuum of Care it
represents meets the requirements in
§ 578.7;
(2) The collaborative applicant has
financial management systems that meet
the standards set forth in 24 CFR 84.21
(for nonprofit organizations) and 24 CFR
85.20 (for States);
(3) The collaborative applicant
demonstrates the ability to monitor
subrecipients; and
(4) Such other criteria as HUD may
establish by NOFA.
(c) Requirements. HUD - designated
UFAs shall:
(1) Apply to HUD for funding for all
of the projects within the geographic
area and enter into a grant agreement
with HUD for the entire geographic area.
(2) Enter into legally binding
agreements with subrecipients, and
receive and distribute funds to
subrecipients for all projects within the
geographic area.
(3) Require subrecipients to establish
fiscal control and accounting
procedures as necessary to assure the
proper disbursal of and accounting for
federal funds in accordance with the
requirements of 24 CFR parts 84 and 85
and corresponding OMB circulars.
(4) Obtain approval of any proposed
grant agreement amendments by the
Continuum of Care before submitting a
request for an amendment to HUD.
§ 578.13 Remedial action.
(a) If HUD finds that the Continuum
of Care for a geographic area does not
meet the requirements of the Act or its
implementing regulations, or that there
is no Continuum for a geographic area,
HUD may take remedial action to ensure
fair distribution of grant funds within
the geographic area. Such measures may
include:
(1) Designating a replacement
Continuum of Care for the geographic
area;
(2) Designating a replacement
collaborative applicant for the
Continuum's geographic area; and
(3) Accepting applications from other
eligible applicants within the
Continuum's geographic area.
(b) HUD must provide a 30 -day prior
written notice to the Continuum and its
collaborative applicant and give them
an opportunity to respond.
Subpart C— Application and Grant
Award Process
§578.15 Eligible applicants.
(a) Who may apply. Nonprofit
organizations, States, local governments,
and instrumentalities of State or local
governments are eligible to apply for
grants.
(b) Designation by the Continuum of
Care. Eligible applicant(s) must have
been designated by the Continuum of
Care to submit an application for grant
funds under this part. The designation
must state whether the Continuum is
designating more than one applicant to
apply for funds and, if it is, which
applicant is being designated as the
collaborative applicant. If the
Continuum is designating only one
applicant to apply for funds, the
Continuum must designate that
applicant to be the collaborative
applicant.
(c) Exclusion, For -profit entities are
not eligible to apply for grants or to be
subrecipients of grant funds.
§578.17 Overview of application and grant
award process,
(a) Formula. (1) After enactment of the
annual appropriations act for each fiscal
year, and issuance of the NOFA, HUD
will publish, on its Web site, the
Preliminary Pro Rata Need (PPRN)
assigned to metropolitan cities, urban
counties, and all other counties.
(2) HUD will apply the formula used
to determine PPRN established in
paragraph (a)(3) of this section, to the
amount of funds being made available
under the NOFA. That amount is
calculated by:
(i) Determining the total amount for
the Continuum of Care competition in
accordance with section 413 of the Act
or as otherwise directed by the annual
ap ropriations act;
i) From the amount in paragraph
(a)(2)(i) of this section, deducting the
amount published in the NOFA as being
set aside to provide a bonus to
geographic areas for activities that have
proven to be effective in reducing
homelessness generally or for specific
subpopulations listed in the NOFA or
achieving homeless prevention and
independent living goals established in
the NOFA and to meet policy priorities
set in the NOFA; and
(iii) Deducting the amount of funding
necessary for Continuum of Care
planning activities and UFA costs.
(3) PPRN is calculated on the amount
determined under paragraph (a)(2) of
this section by using the following
formula:
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(i) Two percent will be allocated
among the four insular areas (American
Samoa, Guam, the Commonwealth of
the Northern Marianas, and the Virgin
Islands) on the basis of the ratio of the
population of each insular area to the
po ulation of all insular areas.
�ii) Seventy -five percent of the
remaining amount will be allocated,
using the Community Development
Block Grant (CDBG) formula, to
metropolitan cities and urban counties
that have been funded under either the
Emergency Shelter Grants or Emergency
Solutions Grants programs in any one
year since 2004.
(iii) The amount remaining after the
allocation under paragraphs (a)(1) and.
(2) of this section will be allocated,
using the CDBG formula, to
metropolitan cities and urban counties
that have not been funded under the
Emergency Solutions Grants program in
any year since 2004 and all other
counties in the United States and Puerto
Rico.
(4) If the calculation in paragraph
(a)(2) of this section results in an
amount less than the amount required to
renew all projects eligible for renewal in
that year for at least one year, after
making adjustments proportional to
increases in fair market rents for the
geographic area for leasing, operating,
and rental assistance for permanent
housing, HUD will reduce,
proportionately, the total amount
required to renew all projects eligible
for renewal in that year for at least one
year, for each Continuum of Care. HUD
will publish, via the NOFA, the total
dollar amount that every Continuum
will be required to deduct from renewal
projects Continuum -wide.
(b) Calculating a Continuum of Care's
maximum award amount. (1) Establish
the PPRN amount. First, HUD will total
the PPRN amounts for each
metropolitan city, urban county, other
county, and insular area claimed by the
Continuum as part of its geographic
area, excluding any counties applying
for or receiving funding from the Rural
Housing Stability Assistance program
under 24 CFR part 579.
(2) Establishing renewal demand.
Next, HUD will determine the renewal
demand within the Continuum's
geographic area. Renewal demand is the
sum of the annual renewal amounts of
all projects within the Continuum
eligible to apply for renewal in that
fiscal year's competition, before any
adjustments to rental assistance, leasing,
and operating line items based on FMR
changes.
(3) Establishing FPRN. The higher of
PPRN or renewal demand for the
Continuum of Care is the FPRN, which
is the base for the maximum award
amount for the Continuum,
(4) Establishing the maximum award
amount, The maximum award amount
for the Continuum is the FPRN amount
plus any additional eligible amounts for
Continuum planning; UFA costs;
adjustments to leasing, operating and
rental assistance line items based on
changes to FMR; and available bonuses.
§578.19 Application process.
(a) Notice of Funding Availability,
After enactment of the annual
appropriations act for the fiscal year,
HUD will issue a NOFA in accordance
with the requirements of 24 CFR part 4.
(b) Applications. All applications to
HUD, including applications for grant
funds and requests for designation as a
UFA or HPC, must be submitted at such
time and in such manner as HUD may
require, and contain such information as
HUD determines necessary. At a
minimum, an application for grant
funds must contain a list of the projects
for which it is applying for funds; a
description of the projects; a list of the
projects that will be carried out by
subrecipients. and the names of the
subrecipients; a description of the
subpopulations of homeless or at risk of
homelessness to be served by projects;
the number of units to be provided and/
or the number of persons to be served
by each project; a budget request by
project; and reasonable assurances that
the applicant, or the subrecipient, will
own or have control of a site for the
proposed project not later than the
expiration of the 12 -month period
beginning upon notification of an award
for grant assistance,
§578.21 Awarding funds.
(a) Selection. HUD will review
applications in accordance with the
guidelines and procedures provided in
the NOFA and will award funds to
recipients through a national
competition based on selection criteria
as defined in section 427 of the Act.
(b) Announcement of awards. HUD
will announce awards and notify
selected applicants of any conditions
imposed on awards. Conditions must be
satisfied before HUD will execute a
grant agreement with the applicant,
(c) Satisfying conditions. HUD will
withdraw an award if the applicant does
not satisfy all conditions imposed on it,
Correcting all issues and conditions
attached to an award must be completed
within the time frame established in the
NOFA. Proof of site control, match,
environmental review, and the
documentation of financial feasibility
must be completed within 12 months of
the announcement of the award, or 24
months in the case of funds for
acquisition, rehabilitation, or new
construction. The 12 -month deadline
may be extended by HUD for up to 12
additional months upon a showing of
compelling reasons for delay due to
factors beyond the control of the
recipient or subrecipient.
§ 578.23 Executing grant agreements.
(a) Deadline. No later than 45 days
from the date when all conditions are
satisfied, the recipient and HUD must
execute the grant agreement.
(b) Grant agreements. (1) Multiple
applicants for one Continuum. If a
Continuum designates more than one
applicant for the geographic area, HUD
will enter into a grant agreement with
each designated applicant for which an
award is announced,
(2) One applicant for a Continuum. If
a Continuum designates only one
applicant for the geographic area, after
awarding funds, HUD may enter into a
grant agreement with that applicant for
new awards, if any, and one grant
agreement for renewals, Continuum of
Care planning, and UFA costs, if any,
These two grants will cover the entire
geographic area, A default by the
recipient under one of those grant
agreements will also be a default under
the other,
(3) Unified Funding Agencies. If a
Continuum is a UFA that HUD has
approved, then HUD will enter into one
grant agreement with the UFA for new
awards, if any, and one grant agreement
for renewals, Continuum of Care
planning and UFA costs, if any. These
two grants will cover the entire
geographic area. A default by the UFA
under one of those grant agreements
will also be a default under the other.
(c) Required agreements, Recipients
will be required to sign a grant
agreement in which the recipient agrees;
(1) To ensure the operation of the
project(s) in accordance with the
provisions of the McKinney -Veto Act
and all requirements under 24 CFR part
578;
(2) To monitor and report the progress
of the project(s) to the Continuum of
Care and HUD;
(3) To ensure, to the maximum extent
practicable, that individuals and
families experiencing homelessness are
involved, through employment,
provision of volunteer services; or
otherwise, in constructing,
rehabilitating, maintaining, and
operating facilities for the project and in
providing supportive services for the
project;
(4) To require certification from all
subrecipients that;
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(i) Subrecipients will maintain the
confidentiality of records pertaining to
any individual or family that was
provided family violence prevention or
treatment services through the project;
(ii) The address or location of any
family violence project assisted under
this part will not be made public, except
with written authorization of the person
responsible for the operation of such
project;
(iii) Subrecipients will establish
policies and practices that are consistent
with, and do not restrict, the exercise of
rights provided by subtitle B of title VII
of the Act and other laws relating to the
provision of educational and related
services to individuals and families
experiencing homelessness;
(iv) In the case of projects that provide
housing or services to families, that
subrecipients will designate a staff
person to be responsible for ensuring
that children being served in the
program are enrolled in school and
connected to appropriate services in the
community, including early childhood
programs such as Head Start, part C of
the Individuals with Disabilities
Education Act, and programs authorized
under subtitle B of title VII of the Act;
(v) The subrecipient, its officers, and
employees are not debarred or
suspended from doing business with the
Federal Government; and
(vi) Subrecipients will provide
information, such as data and reports, as
re uired by HUD; and
�5) To establish such fiscal control
and accounting procedures as may be
necessary to assure the proper disbursal
of, and accounting for grant funds in
order to ensure that all financial
transactions are conducted, and records
maintained in accordance with
generally accepted accounting
principles, if the recipient is a UFA;
(6) To monitor subrecipient match
and report on match to HUD;
(7) To take the educational needs of
children into account when families are
placed in housing and will, to the
maximum extent practicable, place
families with children as close as
possible to their school of origin so as
not to disrupt such children's
education;
(8) To monitor subrecipients at least
annually;
(9) To use the centralized or
coordinated assessment system
established by the Continuum of Care as
set forth in § 578.7(a)(8). A victim
service provider may choose not to use
the Continuum of Care's centralized or
coordinated assessment system,
provided that victim service providers
in the area use a centralized or
coordinated assessment system that
meets HUD's minimum requirements
and the victim service provider uses
that system instead;
(10) To follow the written standards
for providing Continuum of Care
assistance developed by the Continuum
of Care, including the minimum
requirements set forth in § 578.7(a)(9);
(11) Enter into subrecipient
agreements requiring subrecipients to
operate the project(s) in accordance
with the provisions of this Act and all
requirements under 24 CFR part 578;
and
(12) To comply with such other terms
and conditions as HUD may establish by
NOFA.
§578.25 Site control.
(a) In general. When grant funds will
be used for acquisition, rehabilitation,
new construction, operating costs, or to
provide supportive services, the
recipient or subrecipient must
demonstrate that it has site control
within the time frame established in
section § 578.21 before HUD will
execute a grant agreement. This
requirement does not apply to funds
used for housing that will eventually be
owned or controlled by the individuals
or families served or for supportive
services provided at sites not operated
by the recipient or subrecipient.
(b) Evidence. Acceptable evidence of
site control is a deed or lease. If grant
funds will be used for acquisition,
acceptable evidence of site control will
be a purchase agreement. The owner,
lessee, and purchaser shown on these
documents must be the selected
applicant or intended subrecipient
identified in the application for
assistance.
(c) Tax credit projects. (1) Applicants
that plan to use the low- income housing
tax credit authorized under 26 U.S.C. 42
to finance a project must prove to HUD's
satisfaction that the applicant or
subrecipient identified in the
application is in control of the limited
partnership or limited liability
corporation that has a deed or lease for
the project site.
(i) To have control of the limited
partnership, the applicant or
subrecipient must be the general partner
of the limited partnership or have a 51
percent controlling interest in that
general partner.
(ii) To have control of the limited
liability company, the applicant or
subrecipient must be the sole managing
member.
(2) If grant funds are to be used for
acquisition, rehabilitation, or new
construction, the recipient or
subrecipient must maintain control of
the partnership or corporation and must
ensure that the project is operated in
compliance with law and regulation for
15 years from the date of initial
occupancy or initial service provision.
The partnership or corporation must
own the project site throughout the 15-
year period. If grant funds were not used
for acquisition, rehabilitation, or new
construction, then the recipient or
subrecipient must maintain control for
the term of the grant agreement and any
renewals thereof.
§578.27 Consolidated plan.
(a) States or units of general local
government. An applicant that is a State
or a unit of general local government
must have a HUD - approved, complete
or abbreviated, consolidated plan in
accordance with 24 CFR part 91. The
applicant must submit a certification
that the application for funding is
consistent with the HUD - approved
consolidated plan(s) for the
jurisdiction(s) in which the proposed
project will be located. Funded
applicants must certify in a grant
agreement that they are following the
HUD - approved consolidated plan.
(b) Other applicants. Applicants that
are not States or units of general local
government must submit a certification
by the jurisdiction(s) in which the
proposed project will be located that the
applicant's application for funding is
consistent with the jurisdiction's HUD -
approved consolidated plan. The
certification must be made by the unit
of general local government or the State,
in accordance with the consistency
certification provisions under 24 CFR
part 91, subpart F. If the jurisdiction
refuses to provide a certification of
consistency, the applicant may appeal
to HUD under § 578.35.
(c) Timing of consolidated plan
certification submissions. The required
certification that the application for
funding is consistent with the HUD -
approved consolidated plan must be
submitted by the funding application
submission deadline announced in the
NOFA.
§578.29 Subsidy layering.
HUD may provide assistance under
this program only in accordance with
HUD subsidy layering requirements in
section 102 of the Housing and Urban
Development Reform Act of 1989 (42
U.S.C. 3545) and 24 CFR part 4, subpart
A. An applicant must submit
information in its application on other
sources of governmental assistance that
the applicant has received, or
reasonably expects to receive, for a
proposed project or activities. HUD's
review of this information is intended to
prevent excessive public assistance for
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proposed project or activities by
combining (layering) assistance under
this program with other governmental
housing assistance from federal, State,
or local agencies, including assistance
such as tax concessions or tax credits.
§578.31 Environmental review.
(a) Activities under this part are
subject to environmental review by
HUD under 24 CFR part 50. The
recipient or subrecipient shall supply
all available, relevant information
necessary for HUD to perform, for each
property, any environmental review
required by 24 CFR part 50. The
recipient or subrecipient must carry out
mitigating measures required by HUD or
select an alternate eligible property.
HUD may eliminate from consideration
any application that would require an
Environmental Impact Statement.
(b) The recipient or subrecipient, its
project partners, and their contractors
may not acquire, rehabilitate, convert,
lease, repair, dispose of, demolish, or
construct property for a project under
this part, or commit or expend HUD or
local funds for such eligible activities
under this part, until HUD has
performed an environmental review
under 24 CFR part 50 and the recipient
or subrecipient has received HUD
approval of the property.
§578.33 Renewals.
(a) In general. Awards made under
this part and title IV of the Act, as in
effect before August 30, 2012 (the
Supportive Housing Program and the
Shelter Plus Care program), may be
renewed to continue ongoing leasing,
operations, supportive services, rental
assistance, HMIS, and administration
beyond the initial funding period. To be
considered for funding, recipients must
submit a request in a form specified by
HUD, must meet the requirements of
this part, and must submit the request
within the time frame established by
HUD.
(b) Length of renewal. HUD may
award up to 3 years of funds for
supportive services, leasing, HMIS, and
operating costs. Renewals of tenant -
based and sponsor -based rental
assistance may be for up to one year of
rental assistance. Renewals of project -
based rental assistance may be for up to
15 years of rental, assistance, subject to
availability of annual appropriations.
(c) Assistance available. (1)
Assistance during each year of a
renewal period may be for:
(1) Up to 100 percent of the amount
for supportive services and HMIS costs
in the final year of the prior funding
period;
(ii) Up to 100 percent of the amount
for leasing and operating in the final
year of the prior funding period
adjusted in proportion to changes in the
FMR for the geographic area; and
(iii) For rental assistance, up to 100
percent of the result of multiplying the
number and unit size(s) in the grant
agreement by the number of months in
the renewal grant term and the
an FMR.
(d) Review criteria. (1) Awards made
under title IV of the Act, as in effect
before August 30, 2012 are eligible for
renewal in the Continuum of Care
program even if the awardees would not
be eligible for a new grant under the
program, so long as they continue to
serve the same population and the same
number of persons or units in the same
type of housing as identified in their
most recently amended grant agreement
signed before August 30, 2012. Grants
will be renewed if HUD receives a
certification from the Continuum that
there is a demonstrated need for the
project, and HUD finds that the project
complied with program requirements
applicable before August 30, 2012. For
purposes of meeting the requirements of
this part, a project will continue to be
administered in accordance with 24
CFR 582.330, if the project received
funding under the Shelter Plus Care
program, or 24 CFR 583.325, if the
project received funding under the
Supportive Housing Program,
(2) Renewal of awards made after
August 30, 2012. Review criteria for
competitively awarded renewals made
after August 30, 2012 will be described
in the NOFA.
(e) Unsuccessful projects. HUD may
renew a project that was eligible for
renewal in the competition and was part
of an application that was not funded
despite having been submitted on time,
in the manner required by HUD, and
containing the information required by
HUD, upon a finding that the project
meets the purposes of the Continuum of
Care program. The renewal will not
exceed more than one year and will be
under such conditions as HUD deems
appropriate.
(f) Annual Performance Report
condition. HUD may terminate the
renewal of any grant and require the
recipient to repay the renewal grant if:
(1) The recipient fails to timely
submit a HUD Annual Performance
Report (APR) for the grant year
immediately prior to renewal; or
(2) The recipient submits an APR that
HUD deems unacceptable or shows
noncompliance with the requirements
of the grant and this part.
§578.35 Appeal.
(a) In general. Failure to follow the
procedures or meet the deadlines
established in this section will result in
denial of the appeal.
(b) Solo applicants. (1) Who may
appeal. Nonprofits, States, and local
governments, and instrumentalities of
State or local governments that
attempted to participate in the
Continuum of Care planning process in
the geographic area in which they
operate, that believe they were denied
the right to participate in a reasonable
manner, and that submitted a solo
application for funding by the
application deadline established in the
NOFA, may appeal the decision of the
Continuum to HUD.
(2) Notice of intent to appeal. The
solo applicant must submit a written
notice of intent to appeal, with a copy
to the Continuum, with their funding
ap lication.
�3) Deadline for submitting proof. No
later than 30 days after the date that
HUD announces the awards, the solo
applicant shall submit in writing, with
a copy to the Continuum, all relevant
evidence supporting its claim, in such
manner as HUD may require by Notice.
(4) Response from the Continuum of
Care, The Continuum shall have 30 days
from the date of its receipt of the solo
applicant's evidence to respond to HUD
in writing and in such manner as HUD
may require, with a copy to the solo
ap licant.
5) Decision. HUD will notify the solo
applicant and the Continuum of its
decision within 60 days of receipt of the
Continuum's response.
(6) Funding. If HUD finds that the solo
applicant was not permitted to
participate in the Continuum of Care
planning process in a reasonable
manner, then HUD may award a grant
to the solo applicant when funds next
become available and may direct the
Continuum of Care to take remedial
steps to ensure reasonable participation
in the future. HUD may also reduce the
award to the Continuum's applicant(s).
(c) Denied or decreased funding. (1)
Who may appeal. Eligible applicants
that are denied funds by HUD, or that
requested more funds than HUD
awarded to them, may appeal the award
by filing a written appeal, in such form
and manner as HUD may require by
Notice, within 45 days of the date of
HUD's announcement of the award.
(2) Decision. HUD will notify the
applicant of its decision on the appeal
within 60 days of HUD's receipt of the
written appeal. HUD will reverse a
decision only when the applicant can
show that HUD error caused the denial
or decrease.
G
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45450 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
(3) Funding. Awards and increases to
awards made upon appeal will be made
from next available funds.
(d) Competing Continuums of Care.
(1) In general. If more than one
Continuum of Care claims the same
geographic area, HUD will award funds
to the Continuum applicant(s) whose
application(s) has the highest total
score. No projects will be funded from
the lower scoring Continuum) No
projects that are submitted in two or
more competing Continuum of Care
applications will be funded.
(2) Who may appeal. The designated
applicant(s) for the lower scoring
Continuum may appeal HUD's decision
to fund the application(s) from the
competing Continuum by filing a
written appeal, in such form and
manner as HUD may require by Notice,
within 45 days of the date of HUD's
announcement of the award.
(3) Decision. HUD will notify the
applicant(s) of its decision on the appeal
within 60 days of the date of HUD's
receipt of the written appeal. HUD will
reverse a decision only upon a showing
by the applicant that HUD error caused
the denial.
(e) Consolidated plan certification. (1)
In general. An applicant may appeal to
HUD a jurisdiction's refusal to provide
a certification of consistency with the
Consolidated Plan.
(2) Procedure. The applicant must
submit a written appeal with its
application to HUD and send a copy of
the appeal to the jurisdiction that
denied the certification of consistency.
The appeal must include, at a
minimum:
(i) A copy of the applicant's request
to the jurisdiction for the certification of
consistency with the Consolidated Plan;
(ii) A copy of the jurisdiction's
response stating the reasons for denial,
including the reasons the proposed
project is not consistent with the
jurisdiction's Consolidated Plan in
accordance with 24 CFR 91.500(c); and
(iii) A statement of the reasons why
the applicant believes its project is
consistent with the jurisdiction's
Consolidated Plan.
(3) jurisdiction response. The
jurisdiction that refused to provide the
certification of consistency with the
jurisdiction's Consolidated Plan shall
have 10 days after receipt of a copy of
the appeal to submit a written
explanation of the reasons originally
given for refusing to provide the
certification and a written rebuttal to
any claims made by the applicant in the
ap eal.
�4) HUD review. (i) HUD will issue its
decision within 45 days of the date of
HUD's receipt of the jurisdiction's
response. As part of its review, HUD
will consider:
(A) Whether the applicant submitted
the request to the appropriate political
jurisdiction; and
(B) The reasonableness of the
jurisdiction's refusal to provide the
certificate.
(ii) If the jurisdiction did not provide
written reasons for refusal, including
the reasons why the project is not
consistent with the jurisdiction's
Consolidated Plan in its initial response
to the applicant's request for a
certification, HUD will find for the
applicant without further inquiry or
response from the political jurisdiction.
Subpart D— Program Components and
Eligible Costs
§578.37 Program components and uses of
assistance.
(a) Continuum of Care funds may be
used to pay for the eligible costs listed
in § 578.39 through § 578.63 when used
to establish and operate projects under
five program components: permanent
housing; transitional housing;
supportive services only; HMIS; and, in
some cases, homelessness prevention.
Although grant funds may be used by
recipients and subrecipients in all
components for the eligible costs of
contributing data to the HMIS
designated by the Continuum of Care,
only HMIS Leads may use grant funds
for an HMIS component. Administrative
costs are eligible for all components. All
components are subject to the
restrictions on combining funds for
certain eligible activities in a single
project found in § 578.87(c). The eligible
program components are:
(1) Permanent housing (PH).
Permanent housing is community -based
housing, the purpose of which is to
provide housing without a designated
length of stay. Grant funds may be used
for acquisition, rehabilitation, new
construction, leasing, rental assistance,
operating costs, and supportive services.
PH includes:
(i) Permanent supportive housing for
persons with disabilities (PSH). PSH can
only provide assistance to individuals
with disabilities and families in which
one adult or child has a disability.
Supportive services designed to meet
the needs of the program participants
must be made available to the program
participants.
(ii) Rapid rehousing. Continuum of
Care funds may provide supportive
services, as set forth in § 578.53, and /or
short -term (up to 3 months) and /or
medium -term (for 3 to 24 months)
tenant -based rental assistance, as set
forth in § 578.51(c), as necessary to help
a homeless individual or family, with or
without disabilities, move as quickly as
possible into permanent housing and
achieve stability in that housing. When
providing short -term and /or medium -
term rental assistance to program
participants, the rental assistance is
subject to § 578.51(a)(1), but not
§ 578.51(a)(1)(i) and (ii); (a)(2); (c) and
(f) through (i); and (1)(1). These projects:
(A) Must follow the written policies
and procedures established by the
Continuum of Care for determining and
prioritizing which eligible families and
individuals will receive rapid rehousing
assistance, as well as the amount or
percentage of rent that each program
participant must pay.
(B) May set a maximum amount or
percentage of rental assistance that a
program participant may receive, a
maximum number of months that a
program participant may receive rental
assistance, and /or a maximum number
of times that a program participant may
receive rental assistance. The recipient
or subrecipient may also require
program participants to share in the
costs of rent. For the purposes of
calculating rent for rapid rehousing, the
rent shall equal the sum of the total
monthly rent for the unit and, if the
tenant pays separately for utilities, the
monthly allowance for utilities
(excluding telephone) established by the
public housing authority for the area in
which the housing is located.
(C) Limit rental assistance to no more
than 24 months to a household.
(D) May provide supportive services
for no longer than 6 months after rental
assistance stops.
(E) Must re- evaluate, not less than
once annually, that the program
participant lacks sufficient resources
and support networks necessary to
retain housing without Continuum of
Care assistance and the types and
amounts of assistance that the program
participant needs to retain housing, The
recipient or subrecipient may require
each program participant receiving
assistance to notify the recipient or
subrecipient of changes in the program
participant's income or other
circumstances (e.g., changes in
household composition) that affect the
program participant's need for
assistance. When notified of a relevant
change, the recipient or subrecipient
must reevaluate the program
participant's eligibility and the amount
and types of assistance that the program
participant needs.
(F) Require the program participant to
meet with a case manager not less than
once per month to assist the program
participant in ensuring long -term
housing stability. The project is exempt
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Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations 45451
from this requirement if the Violence
Against Women Act of 1994 (42 U.S.C.
13925 et seq.) or the Family Violence
Prevention and Services Act (42 U.S.C.
10401 et seq.) prohibits the recipient
carrying out the project from making its
housing conditional on the participant's
acceptance of services.
(2) Transitional Housing (TH).
Transitional housing facilitates the
movement of homeless individuals and
families to PH within 24 months of
entering TH. Grant funds may be used
for acquisition, rehabilitation, new
construction, leasing, rental assistance,
operating costs, and supportive services.
(3) Supportive Service Only (SSO).
Funds may be used for acquisition,
rehabilitation, relocation costs, or
leasing of a facility from which
supportive services will be provided,
and supportive services in order to
provide supportive services to
unsheltered and sheltered homeless
persons for whom the recipient or
subrecipient is not providing housing or
housing assistance. SSO includes street
outreach.
(4) HMIS. Funds may be used by
HMIS Leads to lease a structure in
which the HMIS is operated or as
operating funds to operate a structure in
which the HMIS is operated, and for
other costs eligible in § 578.57.
(5) Homelessness prevention. Funds
may be used by recipients in
Continuums of Care- designated high -
performing communities for housing
relocation and stabilization services,
and short- and /or medium -term rental
assistance, as described in 24 CFR
576.105 and 24 CFR 576.106, that are
necessary to prevent an individual or
family from becoming homeless.
(b) Uses of assistance. Funds are
available to pay for the eligible costs
listed in § 578.39 through § 578.63 when
used to;
(1) Establish new housing or new
facilities to provide supportive services;
(2) Expand existing housing and
facilities in order to increase the number
of homeless persons served;
(3) Bring existing housing and
facilities into compliance with State and
local government health and safety
standards, as described in § 578.87;
(4) Preserve existing permanent
housing and facilities that provide
sup ortive services;
(5} Provide supportive services for
residents of supportive housing or for
homeless persons not residing in
su ortive housing;
(61 Continue funding permanent
housing when the recipient has received
funding under this part for leasing,
supportive services, operating costs, or
rental assistance;
(7) Establish and operate an HMIS or
comparable database;.and
(8) Establish and carry out a
Continuum of Care planning process
and operate a Continuum of Care.
(c) Multiple purposes. Structures used
to provide housing, supportive housing,
supportive services, or as a facility for
HMIS activities may also be used for
other purposes. However, assistance
under this part will be available only in
proportion to the use of the structure for
supportive housing or supportive
services. If eligible and ineligible
activities are carried out in separate
portions of the same structure or in
separate structures, grant funds may not
be used to pay for more than the actual
cost of acquisition, construction, or
rehabilitation of the portion of the
structure or structures used for eligible
activities. If eligible and ineligible
activities are carried out in the same
structure, the costs will be prorated
based on the amount of time that the
space is used for eligible versus
ineligible activities.
§578.39 Continuum of Care planning
activities.
(a) In general. Collaborative
applicants may use up to 3 percent of
their FPRN, or a maximum amount to be
established by the NOFA, for costs of;
(1) Designing and carrying out a
collaborative process for the
development of an application to HUD;
(2) Evaluating the outcomes of
projects for which funds are awarded in
the geographic area under the
Continuum of Care and the Emergency
Solutions Grants programs; and
(3) Participating in the consolidated
plan(s) for the geographic area(s).
(b) Continuum of Care planning
activities. Eligible planning costs
include the costs of;
(1) Developing a communitywide or
regionwide process involving the
coordination of nonprofit homeless
providers, victim service providers,
faith -based organizations, governments,
businesses, advocates, public housing
agencies, school districts, social service
providers, mental health agencies,
hospitals, universities, affordable
housing developers, law enforcement,
organizations that serve veterans, and
homeless and formerly homeless
individuals;
(2) Determining the geographic area
that the Continuum of Care will serve;
(3) Developing a Continuum of Care
system;
(4) Evaluating the outcomes of
projects for which funds are awarded in
the geographic area, including the
Emergency Solutions Grants program;
(5) Participating in the consolidated
plan(s) of the jurisdiction(s) in the
geographic area; and
(6) Preparing and submitting an
application to HUD on behalf of the
entire Continuum of Care membership,
including conducting a sheltered and
unsheltered point -in -time count and
other data collection as required by
HUD.
(c) Monitoring costs. The costs of
monitoring recipients and subrecipients
and enforcing compliance with program
requirements are eligible.
§578.41 Unified Funding Agency costs.
(a) In general. UFAs may use up to 3
percent of their FPRN, or a maximum
amount to be established by the NOFA,
whichever is less, for fiscal control and
accounting costs necessary to assure the
proper disbursal of, and accounting for,'
federal funds awarded to subrecipients
under the Continuum of Care program.
(b) UFA costs. UFA costs include
costs of ensuring that all financial
transactions carried out under the
Continuum of Care program are
conducted and records are maintained
in accordance with generally accepted
accounting principles, including
arranging for an annual survey, audit, or
evaluation of the financial records of
each project carried out by a
subrecipient funded by a grant received
through the Continuum of Care
program.
(c)Monitoring costs. The costs of
monitoring subrecipients and enforcing
compliance with program requirements
are eligible for costs.
§578.43 Acquisition.
Grant funds may be used to pay up to
100 percent of the cost of acquisition of
real property selected by the recipient or
subrecipient for use in the provision of
housing or supportive services for
homeless persons.
§578.45 Rehabilitation.
(a) Use. Grant funds may be used to
pay up to 100 percent of the cost of
rehabilitation of structures to provide
housing or supportive services to
homeless persons.
(b) Eligible costs. Eligible
rehabilitation costs include installing
cost - effective energy measures, and
bringing an existing structure to State
and local government health and safety
standards.
(c) Ineligible costs. Grant funds may
not be used for rehabilitation of leased
property.
45452 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
building of a new structure or building
an addition to an existing structure that
increases the floor area by 100 percent
or more, and the cost of land associated
with that construction, for use as
housing.
(2) If grant funds are used for new
construction, the applicant must
demonstrate that the costs of new
construction are substantially less than
the costs of rehabilitation or that there
is a lack of available appropriate units
that could be rehabilitated at a cost less
than new construction. For purposes of
this cost comparison, costs of
rehabilitation or new construction may
include the cost of real property
acquisition.
(b) Ineligible costs. Grant funds may
not be used for new construction on
leased property.
§578.49 Leasing.
(a) Use. (1) Where the recipient or
subrecipient is leasing the structure, or
portions thereof, grant funds may be
used to pay for 100 percent of the costs
of leasing a structure or structures, or
portions thereof, to provide housing or
supportive services to homeless persons
for up to 3 years. Leasing funds may not
be used to lease units or structures
owned by the recipient, subrecipient,
their parent organization(s), any other
related organization(s), or organizations
that are members of a partnership,
where the partnership owns the
structure, unless HUD authorized an
exception for good cause.
(2) Any request for an exception must
include the following:
(i) A description of how leasing these
structures is in the best interest of the
program;
(ii) Supporting documentation
showing that the leasing charges paid
with grant funds are reasonable for the
market; and
(iii) A copy of the written policy for
resolving disputes between the landlord
and tenant, including a recusal for
officers, agents, and staff who work for
both the landlord and tenant.
(b) Requirements. (1) Leasing
structures. When grants are used to pay
rent for all or part of a structure or
structures, the rent paid must be
reasonable in relation to rents being
charged in the area for comparable
space. In addition, the rent paid may not
exceed rents currently being charged by
the same owner for comparable
unassisted space.
(2) Leasing individual units. When
grants are used to pay rent for
individual housing units, the rent paid
must be reasonable in relation to rents
being charged for comparable units,
taking into account the location, size,
type, quality, amenities, facilities, and
management services. In addition, the
rents may not exceed rents currently
being charged for comparable units, and
the rent paid may not exceed HUD -
determined fair market rents.
(3) Utilities. If electricity, gas, and
water are included in the rent, these
utilities may be paid from leasing funds.
If utilities are not provided by the
landlord, these utility costs are an
operating cost, except for supportive
service facilities. If the structure is being
used as a supportive service facility,
then these utility costs are a supportive
service cost.
(4) Security deposits and first and last
month's rent. Recipients and
subrecipients may use grant funds to
pay security deposits, in an amount not
to exceed 2 months of actual rent. An
advance payment of the last month's
rent may be provided to the landlord in
addition to the security deposit and
payment of the first month's rent.
(5) Occupancy agreements and
subleases. Occupancy agreements and
subleases are required as specified in
§ 578.77(a).
(6) Calculation of occupancy charges
and rent. Occupancy charges and rent
from program participants must be
calculated as provided in § 578.77.
(7) Program income. Occupancy
charges and rent collected from program
participants are program income and.
may be used as provided under
§ 578.97.
(8) Transition, Beginning in the first
year awards are made under the
Continuum of Care program, renewals of
grants for leasing funds entered into
under the authority of title IV, subtitle
D of the Act as it existed before May 20,
2009, will be renewed either as grants
for leasing or as rental assistance,
depending on the characteristics of the
project, Leasing funds will be renewed
as rental assistance if the funds are used
to pay rent on units where the lease is
between the program participant and
the landowner or sublessor. Projects
requesting leasing funds will be
renewed as leasing if the funds were
used to lease a unit or structure and the
lease is between the recipient or
subrecipient and the landowner.
§ 578.51 Rental assistance.
(a) Use. (1) Grant funds may be used
for rental assistance for homeless
individuals and families. Rental
assistance cannot be provided to a
program participant who is already
receiving rental assistance, or living in
a housing unit receiving rental
assistance or operating assistance
through other federal, State, or local
sources.
(i) The rental assistance may be short -
term, up to 3 months of rent; medium -
term, for 3 to 24 months of rent; or long-
term, for longer than 24 months of rent
and must be administered in accordance
with the policies and procedures
established by the Continuum as set
forth in § 578.7(a)(9) and this section,
(ii) The rental assistance may be
tenant - based, project- based, or sponsor -
based, and may be for transitional or
permanent housing.
(2) Grant funds may be used for
security deposits in an amount not to
exceed 2 months of rent. An advance
payment of the last month's rent may be
provided to the landlord, in addition to
the security deposit and payment of first
month's rent.
(b) Rental assistance administrator.
Rental assistance must be administered
by a State, unit of general local
government, or a public housing agency.
(c) Tenant -based rental assistance.
Tenant -based rental assistance is rental
assistance in which program
participants choose housing of an
appropriate size in which to reside.
When necessary to facilitate the
coordination of supportive services,
recipients and subrecipients may
require program participants to live in a
specific area for their entire period of
participation, or in a specific structure
for the first year and in a specific area
for the remainder of their period of
participation. Program participants who
are receiving rental assistance in
transitional housing may be required to
live in a specific structure for their
entire period of participation in
transitional housing.
(1) Up to 5 years worth of rental
assistance may be awarded to a project
in one competition.
(2) Program participants who have
complied with all program requirements
during their residence retain the rental
assistance if they move within the
Continuum of Care geographic area.
(3) Program participants who have
complied with all program requirements
during their residence and who have
been a victim of domestic violence,
dating violence, sexual assault, or
stalking, and who reasonably believe
they are imminently threatened by harm
from further domestic violence, dating
violence, sexual assault, or stalking
(which would include threats from a
third party, such as a friend or family
member of the perpetrator of the
violence), if they remain in the assisted
unit, and are able to document the
violence and basis for their belief, may
retain the rental assistance and move to
a different Continuum of Care
geographic area if they move out of the
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assisted unit to protect their health and
safety.
(d) Sponsor -based rental assistance.
Sponsor -based rental assistance is
provided through contracts between the
recipient and sponsor organization. A
sponsor may be a private, nonprofit
organization, or a community mental
health agency established as a public
nonprofit organization. Program
participants must reside in housing
owned or leased by the sponsor. Up to
5 years worth of rental assistance may
be awarded to a project in one
competition.
(e) Project -based rental assistance.
Project -based rental assistance is
provided through a contract with the
owner of an existing structure, where
the owner agrees to lease the subsidized
units to program participants. Program
participants will not retain rental
assistance if they move. Up to 15 years
of rental assistance may be awarded in
one competition,
(f) Grant amount. The amount of
rental assistance in each project will be
based on the number and size of units
proposed by the applicant to be assisted
over the grant period. The amount of
rental assistance in each project will be
calculated by multiplying the number
and size of units proposed by the FMR
of each unit on the date the application
is submitted to HUD, by the term of the
grant,
(g) Rent reasonableness. HUD will
only provide rental assistance for a unit
if the rent is reasonable. The recipient
or subrecipient must determine whether
the rent charged for the unit receiving
rental assistance is reasonable in
relation to rents being charged for
comparable unassisted units, taking into
account the location, size, type, quality,
amenities, facilities, and management
and maintenance of each unit.
Reasonable rent must not exceed rents
currently being charged by the same
owner for comparable unassisted units.
(h) Payment of grant. (1) The amount
of rental assistance in each project will
be reserved for rental assistance over the
grant period. An applicant's request for
rental assistance in each grant is an
estimate of the amount needed for rental
assistance. Recipients will make draws
from the grant funds to pay the actual
costs of rental assistance for program
participants.
(2) For tenant -based rental assistance,
on demonstration of need:
(i) Up to 25 percent of the total rental
assistance awarded may be spent in any
year of a 5 -year grant term; or
(ii) A higher percentage if approved in
advance by HUD, if the recipient
provides evidence satisfactory to HUD
that it is financially committed to
providing the housing assistance
described in the application for the full
5 -year period.
(3) A recipient must serve at least as
many program participants as shown in
its a plication for assistance.
(4f If the amount in each grant
reserved for rental assistance over the
grant period exceeds the amount that
will be needed to pay the actual costs
of rental assistance, due to such factors
as contract rents being lower than FMRs
and program participants being able to
pay a portion of the rent, recipients or
subrecipients may use the excess funds
for covering the costs of rent increases,
or for serving a greater number of
program participants.
(i) Vacancies. If a unit assisted under
this section is vacated before the
expiration of the lease, the assistance for
the unit may continue for a maximum
of 30 days from the end of the month
in which the unit was vacated, unless
occupied by another eligible person. No
additional assistance will be paid until
the unit is occupied by another eligible
person. Brief periods of stays in
institutions, not to exceed 90 days for
each occurrence, are not considered
vacancies.
(j) Property damage. Recipients and
subrecipients may use grant funds in an
amount not to exceed one month's rent
to pay for any damage to housing due
to the action of a program participant.
This shall be a one -time cost per
participant, incurred at the time a
participant exits a housing unit.
(k) Resident rent. Rent must be
calculated as provided in § 578.77.
Rents collected from program
participants are program income and
may be used as provided under
§ 578.97.
(1) Leases. (1) Initial lease. For project -
based, sponsor- based, or tenant -based
rental assistance, program participants
must enter into a lease agreement for a
term of at least one year, which is
terminable for cause. The leases must be
automatically renewable upon
expiration for terms that are a minimum
of one month long, except on prior
notice by either party.
(2) Initial lease for transitional
housing. Program participants in
transitional housing must enter into a
lease agreement for a term of at least one
month, The lease must be automatically
renewable upon expiration, except on
prior notice by either party, up to a
maximum term of 24 months.
§578.53 Supportive services.
(a) In general. Grant funds may be
used to pay the eligible costs of
supportive services that address the
special needs of the program
participants. If the supportive services
are provided in a supportive service
facility not contained in a housing
structure, the costs of day -to -day
operation of the supportive service
facility, including maintenance, repair,
building security, furniture, utilities,
and equipment are eligible as a
supportive service.
(1) Supportive services must be
necessary to assist program participants
obtain and maintain housing.
(2) Recipients and subrecipients shall
conduct an annual assessment of the
service needs of the program
participants and should adjust services
accordingly.
(b) Duration. (1) For a transitional
housing project, supportive services
must be made available to residents
throughout the duration of their
residence in the project.
(2) Permanent supportive housing
projects must provide supportive
services for the residents to enable them
to live as independently as is
practicable throughout the duration of
their residence in the project.
(3) Services may also be provided to
former residents of transitional housing
and current residents of permanent
housing who were homeless in the prior
6 months, for no more than 6 months
after leaving transitional housing or
homelessness, respectively, to assist
their adjustment to independent living.
(4) Rapid rehousing projects must
require the program participant to meet
with a case manager not less than once
per month as set forth in
§ 578.37(a)(1)(ii)(F), to assist the
program participant in maintaining
long -term housing stability.
(c) Special populations. All eligible
costs are eligible to the same extent for
program participants who are
unaccompanied homeless youth;
persons living with HIV /AIDS; and
victims of domestic violence, dating
violence, sexual assault, or stalking.
(d) Ineligible costs. Any cost that is
not described as an eligible cost under
this section is not an eligible cost of
providing supportive services using
Continuum of Care program funds. Staff
training and the costs of obtaining
professional licenses or certifications
needed to provide supportive services
are not eligible costs,
(e) Eligible costs.
(1) Annual Assessment of Service
Needs. The costs of the assessment
required by § 578.53(a)(2) are eligible
costs.
(2) Assistance with moving costs.
Reasonable one -time moving costs are
eligible and include truck rental and
hiring a moving company.
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(3) Case management. The costs of
assessing, arranging, coordinating, and
monitoring the delivery of
individualized services to meet the
needs of the program participant(s) are
eligible costs. Component services and
activities consist of:
(i) Counseling;
(ii) Developing, securing, and
coordinating services;
(iii) Using the centralized or
coordinated assessment system as
required under § 578.23(c)(9).
(iv) Obtaining federal, State, and local
benefits;
(v) Monitoring and evaluating
program participant progress;
(vi) Providing information and
referrals to other providers;
(vii) Providing ongoing risk
assessment and safety planning with
victims of domestic violence, dating
violence, sexual assault, and stalking;
and
(viii) Developing an individualized
housing and service plan, including
planning a path to permanent housing
stability.
(4) Child care. The costs of
establishing and operating child care,
and providing child -care vouchers, for
children from families experiencing
homelessness, including providing
meals and snacks, and comprehensive
and coordinated developmental
activities, are eligible.
(i) The children must be under the age
of 13, unless they are disabled children.
(ii) Disabled children must be under
the age of 18.
(iii) The child -care center must be
licensed by the jurisdiction in which it
operates in order for its costs.to be
eligible.
(5) Education services. The costs of
improving knowledge and basic
educational skills are eligible.
(i) Services include instruction or
training in consumer education, health
education, substance abuse prevention,
literacy, English as a Second Language,
and General Educational Development
(GED).
(ii) Component services or activities
are screening, assessment and testing;
individual or group instruction;
tutoring; provision of books, supplies,
and instructional material; counseling;
and referral to community resources.
(6) Employment assistance and job
training. The costs of establishing and
operating employment assistance and
job training programs are eligible,
including classroom, online and /or
computer instruction, on- the -job
instruction, services that assist
individuals in securing employment,
acquiring learning skills, and /or
increasing earning potential. The cost of
providing reasonable stipends to
program participants in employment
assistance and job training programs is
also an eligible cost.
(i) Learning skills include those skills
that can be used to secure and retain a
job, including the acquisition of
vocational licenses and /or certificates.
(ii) Services that assist individuals in
securing employment consist of:
(A) Employment screening,
assessment, or testing;
(B) Structured job skills and job -
seeking skills;
(C) Special training and tutoring,
including literacy training and pre-
vocational training;
(D) Books and instructional material;
(E) Counseling or job coaching; and
(F) Referral to community resources.
(7) Food. The cost of providing meals
or groceries to program participants is
eligible.
(8) Housing search and counseling
services. Costs of assisting eligible
program participants to locate, obtain,
and retain suitable housing are eligible.
(i) Component services or activities
are tenant counseling; assisting
individuals and families to understand
leases; securing utilities; and making
moving arrangements.
(ii) Other eligible costs are:
(A) Mediation with property owners
and landlords on behalf of eligible
program participants;
(B) Credit counseling, accessing a free
personal credit report, and resolving
personal credit issues; and
(C) The payment of rental application
fees.
(9) Legal services. Eligible costs are
the fees charged by licensed attorneys
and by person(s) under the supervision
of licensed attorneys, for advice and
representation in matters that interfere
with the homeless individual or family's
ability to obtain and retain housing.
(i) Eligible subject matters are child
support; guardianship; paternity;
emancipation; legal separation; orders of
protection and other civil remedies for
victims of domestic violence, dating
violence, sexual assault, and stalking;
appeal of veterans and public benefit
claim denials; landlord tenant disputes;
and the resolution of outstanding
criminal warrants.
(ii) Component services or activities
may include receiving and preparing
cases for trial, provision of legal advice,
representation at hearings, and
counseling.
(iii) Fees based on the actual service
performed (i.e., fee for service) are also
eligible, but only if the cost would be
less than the cost of hourly fees. Filing
fees and other necessary court costs are
also eligible, If the subrecipient is a
legal services provider and performs the
services itself, the eligible costs are the
subrecipient's employees' salaries and
other costs necessary to perform the
services.
(iv) Legal services for immigration
and citizenship matters and issues
related to mortgages and
homeownership are ineligible. Retainer
fee arrangements and contingency fee
arrangements are ineligible.
(10) Life skills training. The costs of
teaching critical life management skills
that may never have been learned or
have been lost during the course of
physical or mental illness, domestic
violence, substance abuse, and
homelessness are eligible. These
services must be necessary to assist the
program participant to function
independently in the community.
Component life skills training are the
budgeting of resources and money
management, household management,
conflict management, shopping for food
and other needed items, nutrition, the
use of public transportation, and parent
training.
(11) Mental health services. Eligible
costs are the direct outpatient treatment
of mental health conditions that are
provided by licensed - professionals.
Component services are crisis
interventions; counseling; individual,
family, or group therapy sessions; the
prescription of psychotropic
medications or explanations about the
use and management of medications;
and combinations of therapeutic
approaches to address multiple
problems.
(12) Outpatient health services.
Eligible costs are the direct outpatient
treatment of medical conditions when
provided by licensed medical
professionals including:
(i) Providing an analysis or
assessment of an individual's health
problems and the development of a
treatment plan;
(ii) Assisting individuals to
understand their health needs;
(iii) Providing directly or assisting
individuals to obtain and utilize
appropriate medical treatment;
(iv) Preventive medical care and
health maintenance services, including
in -home health services and emergency
medical services;
(v) Provision of appropriate
medication;
(vi) Providing follow -up services; and
(vii) Preventive and noncosmetic
dental care.
(13) Outreach services. The costs' of
activities to engage persons for the
purpose of providing immediate support
and intervention, as well as identifying
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potential program participants, are
eligible.
(f) Eligible costs include the outreach
worker's transportation costs and a cell
phone to be used by the individual
performing the outreach.
(ii) Component activities and services
consist of. initial assessment; crisis
counseling; addressing urgent physical
needs, such as providing meals,
blankets, clothes, or toiletries; actively
connecting and providing people with
information and referrals to homeless
and mainstream programs; and
publicizing the availability of the
housing and /or services provided
within the geographic area covered by
the Continuum of Care.
(14) Substance abuse treatment
services. The costs of program
participant intake and assessment,
outpatient treatment, group and
individual counseling, and drug testing
are eligible. Inpatient detoxification and
other inpatient drug or alcohol
treatment are ineligible.
(15) Transportation. Eligible costs are:
(i) The costs of program participant's
travel on public transportation or in a
vehicle provided by the recipient or
subrecipient to and from medical care,
employment, child care, or other
services eligible under this section.
(ii) Mileage allowance for service
workers to visit program participants
and to carry out housing quality
inspections;
(iii) The cost of purchasing or leasing
a vehicle in which staff transports
program participants and /or staff
serving program participants;
(iv) The cost of gas, insurance, taxes,
and maintenance for the vehicle;
(v) The costs of recipient or
subrecipient staff to accompany or assist
program participants to utilize public
transportation; and
(vi) If public transportation options
are not sufficient within the area, the
recipient may make a one -time payment
on behalf of a program participant
needing car repairs or maintenance
required to operate a personal vehicle,
subject to the following:
(A) Payments for car repairs or
maintenance on behalf of the program
participant may not exceed 10 percent
of the Blue Book value of the vehicle
(Blue Book refers to the guidebook that
compiles and quotes prices for new and
used automobiles and other vehicles of
all makes, models, and types);
(B) Payments for car repairs or
maintenance must be paid by the
recipient or subrecipient directly to the
third party that repairs or maintains the
car; and
(C) The recipients or subrecipients
may require program participants to
share in the cost of car repairs or
maintenance as a condition of receiving
assistance with car repairs or
maintenance.
(16) Utility deposits. This form of
assistance consists of paying for utility
deposits. Utility deposits must be a one-
time fee, paid to utility companies.
(17) Direct provision of services. If the
service described in paragraphs (e)(1)
through (e)(16) of this section is being
directly delivered by the recipient or
subrecipient, eligible costs for those
services also include:
(i) The costs of labor or supplies, and
materials incurred by the recipient or
subrecipient in directly providing
supportive services to program .
participants; and
(ii) The salary and benefit packages of
the recipient and subrecipient staff who
directly deliver the services.
§578.55 Operating costs.
(a) Use. Grant funds may be used to
pay the costs of the day -to -day operation
of transitional and permanent housing
in a single structure or individual
housing units.
(b) Eligible costs. (1) The maintenance
and repair of housing;
(2) Property taxes and insurance;
(3) Scheduled payments to a reserve
for replacement of major systems of the
housing (provided that the payments
must be based on the useful life of the
system and expected replacement cost);
(4) Building security for a structure
where more than 50 percent of the units
or area is paid for with grant funds;
(5) Electricity, gas, and water;
(6) Furniture; and
(7) Equipment.
(c) Ineligible costs. Program funds
may not be used for rental assistance
and operating costs in the same project.
Program funds may not be used for the
operating costs of emergency shelter -
and supportive service -only facilities.
Program funds may not be used for the
maintenance and repair of housing
where the costs of maintaining and
repairing the housing are included in
the lease.
§ 578.57 Homeless Management
Information System.
(a) Eligible costs. (1) The recipient or
subrecipient may use Continuum of
Care program funds to pay the costs of
contributing data to the HMIS
designated by the Continuum of Care,
including the costs of:
(i) Purchasing or leasing computer
hardware;
(ii) Purchasing software or software
licenses;
(iii) Purchasing or leasing equipment,
including telephones, fax machines, and
furniture;
(iv) Obtaining technical support;
(v) Leasing office space;
(vi) Paying charges for electricity, gas,
water, phone service, and high -speed
data transmission necessary to operate
or contribute data to the HMIS;
(vii) Paying salaries for operating
HMIS, including:
(A) Completing data entry;
(B) Monitoring and reviewing data
quality;
(C) Completing data analysis;
(D) Reporting to the HMIS Lead;
(E) Training staff on using the HMIS;
and
(F) Implementing and complying with
HMIS requirements;
(viii) Paying costs of staff to travel to
and attend HUD - sponsored and HUD -
approved training on HMIS and
programs authorized by Title IV of the
McKinney -Vento Homeless Assistance
Act;
(ix) Paying staff travel costs to
conduct intake; and
(x) Paying participation fees charged
by the HMIS Lead, as authorized by
HUD, if the recipient or subrecipient is
not the HMIS Lead.
(2) If the recipient or subrecipient is
the HMIS Lead, it may also use
Continuum of Care funds to pay the
costs of:
(i) Hosting and maintaining HMIS
software or data;
(ii) Backing up, recovering, or
repairing HMIS software or data;
(iii) Upgrading, customizing, and
enhancing the HMIS;
(iv) Integrating and warehousing data,
including development of a data
warehouse for use in aggregating data
from subrecipients using multiple
software systems;
(v) Administering the system;
(vi) Reporting to providers, the
Continuum of Care, and HUD; and
(vii) Conducting training on using the
system, including traveling to the
training.
(3) If the recipient or subrecipient is
a victim services provider, or a legal
services provider, it may use Continuum
of Care funds to establish and operate a
comparable database that complies with
HUD's HMIS requirements.
(b) General restrictions. Activities
funded under this section must comply
with the HMIS requirements.
§578.59 Project administrative costs.
(a) Eligible costs. The recipient or
subrecipient may use up to 10 percent
of any grant awarded under this part,
excluding the amount for Continuum of
Care Planning Activities and UFA costs,
for the payment of project
administrative costs related to the
planning and execution of Continuum
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of Care activities. This does not include
staff and overhead costs directly related
to carrying out activities eligible under
§ 578.43 through § 578.57, because those
costs are eligible as part of those
activities. Eligible administrative costs
include:
(1) General management, oversight,
and coordination. Costs of overall
program management, coordination,
monitoring, and evaluation. These costs
include, but are not limited to,
necessary expenditures for the -
following:
(i) Salaries, wages, and related costs of
the recipient's staff, the staff of
subrecipients, or other staff engaged in
program administration. In charging
costs to this category, the recipient may
include the entire salary, wages, and
related costs allocable to the program of
each person whose primary
responsibilities with regard to the
program involve program
administration assignments, or the pro
rata share of the salary, wages, and
related costs of each person whose job
includes any program administration
assignments. The recipient may use
only one of these methods for each
fiscal year grant. Program
administration assignments include the
following:
(A) Preparing program budgets and
schedules, and amendments to those
budgets and schedules;
(B) Developing systems for assuring
compliance with program requirements;
(C) Developing agreements with
subrecipients and contractors to carry
out program activities;
(D) Monitoring program activities for
progress and compliance with program
requirements;
(E) Preparing reports and other
documents directly related to the
program for submission to HUD,
(F) Coordinating the resolution of
audit and monitoring findings;
(G) Evaluating program results against
stated objectives; and
(H) Managing or supervising persons
whose primary responsibilities with
regard to the program include such
assignments as those described in
paragraph (a)(1)(i)(A) through (G) of this
section.
(ii) Travel costs incurred for
monitoring of subrecipients;
(iii) Administrative services
performed under third -party contracts
or agreements, including general legal
services, accounting services, and audit
services; and
(iv) Other costs for goods and services
required for administration of the
program, including rental or purchase of
equipment, insurance, utilities, office
supplies, and rental and maintenance
(but not purchase) of office space.
(2) Training on Continuum of Care
requirements. Costs of providing
training on Continuum of Care
requirements and attending HUD -
sponsored Continuum of Care trainings.
(3) Environmental review. Costs of
carrying out the environmental review
respponsibilities under § 578.31.
(b) Sharing requirement. (1) UFAs. If
the recipient is a UFA that carries out
a project, it may use up to 10 percent
of the grant amount awarded for the
project on project administrative costs.
The UFA must share the remaining
project administrative funds with its
subrecipients.
(2) Recipients that are not UFAs. If the
recipient is not a UFA, it must share at
least 50 percent of project
administrative funds with its
subrecipients.
§578.61 Relocation costs.
(a) In general. Relocation costs under
the Uniform Relocation Assistance and
Real Property Acquisition Policies Act
of 1970 are eligible.
(b) Eligible relocation costs. Eligible
costs are costs to provide relocation
payments and other assistance to
persons displaced by a project assisted
with grant funds in accordance with
§ 578.83.
§578.63 Indirect costs.
(a) In general. Continuum of Care
funds may be used to pay indirect costs
in accordance with OMB Circulars A -87
or A -122, as applicable.
(b) Allocation. Indirect costs may be
allocated to each eligible activity as
provided in subpart D, so long as that
allocation is consistent with an indirect
cost rate proposal developed in
accordance with OMB Circulars A -87 or
A -122, as applicable.
(c) Expenditure limits. The indirect
costs charged to an activity subject to an
expenditure limit under §§ 578.39,
578.41, and 578.59 must be added to the
direct costs charged for that activity
when determining the total costs subject
to the expenditure limits.
Subpart E— High - Performing
Communities
§ 578.65 Standards.
(a) In general. The collaborative
applicant for a Continuum may apply to
HUD to have the Continuum be
designated a high - performing
community (HPC). The designation
shall be for grants awarded in the same
competition in which the designation is
appplied for and made.
(b) Applying for HPC designation. The
application must be submitted at such
time and in such manner as HUD may
require, must use HMIS data where
required to show the standards for
qualifying are met, and must contain
such information as HUD requires,
including at a minimum:
(1) A report showing how the
Continuum of Care program funds
received in the preceding year were
expended;
(2) A specific plan for how grant
funds will be expended; and
(3) Information establishing that the
Continuum of Care meets the standards
for HPCs.
(c) Standards for qualifying as an
HPC. To qualify as an HPC, a
Continuum must demonstrate through:
(1) Reliable data generated by the
Continuum of Care's HMIS that it meets
all of the following standards:
(i) Mean length of homelessness.
Either the mean length of episode of
homelessness within the Continuum's
geographic area is fewer than 20 days,
or the mean length of episodes of
homelessness for individuals or families
in similar circumstances was reduced
by at least 10 percent from the
preceding federal fiscal year.
(ii) Reduced recidivism. Of
individuals and families who leave
homelessness, less than 5 percent
become homeless again at any time
within the next 2 years; or the
percentage of individuals and families
in similar circumstances who become
homeless again within 2 years after
leaving homelessness was decreased by
at least 20 percent from the preceding
federal fiscal year.
(iii) HMIS coverage. The Continuum's
HMIS must have a bed coverage rate of
80 percent and a service volume
coverage rate of 80 percent as calculated
in accordance with HUD's HMIS
requirements.
(iv) Serving families and youth. With
respect to Continuums that served
homeless families and youth defined as
homeless under other federal statutes in
paragraph (3) of the definition of
homeless in § 576.2:
(A) 95 percent of those families and
youth did not become homeless again
within a 2 -year period following
termination of assistance; or
(B) 85 percent of those families
achieved independent living in
permanent housing for at least 2 years
following termination of assistance.
(2) Reliable data generated from
sources other than the Continuum's
HMIS that is provided in a narrative or
other form prescribed by HUD that it
meets both of the following standards:
(i) Community action. All the
metropolitan cities and counties within
the Continuum's geographic area have a
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comprehensive outreach plan, including
specific steps for identifying homeless
persons and referring them to
appropriate housing and services in that
geographic area.
(ii) Renewing HPC status. If the
Continuum was designated an HPC in
the previous federal fiscal year and used
Continuum of Care grant funds for
activities described under § 578.71, that
such activities were effective at
reducing the number of individuals and
families who became homeless in that
community.
§578.67 Publication of application.
HUD will publish the application to
be designated an HPC through the HUD
Web site, for public comment as to
whether the Continuum seeking
designation as an HPC meets the
standards for being one.
§578.69 Cooperation among entities.
An HPC must cooperate with HUD in
distributing information about its
successful efforts to reduce
homelessness.
§578.71 HPC - eligible activities.
In addition to using grant funds for
the eligible costs described in subpart D
of this part, recipients and subrecipients
in Continuums of Care designated as
HPCs may also use grant funds to
provide housing relocation and
stabilization services and short- and /or
medium -term rental assistance to
individuals and families at risk of
homelessness as set forth in 24 CFR
576.103 and 24 CFR 576.104, if
necessary to prevent the individual or
family from becoming homeless.
Activities must be carried out in
accordance with the plan submitted in
the application. When carrying out
housing relocation and stabilization
services and short- and /or medium -term
rental assistance, the written standards
set forth in § 578.7(a)(9)(v) and
recordkeeping requirements of 24 CFR
576.500 apply.
Subpart F— Program Requirements
§578.73 Matching requirements.
(a) In general. The recipient or
subrecipient must match all grant funds,
except for leasing funds, with no less
than 25 percent of funds or in -kind
contributions from other sources. For
Continuum of Care geographic areas in
which there is more than one grant
agreement, the 25 percent match must
be provided on a grant -by -grant basis.
Recipients that are UFAs or are the sole
recipient for their Continuum, may
provide match on a Continuum -wide
basis. Cash match must be used for the
costs of activities that are eligible under
subpart D of this part, except that HPCs
may use such match for the costs of
activities that are eligible under
§ 578.71.
(b) Cash sources. A recipient or
subrecipient may use funds from any
source, including any other federal
sources (excluding Continuum of Care
program funds), as well as State, local,
and private sources, provided that funds
from the source are not statutorily
prohibited to be used as a match. The
recipient must ensure that any funds
used to satisfy the matching
requirements of this section are eligible
under the laws governing the funds in
order to be used as matching funds for
a grant awarded under this program.
(c) In -kind contributions. (1) The
recipient or subrecipient may use the
value of any real property, equipment,
goods, or services contributed to the
project as match, provided that if the
recipient or subrecipient had to pay for
them with grant funds, the costs would
have been eligible under Subpart D, or,
in the case of HPCs, eligible under
§ 578.71.
(2) The requirements of 24 CFR 84.23
and 85.24 apply.
(3) Before grant execution, services to
be provided by a third party must be
documented by a memorandum of
understanding (MOU) between the
recipient or subrecipient and the third
party that will provide the services.
Services provided by individuals must
be valued at rates consistent with those
ordinarily paid for similar work in the
recipient's or subrecipient's
organization. If the recipient or
subrecipient does not have employees
performing similar work, the rates must
be consistent with those ordinarily paid
by other employers for similar work in
the same labor market.
(i) The MOU must establish the
unconditional commitment, except for
selection to receive a grant, by the third
party to provide the services, the
specific service to be provided, the
profession of the persons providing the
service, and the hourly cost of the
service to be provided.
(ii) During the term of the grant, the
recipient or subrecipient must keep and
make available, for inspection, records
documenting the service hours
provided.
§578.75 General operations.
(a) State and local requirements. (1)
Housing and facilities constructed or
rehabilitated with assistance under this
part must meet State or local building
codes, and in the absence of State or
local building codes, the International
Residential Code or International
Building Code (as applicable to the type
of structure) of the International Code
Council.
(2) Services provided with assistance
under this part must be provided in
compliance with all applicable State
and local requirements, including
licensing requirements.
(b) Housing quality standards.
Housing leased with Continuum of Care
program funds, or for which rental
assistance payments are made with
Continuum of Care program funds, must
meet the applicable housing quality
standards (HQS) under 24 CFR 982.401
of this title, except that 24 CFR
982.401(j) applies only to housing
occupied by program participants
receiving tenant -based rental assistance.
For housing rehabilitated with funds
under this part, the lead -based paint
requirements in 24 CFR part 35,
subparts A, B, J, and R apply. For
housing that receives project -based or
sponsor -based rental assistance, 24 CFR
part 35, subparts A, B, H, and R apply.
For residential property for which funds
under this part are used for acquisition,
leasing, services, or operating costs, 24
CFR part 35, subparts A, B, K, and R
apply.
1) Before any assistance will be
provided on behalf of a program
participant, the recipient, or
subrecipient, must physically inspect
each unit to assure that the unit meets
HQS. Assistance will not be provided
for units that fail to meet HQS, unless
the owner corrects any deficiencies
within 30 days from the date of the
initial inspection and the recipient or
subrecipient verifies that all deficiencies
have been corrected.
(2) Recipients or subrecipients must
inspect all units at least annually during
the grant period to ensure that the units
continue to meet HQS.
(c) Suitable dwelling size. The
dwelling unit must have at least one
bedroom or living /sleeping room for
each two persons.
(1) Children of opposite sex, other
than very young children, may not be
required to occupy the same bedroom or
living /sleeping room.
(2) If household composition changes
during the term of assistance, recipients
and subrecipients may relocate the
household to a more appropriately sized
unit. The household must still have
access to appropriate supportive
services.
(d) Meals. Each recipient and
subrecipient of assistance under this
part who provides supportive housing
for homeless persons with disabilities
must provide meals or meal preparation
facilities for residents.
(e) Ongoing assessment of supportive
services. To the extent practicable, each
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project must provide supportive
services for residents of the project and
homeless persons using the project,
which may be designed by the recipient
or participants. Each recipient and
subrecipient of assistance under this
part must conduct an ongoing
assessment of the supportive services
needed by the residents of the project,
the availability of such services, and the
coordination of services needed to
ensure long -term housing stability and
must make adjustments, as appropriate.
(f) Residential supervision. Each
recipient and subrecipient of assistance
under this part must provide residential
supervision as necessary to facilitate the
adequate provision of supportive
services to the residents of the housing
throughout the term of the commitment
to operate supportive housing.
Residential supervision may include the
employment of a full- or part -time
residential supervisor with sufficient
knowledge to provide or to supervise
the provision of supportive services to
the residents.
(g) Participation of homeless
individuals. (1) Each recipient and
subrecipient must provide for the
participation of not less than one
homeless individual or formerly
homeless individual on the board of
directors or other equivalent
policymaking entity of the recipient or
subrecipient, to the extent that such
entity, considers and makes policies and
decisions regarding any project,
supportive services, or assistance
provided under this part. This
requirement is waived if a recipient or
subrecipient is unable to meet such
requirement and obtains HUD approval
for a plan to otherwise consult with
homeless or formerly homeless persons
when considering and making policies
and decisions.
(2) Each recipient and subrecipient of
assistance under this part must, to the
maximum extent practicable, involve
homeless individuals and families
through employment; volunteer
services; or otherwise in constructing,
rehabilitating, maintaining, and
operating the project, and in providing
supportive services for the project.
(h) Supportive service agreement.
Recipients and subrecipients may
require the program participants to take
part in supportive services that are not
disability - related services provided
through the project as a condition of
continued participation in the program.
Examples of disability - related services
include, but are not limited to, mental
health services, outpatient health
services, and provision of medication,
which are provided to a person with a
disability to address a condition caused
by the disability. Notwithstanding this
provision, if the purpose of the project
is to provide substance abuse treatment
services, recipients and subrecipients
may require program participants to
take part in such services as a condition
of continued participation in the
pro ram.
al Retention of assistance after death,
incarceration, or institutionalization for
more than 90 days of qualifying
member. For permanent supportive
housing projects surviving, members of
any household who were living in a unit
assisted under this part at the time of
the qualifying member's death, long-
term incarceration, or long -term
institutionalization, have the right to
rental assistance under this section until
the expiration of the lease in effect at
the time of the qualifying member's
death, long -term incarceration, or long-
term institutionalization.
§578.77 Calculating occupancy charges
and rent.
(a) Occupancy agreements and leases.
Recipients and subrecipients must have
signed occupancy agreements or leases
(or subleases) with program participants
residing in housing.
(b) Calculation of occupancy charges.
Recipients and subrecipients are not
required to impose occupancy charges
on program participants as a condition
of residing in the housing. However, if
occupancy charges are imposed, they
may not exceed the highest of;
(1) 30 percent of the family's monthly
adjusted income (adjustment factors
include the number of people in the
family, age of family members, medical
expenses, and child -care expenses);
(2) 10 percent of the family's monthly
income; or
(3) If the family is receiving payments
for welfare assistance from a public
agency and a part of the payments
(adjusted in accordance with the
family's actual housing costs) is
specifically designated by the agency to
meet the family's housing costs, the
portion of the payments that is
designated for housing costs.
(4) Income. Income must be
calculated in accordance with 24 CFR
5.609 and 24 CFR 5.611(a). Recipients
and subrecipients must examine a
program participant's income initially,
and if there is a change in family
composition (e.g., birth of a child) or a
decrease in the resident's income during
the year, the resident may request an
interim reexamination, and the
occupancy charge will be adjusted
accordingly.
(c) Resident rent. (1) Amount of rent.
(i) Each program participant on whose
behalf rental assistance payments are
made must pay a contribution toward
rent in accordance with section 3(a)(1)
of the U.S. Housing Act of 1937 (42
U.S.C. 1437a(a)(1)).
(ii) Income of program participants
must be calculated in accordance with
24 CFR 5.609 and 24 CFR 5.611(a).
(2) Review. Recipients or
subrecipients must examine a program
participant's income initially, and at
least annually thereafter, to determine
the amount of the contribution toward
rent payable by the program participant,
Adjustments to a program participant's
contribution toward the rental payment
must be made as changes in income are
identified.
(3) Verification. As a condition of
participation in the program, each
program participant must agree to
supply the information or
documentation necessary to verify the
program participant's income. Program
participants must provide the recipient
or subrecipient with information at any
time regarding changes in income or
other circumstances that may result in
changes to a program participant's
contribution toward the rental payment.
§578.79 Limitation on transitional
housing.
A homeless individual or family may
remain in transitional housing for a
period longer than 24 months, if
permanent housing for the individual or
family has not been located or if the
individual or family requires additional
time to prepare for independent living.
However, HUD may discontinue
assistance for a transitional housing
project if more than half of the homeless
individuals or families remain in that
project longer than 24 months.
§578.81 Term of commitment, repayment
of grants, and prevention of undue benefits.
(a) In general. All recipients and
subrecipients receiving grant funds for
acquisition, rehabilitation, or new
construction must operate the housing
or provide supportive services in
accordance with this part, for at least 15
years from the date of initial occupancy
or date of initial service provision.
Recipient and subrecipients must
execute and record a HUD - approved
Declaration of Restrictive Covenants
before receiving payment of grant funds.
(b) Conversion. Recipients and
subrecipients carrying out a project that
provides transitional or permanent
housing or supportive services in a
structure may submit a request to HUD
to convert a project for the direct benefit
of very low - income persons. The request
must be made while the project is
operating as homeless housing or
supportive services for homeless
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individuals and families, must be in
writing, and must include an
explanation of why the project is no
longer needed to provide transitional or
permanent housing or supportive
services. The primary factor in HUD's
decision on the proposed conversion is
the unmet need for transitional or
permanent housing or supportive
services in the Continuum of Care's
geographic area.
(c) Repayment of grant funds. If a
project is not operated as transitional or
permanent housing for 10 years
following the date of initial occupancy,
HUD will require repayment of the
entire amount of the grant used for
acquisition, rehabilitation, or new
construction, unless conversion of the
project has been authorized under
paragraph (b) of this section. If the
housing is used for such purposes for
more than 10 years, the payment
amount will be reduced by 20
percentage points for each year, beyond
the 10 -year period in which the project
is used for transitional or permanent
housing.
(d) Prevention of undue benefits.
Except as provided under paragraph (e)
of this section, upon any sale or other
disposition of a project site that received
grant funds for acquisition,
rehabilitation, or new construction,
occurring before the 15 -year period, the
recipient must comply with such terms
and conditions as HUD may prescribe to
prevent the recipient or subrecipient
from unduly benefiting from such sale
or disposition.
(e) Exception. A recipient or
subrecipient will not be required to
comply with the terms and conditions
prescribed under paragraphs (c) and (d)
of this section if:
(1) The sale or disposition of the
property used for the project results in
the use of the property for the direct
benefit of very low- income persons;
(2) All the proceeds are used to
provide transitional or permanent
housing that meet the requirements of
this part;
(3) Project -based rental assistance or
operating cost assistance from any
federal program or an equivalent State
or local program is no longer made
available and the project is meeting
applicable performance standards,
provided that the portion of the project
that had benefitted from such assistance
continues to meet the tenant income
and rent restrictions for low- income
units under section 42(g) of the Internal
Revenue Code of 1986; or
(4) There are no individuals and
families in the Continuum of Care
geographic area who are homeless, in
which case the project may serve
individuals and families at risk of
homelessness.
§578.83 Displacement, relocation, and
acquisition.
(a) Minimizing displacement.
Consistent with the other goals and
objectives of this part, recipients and
subrecipients must ensure that they
have taken all reasonable steps to
minimize the displacement of persons
(families, individuals, businesses,
nonprofit organizations, and farms) as a
result of projects assisted under this
part. "Project," as used in this section,
means any activity or series of activities
assisted with Continuum of Care funds
received or anticipated in any phase of
an undertaking.
(b) Temporary relocation. (1) Existing
Building Not Assisted under Title IV of
the McKinney -Vento Act. No tenant may
be required to relocate temporarily for a
project if the building in which the
project is being undertaken or will be
undertaken is not currently assisted
under Title IV of the McKinney -Vento
Act. The absence of such assistance to
the building means the tenants are not
homeless and the tenants are therefore
not eligible to receive assistance under
the Continuum of Care program. When
a tenant moves for such a project under
conditions that cause the Uniform
Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA),
42 U.S.C. 4601 -4655, to apply, the
tenant must be treated as permanently
displaced and offered relocation
assistance and payments consistent with
paragraph (c) of this section.
(2) Existing Transitional Housing or
Permanent Housing Projects Assisted
Under Title IV of the McKinney- Vento
Act. Consistent with paragraph (c)(2)(ii)
of this section, no program participant
may be required to relocate temporarily
for a project if the person cannot be
offered a decent, safe, and sanitary unit
in the same building or complex upon
project completion under reasonable
terms and conditions. The length of
occupancy requirements in § 578.79
may prevent a program participant from
returning to the property upon
completion (See paragraph (c)(2)(iii)(D)
of this section). Any program
participant who has been temporarily
relocated for a period beyond one year
must be treated as permanently
displaced and offered relocation
assistance and payments consistent with
paragraph (c) of this section. Program
participants temporarily relocated in
accordance with the policies described
in this paragraph must be provided:
(i) Reimbursement for all reasonable
out -of- pocket expenses incurred in
connection with the temporary
relocation, including the cost of moving
to and from the temporarily occupied
housing and any increase in monthly
rent /occupancy charges and utility
costs; and
(ii) Appropriate advisory services,
including reasonable advance written
notice of:
(A) The date and approximate
duration of the temporary relocation;
(B) The location of the suitable,
decent, safe, and sanitary dwelling to be
made available for the temporary
period;
(C) The reasonable terms and
conditions under which the program
participant will be able to occupy a
suitable, decent, safe, and sanitary
dwelling in the building or complex
upon completion of the project; and
(D) The provisions of paragraph
(b)(2)(i) of this section.
(c) Relocation assistance for displaced
persons. (1) In general. A displaced
person (defined in paragraph (c)(2) of
this section) must be provided
relocation assistance in accordance with
the requirements of the URA and
implementing regulations at 49 CFR part
24. A displaced person must be advised
of his or her rights under the Fair
Housing Act. Whenever possible,
minority persons must be given
reasonable opportunities to relocate to
decent, safe, and sanitary replacement
dwellings, not located in an area of
minority concentration, that are within
their financial means. This policy,
however, does not require providing a
person a larger payment than is
necessary to enable a person to relocate
to a comparable replacement dwelling.
See 49 CFR 24.205(c)(2)(ii)(D).
(2) Displaced person. (i) For the
purposes of paragraph (c) of this section,
the term "displaced person" means any
person (family, individual, business,
nonprofit organization, or farm) that
moves from real property, or moves
personal property from real property,
permanently, as a direct result of
acquisition, rehabilitation, or
demolition for a project. This includes
any permanent, involuntary move for a
project, including any permanent move
from the real property that is made:
(A) After the owner (or person in
control of the site) issues a notice to
move permanently from the property, or
refuses to renew an expiring lease, if the
move occurs after the date of the
submission by the recipient or
subrecipient of an application for
assistance to HUD (or the recipient, as
applicable) that is later approved and
funded and the recipient or subrecipient
has site control as evidenced in
accordance with § 578.25(b); or
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(B) After the owner (or person in
control of the site) issues a notice to
move permanently from the property, or
refuses to renew an expiring lease, if the
move occurs after the date the recipient
or subrecipient obtains site control, as
evidenced in accordance with
§ 578.25(b), if that occurs after the
ap lication for assistance; or
�C) Before the date described under
paragraph (c)(2)(i)(A) or (B) of this
section, if the recipient or HUD
determines that the displacement
resulted directly from acquisition,
rehabilitation, or demolition for the
project; or '
(D) By a tenant of a building that is
not assisted under Title IV of the
McKinney -Vento Act, if the tenant
moves after execution of the agreement
covering the acquisition, rehabilitation,
or demolition of the property for the
project; or
(ii) For the purposes of paragraph (c)
of this section, the term "displaced
person" means any person (family,
individual, business, nonprofit
organization, or farm) that moves from
real property, or moves personal
property from real property,
permanently, as a direct result of
acquisition, rehabilitation, or
demolition for a project. This includes
any permanent, involuntary move for a
project that is made by a program
participant occupying transitional
housing or permanent housing assisted
under Title IV of the McKinney -Vento
Act, if any one of the following three
situations occurs:
(A) The program participant moves
after execution of the agreement
covering the acquisition, rehabilitation,
or demolition of the property for the
project and is either not eligible to
return upon project completion or the
move occurs before the program
participant is provided written notice
offering the program participant an
opportunity to occupy a suitable,
decent, safe, and sanitary dwelling in
the same building or complex upon
project completion under reasonable
terms and conditions. Such reasonable
terms and conditions must include a
lease (or occupancy agreement, as
applicable) consistent with Continuum
of Care program requirements, including
a monthly rent or occupancy charge and
monthly utility costs that does not
exceed the maximum amounts
established in § 578.77; or
(B) The program participant is
required to relocate temporarily, does
not return to the building or complex,
and any one of the following situations
occurs:
(1) The program participant is not
offered payment for all reasonable out-
of- pocket expenses incurred in
connection with the temporary
relocation;
(2) The program participant is not
eligible to return to the building or
complex upon project completion; or
(3) Other conditions of the temporary
relocation are not reasonable; or
(C) The program participant is
required to move to another unit in the
same building or complex, and any one
of the following situations occurs;
(1) The program participant is not
offered reimbursement for all reasonable
out -of- pocket expenses incurred in
connection with the move;
(2) The program participant is not
eligible to remain in the building or
complex upon project completion; or
(3) Other conditions of the move are
not reasonable.
(iii) Notwithstanding the provisions of
paragraph (c)(2)(i) or (ii) of this section,
a person does not qualify as a
"displaced person" if:
(A) The person has been evicted for
serious or repeated violation of the
terms and conditions of the lease or
occupancy agreement; the eviction
complied with applicable federal, State,
or local requirements (see § 578.91); and
the recipient or subrecipient determines
that the eviction was not undertaken for
the purpose of evading the obligation to
provide relocation assistance;
(B) The person moved into the
property after the submission of the
application but, before signing a lease or
occupancy agreement and commencing
occupancy, was provided written notice
of the project's possible impact on the
person (e.g., the person may be
displaced, temporarily relocated, or
incur a rent increase) and the fact that
the person would not qualify as a
"displaced person" (or for any
relocation assistance provided under
this section), as a result of the project;
(C) The person is ineligible under 49
CFR 24.2(a)(9)(ii));
(D) The person is a program
participant occupying transitional
housing or permanent housing assisted
under Title IV of the Act who must
move as a direct result of the length -of-
occupancy restriction under § 578.79; or
(E) HUD determines that the person
was not displaced as a direct result of
acquisition, rehabilitation, or
demolition for the project.
(iv) The recipient may request, at any
time, HUD's determination of whether a
displacement is or would be covered
under this section.
(3) Initiation of negotiations. For
purposes of determining the formula for
computing replacement housing
payment assistance to be provided to a
displaced person pursuant to this
section, if the displacement is a direct
result of privately undertaken
rehabilitation, demolition, or
acquisition of the real property,
"initiation of negotiations" means the
execution of the agreement between the
recipient and the subrecipient, or
between the recipient (or subrecipient,
as applicable) and the person owning or
controlling the property. In the case of
an option contract to acquire property,
the initiation of negotiations does not
become effective until execution of a
written agreement that creates a legally
enforceable commitment to proceed
with the purchase, such as a purchase
agreement.
(d) Real property acquisition
requirements. Except for acquisitions
described in 49 CFR 24.101(b)(1)
through (5), the URA and the
requirements of 49 CFR part 24, subpart
B apply to any acquisition of real
property for a project where there are
Continuum of Care funds in any part of
the project costs.
(e) Appeals. A person who disagrees
with the recipient's (or subrecipient's, if
applicable) determination concerning
whether the person qualifies as a
displaced person, or the amount of
relocation assistance for which the
person is eligible, may file a written
appeal of that determination with the
recipient (see 49 CFR 24.10). A low -
income person who is dissatisfied with
the recipient's determination on his or
her appeal may submit a written request
for review of that determination to the
local HUD field office.
§578.85 Timeliness standards.
(a) In general. Recipients must initiate
approved activities and projects
promptly.
(b) Construction activities. Recipients
of funds for rehabilitation or new
construction must meet the following
standards:
(1) Construction activities must begin
within 9 months of the later of signing
of the grant agreement or of signing an
addendum to the grant agreement
authorizing use of grant funds for the
project.
(2) Construction activities must be
completed within 24 months of signing
the grant agreement.
(3) Activities that cannot begin until
after construction activities are
completed must begin within 3 months
of the date that construction activities
are completed.
(c) Distribution. A recipient that
receives funds through this part must:
(1) Distribute the funds to
subrecipients (in advance of
expenditures by the subrecipients);
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(2) Distribute the appropriate portion
of the funds to a subrecipient no later
than 45 days after receiving an
approvable request for such distribution
from the subrecipient; and
(3) Draw down funds at least once per
quarter of the program year, after
eligible activities commence.
§578.87 Limitation on use of funds.
(a) Maintenance of effort. No
assistance provided under this part (or
any State or local government funds
used to supplement this assistance) may
be used to replace State or local funds
previously used, or designated for use,
to assist homeless persons.
(b) Faith -based activities. (1) Equal
treatment of program participants and
program beneficiaries. (i) Program
participants. Organizations that are
religious or faith -based are eligible, on
the same basis as any other
organization, to participate in the
Continuum of Care program. Neither the
Federal Government nor a State or local
government receiving funds under the
Continuum of Care program shall
discriminate against an organization on
the basis of the organization's religious
character or affiliation. Recipients and
subrecipients of program funds shall
not, in providing program assistance,
discriminate against a program
participant or prospective program
participant on the basis of religion or
religious belief.
(ii) Beneficiaries. In providing
services supported in whole or in part
with federal financial assistance, and in
their outreach activities related to such
services, program participants shall not
discriminate against current or
prospective program beneficiaries on
the basis of religion, a religious belief,
a refusal to hold a religious belief, or a
refusal to attend or participate in a
religious practice.
(2) Separation of explicitly religious
activities. Recipients and subrecipients
of Continuum of Care funds that engage
in explicitly religious activities,
including activities that involve overt
religious content such as worship,
religious instruction, or proselytization,
must perform such activities and offer
such services outside of programs that
are supported with federal financial
assistance separately, in time or
location, from the programs or services
funded under this part, and
participation in any such explicitly
religious activities must be voluntary for
the program beneficiaries of the HUD -
funded programs or services.
(3) Religious identity. A faith -based
organization that is a recipient or
subrecipient of Continuum of Care
program funds is eligible to use such
funds as provided under the regulations
of this part without impairing its
independence, autonomy, expression of
religious beliefs, or religious character.
Such organization will retain its
independence from federal, State, and
local government, and may continue to
carry out its mission, including the
definition, development, practice, and
expression of its religious beliefs,
provided that it does not use direct
program funds to support or engage in
any explicitly religious activities,
including activities that involve overt
religious content, such as worship,
religious instruction, or proselytization,
or any manner prohibited by law.
Among other things, faith -based
organizations may use space in their
facilities to provide program - funded
services, without removing or altering
religious art, icons, scriptures, or other
religious symbols. In addition, a
Continuum of Care program - funded
religious organization retains its
authority over its internal governance,
and it may retain religious terms in its
organization's name, select its board
members on a religious basis, and
include religious references in its
organization's mission statements and
other governing documents.
(4) Alternative provider. If a program
participant or prospective program
participant of the Continuum of Care
program supported by HUD objects to
the religious character of an
organization that provides services
under the program, that organization
shall, within a reasonably prompt time
after the objection, undertake reasonable
efforts to identify and refer the program
participant to an alternative provider to
which the prospective program
participant has no objection. Except for
services provided by telephone, the
Internet, or similar means, the referral
must be to an alternate provider in
reasonable geographic proximity to the
organization making the referral. In
making the referral, the organization
shall comply with applicable privacy
laws and regulations. Recipients and
subrecipients shall document any
objections from program participants
and prospective program participants
and any efforts to refer such participants
to alternative providers in accordance
with the requirements of
§ 578.103(a)(13). Recipients shall ensure
that all subrecipient agreements make
organizations receiving program funds
aware of these requirements.
(5) Structures. Program funds may not
be used for the acquisition,
construction, or rehabilitation of
structures to the extent that those
structures are used for explicitly
religious activities. Program funds may
be used for the acquisition,
construction, or rehabilitation of
structures only to the extent that those
structures are used for conducting
eligible activities under this part. When
a structure is used for both eligible and
explicitly religious activities, program
funds may not exceed the cost of those
portions of the acquisition, new
construction, or rehabilitation that are
attributable to eligible activities in
accordance with the cost accounting
requirements applicable to the
Continuum of Care program.
Sanctuaries, chapels, or other rooms
that a Continuum of Care program -
funded religious congregation uses as its
principal place of worship, however, are
ineligible for Continuum of Care
program - funded improvements.
Disposition of real property after the
term of the grant, or any change in the
use of the property during the term of
the grant, is subject to governmentwide
regulations governing real property
disposition (see 24 CFR parts 84 and
85).
(6) Supplemental funds. If a State or
local government voluntarily
contributes its own funds to supplement
federally funded activities, the State or
local government has the option to
segregate the federal funds or
commingle them. However, if the funds
are commingled, this section applies to
all of the commingled funds.
(c) Restriction on combining funds. In
a single structure or housing unit, the
following types of assistance may not be
combined;
(1) Leasing and acquisition,
rehabilitation, or new construction;
(2) Tenant -based rental assistance and
acquisition, rehabilitation, or new
construction;
(3) Short- or medium -term rental
assistance and acquisition,
rehabilitation, or new construction;
(4) Rental assistance and leasing; or
(5) Rental assistance and operating.
(d) Program fees. Recipients and
subrecipients may not charge program
participants program fees.
§578.89 Limitation on use of grant funds
to serve persons defined as homeless
under other federal laws.
(a) Application requirement.
Applicants that intend to serve
unaccompanied youth and families with
children and youth defined as homeless
under other federal laws in paragraph
(3) of the homeless definition in § 576.2
must demonstrate in their application,
to HUD's satisfaction, that the use of
grant funds to serve such persons is an
equal or greater priority than serving
persons defined as homeless under
paragraphs (1), (2), and (4) of the
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definition of homeless in § 576.2. To
demonstrate that it is of equal or greater
priority, applicants must'show that it is
equally or more cost effective in meeting
the overall goals and objectives of the
plan submitted under section
427(b)(1)(B) of the Act, especially with
respect to children and unaccompanied
youth.
(b) Limit. No more than 10 percent of
the funds awarded to recipients within
a single Continuum of Care's geographic
area may be used to serve such persons.
(c) Exception. The 10 percent
limitation does not apply to
Continuums in which the rate of
homelessness, as calculated in the most
recent point -in -time count, is less than
one -tenth of one percent of the total
population,
§578.91 Termination of assistance to
program participants.
(a) Termination of assistance. The
recipient or subrecipient may terminate
assistance to a program participant who
violates program requirements or
conditions of occupancy, Termination
under this section does not bar the
recipient or subrecipient from providing
further assistance at a later date to the
same individual or family.
(b) Due process. In terminating
assistance to a program participant, the
recipient or subrecipient must provide a
formal process that recognizes the rights
of individuals receiving assistance
under the due process of law. This
process, at a minimum, must consist of;
(1) Providing the program participant
with a written copy of the program rules
and the termination process before the
participant begins to receive assistance;
(2) Written notice to the program
participant containing a clear statement
of the reasons for termination;
(3) A review of the decision, in which
the program participant is given the
opportunity to present written or oral
objections before a person other than the
person (or a subordinate of that person)
who made or approved the termination
decision; and
(4) Prompt written notice of the final
decision to the program participant.
(c) Hard -to -house populations.
Recipients and subrecipients that are
providing permanent supportive
housing for hard -to -house populations
of homeless persons must exercise
judgment and examine all extenuating
circumstances in determining when
violations are serious enough to warrant
termination so that a program
participant's assistance is terminated
only in the most severe cases.
§578.93 Fair Housing and Equal
Opportunity.
(a) Nondiscrimination and equal
opportunity requirements. The
nondiscrimination and equal
opportunity requirements set forth in 24
CFR 5.105(a) are applicable.
(b) Housing for specific
subpopulations. Recipients and
subrecipients may exclusively serve a
particular homeless subpopulation in
transitional or permanent housing if the
housing addresses a need identified by
the Continuum of Care for the
geographic area and meets one of the
following;
(1) The housing may be limited to one
sex where such housing consists of a
single structure with shared bedrooms
or bathing facilities such that the
considerations of personal privacy and
the physical limitations of the
configuration of the housing make it
appropriate for the housing to be limited
to one sex;
(2) The housing may be limited to a
specific subpopulation, so long as
admission does not discriminate against
any protected class under federal
nondiscrimination laws in 24 CFR 5.105
(e.g., the housing may be limited to
homeless veterans, victims of domestic
violence and their children, or
chronically homeless persons and
families).
(3) The housing may be limited to
families with children.
(4) If the housing has in residence at
least one family with a child under the
age of 18, the housing may exclude
registered sex offenders and persons
with a criminal record that includes a
violent crime from the project so long as
the child resides in the housing.
(5) Sober housing may exclude
persons who refuse to sign an
occupancy agreement or lease that
prohibits program participants from
possessing, using, or being under the
influence of illegal substances and /or
alcohol on the premises.
(6) If the housing is assisted with
funds under a federal program that is
limited by federal statute or Executive
Order to a specific subpopulation, the
housing may be limited to that
subpopulation (e.g., housing also
assisted with funding from the Housing
Opportunities for Persons with AIDS
program under 24 CFR part 574 may be
limited to persons with acquired
immunodeficiency syndrome or related
diseases).
(7) Recipients may limit admission to
or provide a preference for the housing
to subpopulations of homeless persons
and families who need the specialized
supportive services that are provided in
the housing (e.g., substance abuse
addiction treatment, domestic violence
services, or a high intensity package
designed to meet the needs of hard -to-
reach homeless persons). While the
housing may offer services for a
particular type of disability, no
otherwise eligible individuals with
disabilities or families including an
individual with a disability, who may
benefit from the services provided may
be excluded on the grounds that they do
not have a particular disability.
(c) Affirmatively furthering fair
housing. A recipient must implement its
programs in a manner that affirmatively
furthers fair housing, which means that
the recipient must;
(1) Affirmatively market their housing
and supportive services to eligible
persons regardless of race, color,
national origin, religion, sex, age,
familial status, or handicap who are
least likely to apply in the absence of
special outreach, and maintain records
of those marketing activities;
(2) Where a recipient encounters a
condition or action that impedes fair
housing choice for current or
prospective program participants,
provide such information to the
jurisdiction that provided the
certification of consistency with the
Consolidated Plan; and
(3) Provide program participants with
information on rights and remedies
available under applicable federal, State
and local fair housing and civil rights
laws.
(d) Accessibility and integrative
housing and services for persons with
disabilities. Recipients and
subrecipients must comply with the
accessibility requirements of the Fair
Housing Act (24 CFR part 100), Section
504 of the Rehabilitation Act of 1973 (24
CFR part 8), and Titles II and III of the
Americans with Disabilities Act,,as
applicable (28 CFR parts 35 and 36). In
accordance with the requirements of 24
CFR 8.4(d), recipients must ensure that
their program's housing and supportive
services are provided in the most
integrated setting appropriate to the
needs of persons with disabilities:
(e) Prohibition against involuntary
family separation. The age and gender
of a child under age 18 must not be used
as a basis for denying any family's
admission to a project that receives
funds under this part.
§578.95 Conflicts of interest.
(a) Procurement. For the procurement
of property (goods, supplies, or
equipment) and services, the recipient
and its subrecipients must comply with
the codes of conduct and conflict -of-
interest requirements under 24 CFR
85,36 (for governments) and 24 CFR
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84.42 (for private nonprofit
organizations).
(b) Continuum of Care board
members, No Continuum of Care board
member may participate in or influence
discussions or resulting decisions
concerning the award of a grant or other
financial benefits to the organization
that the member represents.
(c) Organizational conflict. An
organizational conflict of interest arises
when, because of activities or
relationships with other persons or
organizations, the recipient or
subrecipient is unable or potentially
unable to render impartial assistance in
the provision of any type or amount of
assistance under this part, or when a
covered person's, as in paragraph (d)(1)
of this section, objectivity in performing
work with respect to any activity
assisted under this part is or might be
otherwise impaired. Such an
organizational conflict would arise
when a board member of an applicant
participates in decision of the applicant
concerning the award of a grant, or
provision of other financial benefits, to
the organization that such member
represents. It would also arise when an
employee of a recipient or subrecipient
participates in making rent
reasonableness determinations under
§ 578.49(b)(2) and § 578.51(g) and
housing quality inspections of property
under § 578,75(b) that the recipient,
subrecipient, or related entity owns.
(d) Other conflicts. For all other
transactions and activities, the following
restrictions apply:
(1) No covered person, meaning a
person who is an employee, agent,
consultant, officer, or elected or
appointed official of the recipient or its
subrecipients and who exercises or has
exercised any functions or
responsibilities with respect to activities
assisted under this part, or who is in a
position to participate in a decision -
making process or gain inside
information with regard to activities
assisted under this part, may obtain a
financial interest or benefit from an
assisted activity, have a financial
interest in any contract, subcontract, or
agreement with respect to an assisted
activity, or have a financial interest in
the proceeds derived from an assisted
activity, either for him or herself or for
those with whom he or she has
immediate family or business ties,
during his or her tenure or during the
one -year period following his or her
tenure,
(2) Exceptions. Upon the written
request of the recipient, HUD may grant
an exception to the provisions of this
section on a case -by -case basis, taking
into account the cumulative effects of
the criteria in paragraph (d)(2)(ii) of this
section, provided that the recipient has
satisfactorily met the threshold
requirements of paragraph (d)(2)(ii) of
this section.
(i) Threshold requirements. HUD will
consider an exception only after the
recipient has provided the following
documentation:
(A) Disclosure of the nature of the
conflict, accompanied by a written
assurance, if the recipient is a
government, that there has been public
disclosure of the conflict and a
description of how the public disclosure
was made; and if the recipient is a
private nonprofit organization, that the
conflict has been disclosed in
accordance with their written code of
conduct or other conflict -of- interest
policy; and
(B) An opinion of the recipient's
attorney that the interest for which the
exception is sought would not violate
State or local law, or if the subrecipient
is a private nonprofit organization, the
exception would not violate the
organization's internal policies.
(ii) Factors to be considered for
exceptions. In determining whether to
grant a requested exception after the
recipient has satisfactorily met the
threshold requirements under paragraph
(c)(3)(i) of this section, HUD must
conclude that the exception will serve
to further the purposes of the
Continuum of Care program and the
effective and efficient administration of
the recipient's or subrecipient's project,
taking into account the cumulative
effect of the following factors, as
applicable:
(A) Whether the exception would
provide a significant cost benefit or an
essential degree of expertise to the
program or project that would otherwise
not be available;
(B) Whether an opportunity was
provided for open competitive bidding
or negotiation;
(C) Whether the affected person has
withdrawn from his or her functions,
responsibilities, or the decision - making
process with respect to the specific
activity in question;
(D) Whether the interest or benefit
was present before the affected person
was in the position described in
paragraph (c)(1) of this section;
(E) Whether undue hardship will
result to the recipient, the subrecipient,
or the person affected, when weighed
against the public interest served by
avoiding the prohibited conflict;
(F) Whether the person affected is a
member of a group or class of persons
intended to be the beneficiaries of the
assisted activity, and the exception will
permit such person to receive generally
the same interests or benefits as are
being made available or provided to the
grou or class; and
(GfAny other relevant considerations.
§578.97 Program income.
(a) Defined. Program income is the
income received by the recipient or
subrecipient directly generated by a
grant- supported activity.
(b) Use. Program income earned
during the grant term shall be retained
by the recipient, and added to funds
committed to the project by HUD and
the recipient, used for eligible activities
in accordance with the requirements of
this part, Costs incident to the
generation of program income may be
deducted from gross income to calculate
program income, provided that the costs
have not been charged to grant funds.
(c) Rent and occupancy charges.
Rents and occupancy charges collected
from program participants are program
income. In addition, rents and
occupancy charges collected from
residents of transitional housing may be
reserved, in whole or in part, to assist
the residents from whom.they are
collected to move to permanent
housing.
§ 578.99 Applicability of other federal
requirements.
In addition to the requirements set
forth in 24 CFR part 5, use of assistance
provided under this part must comply
with the following federal requirements:
(a) Environmental review. Activities
under this part are subject to
environmental review by HUD under 24
CFR part 50 as noted in § 578.31.
(b) Section 6002 of the Solid Waste
Disposal Act, State agencies and
agencies of a political subdivision of a
state that are using assistance under this
part for procurement, and any person
contracting with such an agency with
respect to work performed under an
assisted contract, must comply with the
requirements of Section 6003 of the
Solid Waste Disposal Act, as amended
by the Resource Conservation and
Recovery Act, In accordance with
Section 6002, these agencies and
persons must:
(1) Procure items designated in
guidelines of the Environmental
Protection Agency (EPA) at 40 CFR part
247 that contain the highest percentage
of recovered materials practicable,
consistent with maintaining a
satisfactory level of competition, where
the purchase price of the item exceeds
$10,000 or the value of the quantity
acquired in the preceding fiscal year
exceeded $10,000;
(2) Procure solid waste management
services in a manner that maximizes
energy and resource recovery; and
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(3) Must have established an
affirmative procurement program for the
procurement of recovered materials
identified in the EPA guidelines.
(c) Transparency Act Reporting.
Section 872 of the Duncan Hunter
Defense Appropriations Act of 2009,
and additional requirements published
by the Office of Management and
Budget (OMB), requires recipients to
report subawards made either as pass -
through awards, subrecipient awards, or
vendor awards in the Federal
Government Web site www.fsrs.gov or
its successor system. The reporting of
award and subaward information is in
accordance with the requirements of the
Federal Financial Assistance
Accountability and Transparency Act of
2006, as amended by section 6202 of
Public Law 110 -252 and in OMB Policy
Guidance issued to the federal agencies
on September 14, 2010 (75 FR 55669).
(d) The Coastal Barrier Resources Act
of 1982 (16 U.S.C. 3501 et seq.) may
apply to proposals under this part,
de ending on the assistance requested.
Pe) Applicability of OMB Circulars.
The requirements of 24 CFR part 85—
Administrative Requirements for Grants
and Cooperative Agreements to State,
Local, and Federally Recognized Indian
Tribal Governments and 2 CFR part
225 —Cost Principles for State, Local
and Indian Tribal Governments (OMB
Circular A -87) —apply to governmental
recipients and subrecipients except
where inconsistent with the provisions
of this part. The requirements of 24 CFR
part 84— Uniform Administrative
Requirements for Grants and
Agreements with Institutions of Higher
Education, Hospitals, and Other Non -
Profit Organizations; 2 CFR part 230 —
Cost Principles for Non -Profit
Organizations (OMB Circular A -122);
and 2 CFR part 220 —Cost Principles for
Education Institutions apply to the
nonprofit recipients and subrecipients,
except where inconsistent with the
provisions of the McKinney -Vento Act
or this part.
(f) Lead -based paint. The Lead -Based
Paint Poisoning Prevention Act (42
U.S.C. 4821- 4846), the Residential
Lead -Based Paint Hazard Reduction Act
of 1992 (42 U.S.C. 4851 - 4856), and
implementing regulations at 24 CFR part
35, subparts A, B, H, J, K, M, and R
apply to activities under this program.
(g) Audit. Recipients and
subrecipients must comply with the
audit requirements of OMB Circular A-
133, "Audits of States, Local
Governments, and Non -profit
Organizations.,,
(h) Davis -Bacon Act. The provisions
of the Davis -Bacon Act do not apply to
this program.
(i) Section 3 of the Housing and
Urban Development Act. Recipients and
subrecipients must, as applicable,
comply with Section 3 of the Housing
and Urban Development Act of 1968
and its implementing regulations at 24
CFR part 135, as applicable.
Subpart G —Grant Administration
§578.101 Technical assistance.
(a) Purpose. The purpose of
Continuum of Care technical assistance
is to increase the effectiveness with
which Continuums of Care, eligible
applicants, recipients, subrecipients,
and UFAs implement and administer
their Continuum of Care planning
process; improve their capacity to
prepare applications; prevent the
separation of families in projects funded
under the Emergency Solutions Grants,
Continuum of Care, and Rural Housing
Stability Assistance programs; and
adopt and provide best practices in
housing and services for persons
experiencing homelessness.
(b) Defined. Technical assistance
means the transfer of skills and
knowledge to entities that may need, but
do not possess, such skills and
knowledge. The assistance may include,
but is not limited to, written
information such as papers, manuals,
guides, and brochures; person -to- person
exchanges; web -based curriculums,
training and Webinars, and their costs.
(c) Set - aside. HUD may set aside
funds annually to provide technical
assistance, either directly by HUD staff
or indirectly through third -party
providers.
(d) Awards. From time to time, as
HUD determines the need, HUD may
advertise and competitively select
providers to deliver technical
assistance. HUD may enter into
contracts, grants, or cooperative
agreements, when necessary, to
implement the technical assistance.
HUD may also enter into agreements
with other federal agencies for awarding
the technical assistance funds.
§578.103 Recordkeeping requirements.
(a) In general. The recipient and its
subrecipients must establish and
maintain standard operating procedures
for ensuring that Continuum of Care
program funds are used in accordance
with the requirements of this part and
must establish and maintain sufficient
records to enable HUD to determine
whether the recipient and its
subrecipients are meeting the
requirements of this part, including:
(1) Continuum of Care records. Each
collaborative applicant must keep the
following documentation related to
establishing and operating a Continuum
of Care:
(i) Evidence that the Board selected by
the Continuum of Care meets the
re uirements of § 578.5(b);
(ii) Evidence that the Continuum has
been established and operated as set
forth in subpart B of this part, including
published agendas and meeting
minutes, an approved Governance
Charter that is reviewed and updated
annually, a written process for selecting
a board that is reviewed and updated at
least once every 5 years, evidence
required for designating a single HMIS
for the Continuum, and monitoring
reports of recipients and subrecipients;
(iii) Evidence that the Continuum has
prepared the application for funds as set
forth in § 578.9, including the
designation of the eligible applicant to
be the collaborative applicant.
(2) Unified funding agency records.
UFAs that requested grant amendments
from HUD, as set forth in § 578.105,
must keep evidence that the grant
amendment was approved by the
Continuum. This evidence may include
minutes of meetings at which the grant
amendment was discussed and
ap roved.
�3) Homeless status. Acceptable
evidence of the homeless as status is set
forth in 24 CFR 576.500(b).
(4) At risk of homelessness status. For
those recipients and subrecipients that
serve persons at risk of homelessness,
the recipient or subrecipient must keep
records that establish "at risk of
homelessness" status of each individual
or family who receives Continuum of
Care homelessness prevention
assistance. Acceptable evidence is
found in 24 CFR 576.500(c).
(5) Records of reasonable belief of
imminent threat of harm. For each
program participant who moved to a
different Continuum of Care due to
imminent threat of further domestic
violence, dating violence, sexual
assault, or stalking under § 578.51(c)(3),
each recipient or subrecipient of
assistance under this part must retain:
(i) Documentation of the original
incidence of domestic violence, dating
violence, sexual assault, or stalking,
only if the original violence is not
already documented in the program
participant's case file. This may be
written observation of the housing or
service provider; a letter or other
documentation from a victim service
provider, social worker, legal assistance
provider, pastoral counselor, mental
health provider, or other professional
from whom the victim has sought
assistance; medical or dental records;
court records or law enforcement
records; or written certification by the
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program participant to whom the
violence occurred or by the head of
household.
(ii) Documentation of the reasonable
belief of imminent threat of further
domestic violence, dating violence, or
sexual assault or stalking, which would
include threats from a third - party, such
as a friend or family member of the
perpetrator of the violence. This may be
written observation by the housing or
service provider; a letter or other
documentation from a victim service
provider, social worker, legal assistance
provider, pastoral counselor, mental
health provider, or other professional
from whom the victim has sought
assistance; current restraining order;
recent court order or other court
records; law enforcement report or
records; communication records from
the perpetrator of the violence or family
members or friends of the perpetrator of
the violence, including emails,
voicemails, text messages, and social
media posts; or a written certification by
the program participant to whom the
violence occurred or the head of
household.
(6) Annual income. For each program
participant who receives housing
assistance where rent or an occupancy
charge is paid by the program
participant, the recipient or subrecipient
must keep the following documentation
of annual income:
(i) Income evaluation form specified
by HUD and completed by the recipient
or subrecipient; and
(ii) Source documents (e.g., most
recent wage statement, unemployment
compensation statement, public benefits
statement, bank statement) for the assets
held by the program participant and
income received before the date of the
evaluation;
(iii) To the extent that source
documents are unobtainable, a written
statement by the relevant third party
(e.g., employer, government benefits
administrator) or the written
certification by the recipient's or
subrecipient's intake staff of the oral
verification by the relevant third party
of the income the program participant
received over the most recent period; or
(iv) To the extent that source
documents and third -party verification
are unobtainable, the written
certification by the program participant
of the amount of income that the
program participant is reasonably
expected to receive over the 3 -month
period following the evaluation.
(7) Program participant records. In
addition to evidence of "homeless"
status or "at- risk -of- homelessness"
status, as applicable, the recipient or
subrecipient must keep records for each
program participant that document:
(i) The services and assistance
provided to that program participant,
including evidence that the recipient or
subrecipient has conducted an annual
assessment of services for those program
participants that remain in the program
for more than a year and adjusted the
service package accordingly, and
including case management services as
provided in § 578.37(a)(1)(ii)(F); and
(ii) Where applicable, compliance
with the termination of assistance
re uirement in § 578.91.
�8) Housing standards. The recipient
or subrecipient must retain
documentation of compliance with the
housing standards in § 578.75(b),
including inspection reports.
(9) Services provided. The recipient or
subrecipient must document the types
of supportive services provided under
the recipient's program and the amounts
spent on those services. The recipient or
subrecipient must keep record that these
records were reviewed at least annually
and that the service package offered to
program participants was adjusted as
necessary.
(10) Match. The recipient must keep
records of the source and use of
contributions made to satisfy the match
requirement in § 578.73. The records
must indicate the grant and fiscal year
for which each matching contribution is
counted. The records must show how
the value placed on third party in -kind
contributions was derived. To the extent
feasible, volunteer services must be
supported by the same methods that the
organization uses to support the
allocation of regular personnel costs.
(11) Conflicts of interest. The
recipient and its subrecipients must
keep records to show compliance with
the organizational conflict -of- interest
requirements in § 578.95(c), the
Continuum of Care board conflict -of-
interest requirements in § 578.95(b), the
other conflict requirements in
§ 578.95(d), a copy of the personal
conflict -of- interest policy developed
and implemented to comply with the
requirements in § 578.95, and records
supporting exceptions to the personal
conflict -of- interest prohibitions.
(12) Homeless participation. The
recipient or subrecipient must
document its compliance with the
homeless participation requirements
under § 578.75(g).
(13) Faith -based activities. The
recipient and its subrecipients must
document their compliance with the
faith -based activities requirements
under § 578.87(b).
(14) Affirmatively Furthering Fair
Housing. Recipients and subrecipients
must maintain copies of their marketing,
outreach, and other materials used to
inform eligible persons of the program
to document compliance with the
re uirements in § 578.93(c).
�15) Other federal requirements. The
recipient and its subrecipients must
document their compliance with the
federal requirements in § 578.99, as
ap licable.
�16) Subrecipients and contractors. (i)
The recipient must retain copies of all
solicitations of and agreements with
subrecipients, records of all payment
requests by and dates of payments made
to subrecipients, and documentation of
all monitoring and sanctions of
subrecipients, as applicable.
(ii) The recipient must retain
documentation of monitoring
subrecipients, including any monitoring
findings and corrective actions required.
(iii) The recipient and its
subrecipients must retain copies of all
procurement contracts and
documentation of compliance with the
procurement requirements in 24 CFR
85.36 and 24 CFR part 84.
(17) Other records specified by HUD.
The recipient and subrecipients must
keep other records specified by HUD.
(b) Confidentiality. In addition to
meeting the specific confidentiality and
security requirements for HMIS data,
the recipient and its subrecipients must
develop and implement written
procedures to ensure:
(1) All records containing protected
identifying information of any
individual or family who applies for
and /or receives Continuum of Care
assistance will be kept secure and
confidential;
(2) The address or location of any
family violence project assisted with
Continuum of Cpre funds will not be
made public, except with written
authorization of the person responsible
for the operation of the project; and
(3) The address or location of any
housing of a program participant will
not be made public, except as provided
under a preexisting privacy policy of the
recipient or subrecipient and consistent
with State and local laws regarding
privacy and obligations of
confidentiality;
(c) Period of record retention. All
records pertaining to Continuum of Care
funds must be retained for the greater of
5 years or the period specified below.
Copies made by microfilming,
photocopying, or similar methods may
be substituted for the original records.
(1) Documentation of each program
participant's qualification as a family or
individual at risk of homelessness or as
a homeless family or individual and
other program participant records must
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45466 Federal Register/Vol. 77, No. 147/Tuesday, July 31, 2012/Rules and Regulations
be retained for 5 years after the
expenditure of all funds from the grant
under which the program participant
was served; and
(2) Where Continuum of Care funds
are used for the acquisition, new
construction, or rehabilitation of a
project site, records must be retained
until 15 years after the date that the
project site is first occupied, or used, by
program participants.
(d) Access to records. (1) Federal
Government rights. Notwithstanding the
confidentiality procedures established
under paragraph (b) of this section,
HUD, the HUD Office of the Inspector
General, and the Comptroller General of
the United States, or any of their
authorized representatives, must have
the right of access to all books,
documents, papers, or other records of
the recipient and its subrecipients that
are pertinent to the Continuum of Care
grant, in order to make audits,
examinations, excerpts, and transcripts.
These rights of access are not limited to
the required retention period, but last as
long as the records are retained.
(2) Public rights. The recipient must
provide citizens, public agencies, and
other interested parties with reasonable
access to records regarding any uses of
Continuum of Care funds the recipient
received during the preceding 5 years,
consistent with State and local laws
regarding privacy and obligations of
confidentiality and confidentiality
requirements in this part.
(e) Reports. In addition to the
reporting requirements in 24 CFR parts
84 and 85, the recipient must collect
and report data on its use of Continuum
of Care funds in an Annual Performance
Report (APR), as well as in any
additional reports as and when required
by HUD. Projects receiving grant funds
only for acquisition, rehabilitation, or
new construction must submit APRs for
15 years from the date of initial
occupancy or the date of initial service
provision, unless HUD provides an
exception under § 578.81(e).
§578.105 Grant and project changes.
(a) For Unified Funding Agencies and
Continuums having only one recipient.
(1) The recipient may not make any
significant changes without prior HUD
approval, evidenced by a grant
amendment signed by HUD and the
recipient. Significant grant changes
include a change of recipient, a shift in
a single year of more than 10 percent of
the total amount awarded under the
grant for one approved eligible activity
category to another activity and a
permanent change in the subpopulation
served by any one project funded under
the grant, as well as a permanent
proposed reduction in the total number
of units funded under the grant,
(2) Approval of substitution of the
recipient is contingent on the new
recipient meeting the capacity criteria in
the NOFA under which the grant was
awarded, or the most recent NOFA.
Approval of shifting funds between
activities and changing subpopulations
is contingent on the change being
necessary to better serve eligible persons
within the geographic area and ensuring
that the priorities established under the
NOFA in which the grant was originally
awarded, or the most recent NOFA, are
met.
(b) For Continuums having more than
one recipient. (1) The recipients or
subrecipients may not make any
significant changes to a project without
prior HUD approval, evidenced by a
grant amendment signed by HUD and
the recipient. Significant changes
include a change of recipient, a change
of project site, additions or deletions in
the types of eligible activities approved
for a project, a shift of more than 10
percent from one approved eligible
activity to another, a reduction in the
number of units, and a change in the
subpopulation served,
(2) Approval of substitution of the
recipient is contingent on the new
recipient meeting the capacity criteria in
the NOFA under which the grant was
awarded, or the most recent NOFA,
Approval of shifting funds between
activities and changing subpopulations
is contingent on the change being
necessary to better serve eligible persons
within the geographic area and ensuring
that the priorities established under the
NOFA in which the grant was originally
awarded, or the most recent NOFA, are
met.
(c) Documentation of changes not
requiring a grant amendment. Any other
changes to an approved grant or project
must be fully documented in the
recipient's or subrecipient's records.
§578.107 Sanctions.
(a) Performance reviews. (1) HUD will
review the performance of each
recipient in carrying out its
responsibilities under this part, with or
without prior notice to the recipient. In
conducting performance reviews, HUD
will rely primarily on information
obtained from the records and reports
from the recipient and subrecipients, as
well as information from on -site
monitoring, audit reports, and
information generated from HUD's
financial and reporting systems (e.g.,
LOCCS and e- snaps) and HMIS, Where
applicable, HUD may also consider
relevant information pertaining to the
recipient's performance gained from
other sources, including citizen
comments, complaint determinations,
and litigation,
(2) If HUD determines preliminarily
that the recipient or one of its
subrecipients has not complied with a
program requirement, HUD will give the
recipient notice of this determination
and an opportunity to demonstrate,
within the time prescribed by HUD and
on the basis of substantial facts and data
that the recipient has complied with the
requirements. HUD may change the
method of payment to require the
recipient to submit documentation
before payment and obtain HUD's prior
approval each time the recipient draws
down funds. To obtain prior approval,
the recipient may be required to
manually submit its payment requests
and supporting documentation to HUD
in order to show that the funds to be
drawn down will be expended on
eligible activities in accordance with all
program requirements.
(3) If the recipient fails to demonstrate
to HUD's satisfaction that the activities
were carried out in compliance with
program requirements, HUD may take
one or more of the remedial actions or
sanctions specified in paragraph (b) of
this section.
(b) Remedial actions and sanctions.
Remedial actions and sanctions for a
failure to meet a program requirement
will be designed to prevent a
continuation of the deficiency; to
mitigate, to the extent possible, its
adverse effects or consequences; and to
prevent its recurrence.
(1) HUD may instruct the recipient to
submit and comply with proposals for
action to correct, mitigate, and prevent
noncompliance with program
re uirements, including;
W) Preparing and following a schedule
of actions for carrying out activities and
projects affected by the noncompliance,
including schedules, timetables, and
milestones necessary to implement the
affected activities and protects;
(ii) Establishing and following a
management plan that assigns
responsibilities for carrying out the
remedial actions;
(iii) Canceling or revising activities or
projects likely to be affected by the
noncompliance, before expending grant
funds for them;
(iv) Reprogramming grant funds that
have not yet been expended from
affected activities or projects to other
eligible activities or projects;
(v) Suspending disbursement of grant
funds for some or all activities or
projects;
(vi) Reducing or terminating the
remaining grant of a subrecipient and
either reallocating those funds to other
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subrecipients or returning funds to
HUD; and
(vii) Making matching contributions
before or as draws are made from the
recipient's grant.
(2) HUD may change the method of
payment to a reimbursement basis.
(3) HUD may suspend payments to
the extent HUD determines necessary to
preclude the further expenditure of
funds for affected activities or projects.
(4) HUD may continue the grant with
a substitute recipient of HUD's
choosing.
(5) HUD may deny matching credit for
all or part of the cost of the affected
activities and require the recipient to
make further matching contributions to
make up for the contribution
determined to be ineligible.
(6) HUD may require the recipient to
reimburse the recipient's line of credit
in an amount equal to the funds used for
the affected activities.
(7) HUD may reduce or terminate the
remaining grant of a recipient.
(8) HUD may condition a future grant.
(9) HUD may take other remedies that
are legally available.
(c) Recipient sanctions. If the
recipient determines that a subrecipient
is not complying with a program
requirement or its subrecipient
agreement, the recipient must take one
of the actions listed in paragraphs (a)
and (b) of this section.
(d) Deobligation. HUD may deobligate
funds for the following reasons:
(1) If the timeliness standards in
§ 578.85 are not met;
(2) If HUD determines that delays
completing construction activities for a
project will mean that the funds for
other funded activities cannot
reasonably be expected to.be expended
for eligible costs during the remaining
term of the grant;
(3) If the actual total cost of
acquisition, rehabilitation, or new
construction for a project is less than the
total cost agreed to in the grant
agreement;
(4) If the actual annual leasing costs,
operating costs, supportive services
costs, rental assistance costs, or HMIS
costs are less than the total cost agreed
to in the grant agreement for a one -year
period;
(5) Program participants have not
moved into units within 3 months of the
time that the units are available for
occupancy; and
(6) The grant agreement may set forth
in detail other circumstances under
which funds may be deobligated and
other sanctions may be imposed.
§578.109 Closeout.
(a) In general. Grants will be closed
out in accordance with the requirements
of 24 CFR parts 84 and 85, and closeout
procedures established by HUD.
(b) Reports. Applicants must submit
all reports required by HUD no later
than 90 days from the date of the end
of the project's grant term.
(c) Closeout agreement. Any
obligations remaining as of the date of
the closeout must be covered by the
terms of a closeout agreement. The
agreement will be prepared by HUD in
consultation with the recipient. The
agreement must identify the grant being
closed out, and include provisions with
respect to the following:
(1) Identification of any closeout casts
or contingent liabilities subject to
payment with Continuum of Care
program funds after the closeout
agreement is signed;
(2) Identification of any unused grant
funds to be deobligated by HUD;
(3) Identification of any program
income on deposit in financial
institutions at the time the closeout
agreement is signed;
(4) Description of the recipient's
responsibility after closeout for:
(i) Compliance with all program
requirements in using program income
on deposit at the time the closeout
agreement is signed and in using any
other remaining Continuum of Care
program funds available for closeout
costs and contingent liabilities;
(ii) Use of real property assisted with
Continuum of Care program funds in
accordance with the terms of
commitment and principles;
(iii) Use of personal property
purchased with Continuum of Care
program funds; and
(iv) Compliance with requirements
governing program income received
subsequent to grant closeout.
(5) Other provisions appropriate to
any special circumstances of the grant
closeout, in modification of or in
addition to the obligations in paragraphs
(c)(1) through (4) of this section.
Dated: June 28, 2012.
Mark Johnston,
Assistant Secretary for Community Planning
and Development (Acting).
[FR Doc. 2012 -17546 Filed 7- 30 -12; 8:45 am]
BILLING CODE 4210 -67 -P
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AUTHENTICATED
U.S. GOVERNMENT
INFORMATION
CPO
PART 200 - UNIFORM ADMINISTRA-
TIVE REQUIREMENTS, COST PRIN-
CIPLES, AND AUDIT REQUIRE-
MENTS FOR FEDERAL AWARDS
Subpart A- Acronyms and
Definitions
ACRONYMS
Sec.
200.0 Acronyms.
200.1 Definitions.
200.2 Acquisition cost.
200.3 Advance payment.
200.4 Allocation,
200.5 Audit finding.
200.6 Auditee.
200.7 Auditor.
200.8 Budget.
200.9 Central service cost allocation plan.
200.10 Catalog of Federal Domestic Assist-
ance (CFDA) number.
200.11 CFDA program title.
200.12 Capital assets.
200.13 Capital expenditures.
200.14 Claim.
200.15 Class of Federal awards.
200.16 Closeout,
200.17 Cluster of programs.
200.18 Cognizant agency for audit.
200.19 Cognizant agency for indirect costs.
200.20 Computing devices.
200.21 Compliance supplement.
200.22 Contract.
200.23 Contractor,
200.24 Cooperative agreement.
200.25 Cooperative audit resolution.
200.26 Corrective action.
200.27 Cost allocation plan.
200.28 Cost objective.
200.29 Cost sharing or matching.
200.30 .Cross- cutting audit finding.
200.31 [Reserved]
200.32 Data Universal Numbering System
(DUNS) number.
200.33 Equipment.
200.34 Expenditures,
200.35 Federal agency.
200.36 Federal Audit Clearinghouse (FAC).
200.37 Federal awarding agency.
200,38 Federal award.
200.39 Federal award date.
200.40 Federal financial assistance.
200.41 Federal interest.
200.42 Federal program.
200.43 Federal share.
200.44 Final cost objective.
200.45 Fixed amount awards.
200.46 Foreign public entity.
200.47 Foreign organization.
77
200.48 General purpose equipment.
200.49 Generally Accepted Accounting Prin-
ciples (GAAP).
200.50 Generally Accepted Government Au-
diting Standards (GAGAS).
200.51 Grant agreement.
200.52 Hospital.
200.53 Improper payment.
200.54 Indian tribe (or "federally recognized
Indian tribe"),
200.55 Institutions of Higher Education
(IHEs).
200.56 Indirect (facilities & administrative
(F &A)) costs.
200.57 Indirect cost rate proposal.
200.68 Information technology systems.
200.69 Intangible property.
200.60 Intermediate cost objective.
200.61 Internal controls.
200.62 Internal control over compliance re-
quirements for Federal awards,
200.63 Loan,
200.64 Local government.
200.65 Major program.
200.66 Management decision.
200.67 Micro - purchase.
200.68 Modified Total Direct Cost (MTDC).
200.69 Non - Federal entity.
200.70 Nonprofit organization.
200.71 Obligations.
200.72 Office of Management and Budget
(OMB).
200.73 Oversight agency for audit.
200.74 Pass- through entity.
200.75 Participant support costs.
200.76 Performance goal.
200.77 Period of performance.
200.78 Personal property.
200.79 Personally Identifiable Information
(PII).
200.80 Program income.
200.81 Property.
20082 Protected Personally Identifiable In-
, formation (Protected PII).
200.83 Project cost.
200.84 Questioned cost,
200.85 Real property.
200.86 Recipient,
200.87 Research and Development (R &D).
200.88 Simplified acquisition threshold.
200.89 Special purpose equipment.
200.90 State.
200.91 Student Financial Aid (SFA).
200.92 Subaward.
200.93 Subrecipient.
200.94 Supplies.
200.95 Termination.
200.96 Third -party in -kind contributions.
200.97 Unliquidated obligations.
200.98 Unobligated balance,
200.99 Voluntary committed cost sharing.
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Pt. 200
Subpart B- General Provisions
200.100
Purpose.
200.101
Applicability.
200.102
Exceptions.
200,103
Authorities.
200.104
Supersession,
200.105
Effect on other issuances,
200.106
Agency implementation,
200.107
OMB responsibilities.
200,108
Inquiries.
200.109
Review date.
200.110
Effective /applicability date.
200.111
English language.
200.112
Conflict of interest.
200,113
Mandatory disclosures.
Subpart
C- Pre - Federal Award Require
ments
and Contents of Federal Awards
200,200 Purpose.
200,201 Use of grant agreements (including
fixed amount awards), cooperative agree-
ments, and contracts.
200.202 Requirement to provide public no-
tice of Federal financial assistance pro-
grams.
200.203 Notices of funding opportunities.
200.204 Federal awarding agency review of
merit of proposals.
200.205 Federal awarding agency review of
risk posed by applicants.
200.206 Standard application requirements.
200.207 Specific conditions.
200,208 Certifications and representations.
200.209 Pre -award costs.
200.210 Information contained in a Federal
award.
200.211 Public access to Federal award infor-
mation.
200,212 Suspension and debarment.
Subpart D -Post Federal Award
Requirements
STANDARDS FOR FINANCIAL AND PROGRAM
MANAGEMENT
200.300
Statutory and national policy re-
qu4rements. '
200.301
Performance measurement.
200.302
Financial management.
200.303
Internal controls;
200.304
Bonds,
200.305
Payment,
200.306
Cost sharing or matching.'
200.307
Program income.
200.308
Revision of budget and program
plans.
200.309
Period of performance.
PROPERTY STANDARDS
200.310 Insurance coverage.
200.311 Real property.
200.312 Federally -owned and exempt prop-
erty.
200.313 Equipment.
78
2 CFR Ch. II (1 -1 -15 Edition)
200.314 Supplies.
200.315 Intangible property.
200.316 Property trust relationship.
PROCUREMENT STANDARDS
200.317 Procurements by states.
200.318 General procurement standards.
200.319 Competition.
200.320 Methods of procurement to be fol-
lowed.
200.321 Contracting with small and minority
businesses, women's business enterprises,
and labor surplus area firms.
200.322 Procurement of recovered materials.
200.323 Contract cost and price.
200.324 Federal awarding agency or pass-
through entity review.
200.325 Bonding requirements.
200.326 Contract provisions.
PERFORMANCE AND FINANCIAL MONITORING
AND REPORTING
200.327 Financial reporting.
200.328 Monitoring and reporting program
performance.
200.329 Reporting on real property.
SUBRECIPIENT MONITORING AND MANAGEMENT
200.330 Subrecipient and contractor deter-
minations.
200.331 Requirements for pass- through enti-
ties.
200.332 Fixed amount subawards.
RECORD RETENTION AND ACCESS
200.333 Retention requirements for records.
200.334 Requests for transfer of records.
200.336 Methods for collection, transmission
and storage of information.
200.336 Access to records.
200.337 Restrictions on public access to
records.
REMEDIES FOR NONCOMPLIANCE
200.338 Remedies for noncompliance.
200.339 Termination.
200.340 Notification of termination require-
ment.
200.341 Opportunities to object, hearings
and appeals.
200.342 Effects of suspension and termi-
nation.
CLOSEOUT
200.343 Closeout.
POST- CLOSEOUT ADJUSTMENTS AND
CONTINUING RESPONSIBILITIES
200.344 Post - closeout adjustments and con-
tinuing responsibilities.
COLLECTION OF AMOUNTS DUE
200.345 Collection of amounts due.
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OMB Guidance
Subpart E --Cost Principles
GENERAL PROVISIONS
200.400 Policy guide.
200.401 Application.
BASIC CONSIDERATIONS
200.402 Composition of costs.
200.403 Factors affecting allowability of
costs.
200.404 Reasonable costs.
200.405 Allocable costs.
200.406 Applicable credits.
200.407 Prior written approval (prior ap-
proval).
200.408 Limitation on allowance of costs.
200.409 Special considerations.
200.410 Collection of unallowable costs.
200.411 Adjustment of previously negotiated
indirect (F &A) cost rates containing un-
allowable costs.
DIRECT AND INDIRECT (F &A) COSTS
200,412 Classification of costs.
200.413 Direct costs.
200.414 Indirect (F &A) costs.
200.415 Required certifications.
SPECIAL CONSIDERATIONS FOR STATES, LOCAL
GOVERNMENTS AND INDIAN TRIBES
200.416 Cost allocation plans and indirect
cost proposals.
200.417 Interagency service.
SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF
HIGHER EDUCATION
200.418 Costa incurred by states and local
governments.
200.419 Cost accounting standards and dis-
closure statement.
GENERAL PROVISIONS FOR SELECTED ITEMS OF
COST
200.420 Considerations for selected items of
cost.
200.421 Advertising and public relations.
200.422 Advisory councils.
200.423 Alcoholic beverages.
200.424 Alumni/ae activities.
200.425 Audit services.
200.426 Bad debts.
200.427 Bonding costs.
200.428 Collections of improper payments.
200.429 Commencement and convocation
costs,
200.430 Compensation - personal services.
200.431 Compensation- fringe benefits.
200.432 Conferences.
200.433 Contingency provisions.
200.434 Contributions and donations.
200.435 Defense and prosecution of criminal
and civil proceedings, claims, appeals
and patent infringements.
200.436 Depreciation,
200.437 Employee health and welfare costs.
79
Pt. 200
200.438 Entertainment costs.
200.439 Equipment and other capital expend-
itures.
200.440 Exchange rates.
200.441 Fines, penalties, damages and other
settlements,
200.442 Fund raising and investment man-
agement costs.
200.443 Gains and losses on disposition of de-
preciable assets.
200.444 General costs of government.
200.445 Goods or services for personal use.
200.446 Idle facilities and idle capacity.
200,447 Insurance and indemnification.
200.448 Intellectual property.
200.449 Interest.
200.450 Lobbying,
200.451 Losses on other awards or contracts.
200.452 Maintenance and repair costs.
200.453 Materials and supplies costs, includ-
ing costs of computing devices.
200.454 Memberships, subscriptions, and pro-
fessional activity costs.
200.465 Organization costs.
200.466 Participant support costs.
200.467 Plant and security costs.
200.468 Pre -award costs.
200.459 Professional service costs.
200.460 Proposal costs.
200.461 Publication and printing costs.
200.462 Rearrangement and reconversion
costs.
200.463 Recruiting costs.
200.464 Relocation costs of employees.
200.465 Rental costs of real property and
equipment.
200.466 Scholarships and student aid costs.
200.467 Selling and marketing costs.
200.468 Specialized service facilities.
200.469 Student activity costs.
200.470 Taxes (including Value Added Tax).
200.471 Termination costs.
200.472 Training and education costs.
200.473 Transportation costs.
200.474 Travel costs.
200.475 Trustees.
Subpart F -Audit Requirements
GENERAL
200.500 Purpose.
AUDITS
200.501 Audit requirements.
200.502 Basis for determining Federal
awards expended.
200.603 Relation to other audit require-
ments.
200.504 Frequency of audits.
200.505 Sanctions,
200.506 Audit costs.
200.507 Program- specific audits.
AUDITEES
200.508 Auditee responsibilities.
200.509 Auditor selection.
ATTACHMENT ..... D.........
PAGE .....�`�...... ®F .. `.. PAGES
§ 200.0
200.510 Financial statements.
200.511 Audit findings follow -up.
200.512 Report submission.
MANAGEMENT DECISIONS
200.521 Management decision.
APPENDIX I TO PART 200 —FULL TEXT OF NO-
TICE OF FUNDING OPPORTUNITY
APPENDIX H TO PART 200 — CONTRACT PROVI-
SIONS FOR NON- FEDERAL ENTITY CON-
TRACTS UNDER FEDERAL AWARDS
APPENDIX III TO PART 200 — INDIRECT (F &A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR INSTITU-
TIONS OF HIGHER EDUCATION (IHEs)
APPENDIX IV TO PART 200 — INDIRECT (F &A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR NONPROFIT
ORGANIZATIONS
APPENDIX V TO PART 200— STATE/LOCAL GOV-
ERNMENTWIDE CENTRAL SERVICE COST AL-
LOCATION PLANS
APPENDIX VI TO PART 200 — PUBLIC ASSIST-
ANCE COST ALLOCATION PLANS
APPENDIX VII TO PART 220 — STATES AND
LOCAL GOVERNMENT AND INDIAN TRIBE IN-
DIRECT COST PROPOSALS
APPENDIX VIII TO PART 200 — NONPROFIT OR-
GANIZATIONS EXEMPTED FROM SUBPART
E—COST PRINCIPLES OF PART 200
APPENDIX IX TO PART 200 — HOSPITAL COST
PRINCIPLES
APPENDIX X TO PART 200 —DATA COLLECTION
FORM (FORM SF —SAC)
APPENDIX XI TO PART 200 — COMPLIANCE SUP-
PLEMENT
AUTHORITY: 31 U.S.C. 503
SOURCE: 78 FR 78608, Dec. 26, 2013, unless
otherwise noted.
Subpart A— Acronyms and
Definitions
ACRONYMS
§200.0 Acronyms.
ACRONYM TERM
CAS Cost Accounting Standards
CFDA Catalog of Federal Domestic
Assistance
80
2 CFR Ch. II (1 -1 -15 Edition)
CFR Code of Federal Regulations
CMIA Cash Management Improve-
ment Act
COG Councils Of Governments
COSO Committee of Sponsoring Orga-
nizations of the Treadway Commis-
sion
EPA Environmental Protection Agen
cy
ERISA Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1301-
1461)
EUI Energy Usage Index
F &A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification
Number
FAPIIS Federal Awardee Perform-
ance and Integrity Information Sys-
tem
FAR Federal Acquisition Regulation
FFATA Federal Funding Account-
ability and Transparency Act of 2006
or Transparency Act — Public Law
109 -282, as amended by section 6202(a)
of Public Law 110 -252 (31 U.S.C. 6101)
FICA Federal Insurance Contribu-
tions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full -time equivalent
GAAP Generally Accepted Account-
ing Principles
GAGAS Generally Accepted Govern-
ment Auditing Standards
GAO Government Accountability Of-
fice
GOCO Government owned, contractor
operated
GSA General Services Administration
IBS Institutional Base Salary
IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self- Determination
and Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
OMB Office of Management and Budg-
et
PII Personally Identifiable Informa-
tion
PMS Payment Management System
PRHP Post - retirement Health Plans
PTE Pass - through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SFA Student Financial Aid
ATTACHMENT ......!�.........
PAGE .... `�...•. OF . I- PAGES
FEDERAL AGENCIES
200.513
Responsibilities.
AUDITORS
200.514
Scope of audit.
200.515
Audit reporting.
200.516
Audit findings.
200.517
Audit documentation.
200.518
Major program determination.
200.519
Criteria for Federal program risk,
200.520
Criteria for a low -risk auditee.
MANAGEMENT DECISIONS
200.521 Management decision.
APPENDIX I TO PART 200 —FULL TEXT OF NO-
TICE OF FUNDING OPPORTUNITY
APPENDIX H TO PART 200 — CONTRACT PROVI-
SIONS FOR NON- FEDERAL ENTITY CON-
TRACTS UNDER FEDERAL AWARDS
APPENDIX III TO PART 200 — INDIRECT (F &A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR INSTITU-
TIONS OF HIGHER EDUCATION (IHEs)
APPENDIX IV TO PART 200 — INDIRECT (F &A)
COSTS IDENTIFICATION AND ASSIGNMENT,
AND RATE DETERMINATION FOR NONPROFIT
ORGANIZATIONS
APPENDIX V TO PART 200— STATE/LOCAL GOV-
ERNMENTWIDE CENTRAL SERVICE COST AL-
LOCATION PLANS
APPENDIX VI TO PART 200 — PUBLIC ASSIST-
ANCE COST ALLOCATION PLANS
APPENDIX VII TO PART 220 — STATES AND
LOCAL GOVERNMENT AND INDIAN TRIBE IN-
DIRECT COST PROPOSALS
APPENDIX VIII TO PART 200 — NONPROFIT OR-
GANIZATIONS EXEMPTED FROM SUBPART
E—COST PRINCIPLES OF PART 200
APPENDIX IX TO PART 200 — HOSPITAL COST
PRINCIPLES
APPENDIX X TO PART 200 —DATA COLLECTION
FORM (FORM SF —SAC)
APPENDIX XI TO PART 200 — COMPLIANCE SUP-
PLEMENT
AUTHORITY: 31 U.S.C. 503
SOURCE: 78 FR 78608, Dec. 26, 2013, unless
otherwise noted.
Subpart A— Acronyms and
Definitions
ACRONYMS
§200.0 Acronyms.
ACRONYM TERM
CAS Cost Accounting Standards
CFDA Catalog of Federal Domestic
Assistance
80
2 CFR Ch. II (1 -1 -15 Edition)
CFR Code of Federal Regulations
CMIA Cash Management Improve-
ment Act
COG Councils Of Governments
COSO Committee of Sponsoring Orga-
nizations of the Treadway Commis-
sion
EPA Environmental Protection Agen
cy
ERISA Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1301-
1461)
EUI Energy Usage Index
F &A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification
Number
FAPIIS Federal Awardee Perform-
ance and Integrity Information Sys-
tem
FAR Federal Acquisition Regulation
FFATA Federal Funding Account-
ability and Transparency Act of 2006
or Transparency Act — Public Law
109 -282, as amended by section 6202(a)
of Public Law 110 -252 (31 U.S.C. 6101)
FICA Federal Insurance Contribu-
tions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full -time equivalent
GAAP Generally Accepted Account-
ing Principles
GAGAS Generally Accepted Govern-
ment Auditing Standards
GAO Government Accountability Of-
fice
GOCO Government owned, contractor
operated
GSA General Services Administration
IBS Institutional Base Salary
IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self- Determination
and Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
OMB Office of Management and Budg-
et
PII Personally Identifiable Informa-
tion
PMS Payment Management System
PRHP Post - retirement Health Plans
PTE Pass - through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SFA Student Financial Aid
ATTACHMENT ......!�.........
PAGE .... `�...•. OF . I- PAGES
OMB Guidance
SNAP Supplemental Nutrition Assist-
ance Program
SPOC Single Point of Contact
TANF Temporary Assistance for
Needy Families
TFM Treasury Financial Manual
U.S.C. United States Code
VAT Value Added Tax
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76880, Dec. 19, 2014]
§ 200.1 Definitions.
These are the definitions for terms
used in this part. Different definitions
may be found in Federal statutes or
regulations that apply more specifi-
cally to particular programs or activi-
ties. These definitions could be supple-
mented by additional instructional in-
formation provided in governmentwide
standard information collections.
§ 200.2 Acquisition cost.
Acquisition cost means the cost of the
asset including the cost to ready the
asset for its intended use. Acquisition
cost for equipment, for example, means
the net invoice price of the equipment,
including the cost of any modifica-
tions, attachments, accessories, or aux-
iliary apparatus necessary to make it
usable for the purpose for which it is
acquired. Acquisition costs for soft-
ware includes those development costs
capitalized in accordance with gen-
erally accepted accounting principles
(GAAP). Ancillary charges, such as
taxes, duty, protective in transit insur-
ance, freight, and installation may be
included in or excluded from the acqui-
sition cost in accordance with the non -
Federal entity's regular accounting
practices.
§200.3 Advance payment.
Advance payment means a payment
that a Federal awarding agency or
pass- through entity makes by any ap-
propriate payment mechanism, includ-
ing a predetermined payment schedule,
before the non - Federal entity disburses
the funds for program purposes.
§200.4 Allocation.
Allocation means the process of as-
signing a cost, or a group of costs, to
one or more cost objective(s), in rea-
sonable proportion to the benefit pro-
81
§ 200.9
vided or other equitable relationship.
The process may entail assigning a
cost(s) directly to a final cost objective
or through one or more intermediate
cost objectives.
§ 200.6 Audit finding.
Audit finding means deficiencies
which the auditor is required by
§200,516 Audit findings, paragraph (a)
to report in the schedule of findings
and questioned costs.
§ 200.6 Auditee.
Auditee means any non - Federal enti-
ty that expends Federal awards which
must be audited under Subpart F—
Audit Requirements of this part.
§ 200.7 Auditor.
Auditor means an auditor who is a
public accountant or a Federal, state,
local government, or Indian tribe audit
organization, which meets the general
standards specified for external audi-
tors in generally accepted government
auditing standards (GAGAS). The term
auditor does not include internal audi-
tors of nonprofit organizations.
[79 FR 76880, Dec. 19, 20141
§ 200.8 Budget.
Budget means the financial plan for
the project or program that the Fed-
eral awarding agency or pass- through
entity approves during the Federal
award process or in subsequent amend-
ments to the Federal award. It may in-
clude the Federal and non - Federal
share or only the Federal share, as de-
termined by the Federal awarding
agency or pass- through entity.
§200.9 Central service cost allocation
plan.
Central service cost allocation plan
means the documentation identifying,
accumulating, and allocating or devel-
oping billing rates based on the allow-
able costs of services provided by a
state, local government, or Indian tribe
on a centralized basis to its depart-
ments and agencies. The costs of these
services may be allocated or billed to
users.
ATTACHMENT ..... P.........
PAGE ......... ®F ...��:.. PAGES
§200.10
§200.10 Catalog of Federal Domestic
Assistance (CFDA) number.
CFDA number means the number as-
signed to a Federal program in the
CFDA.
§ 200.11 CFDA program title.
CFDA program title means the title of
2 CFR Ch. II (1 -1 -15 Edition)
§200.15 Class of Federal awards.
Class of Federal awards means a group
of Federal awards either awarded under
a specific program or group of pro-
grams or to a specific type of non -Fed-
eral entity or group of non - Federal en-
tities to which specific provisions or
exceptions may apply.
the program under which the Federal
award was funded in the CFDA. § 200.16 Closeout.
§200.12 Capital assets.
Capital assets means tangible or in-
tangible assets used in operations hav-
ing a useful life of more than one year
which are capitalized in accordance
with GAAP. Capital assets include:
(a) Land, buildings (facilities), equip-
ment, and intellectual property (in-
cluding software) whether acquired by
purchase, construction, manufacture,
lease - purchase, exchange, or through
capital leases; and
(b) Additions, improvements, modi-
fications, replacements, rearrange-
ments, reinstallations, renovations or
alterations to capital assets that mate-
rially increase their value or useful life
(not ordinary repairs and mainte-
nance).
§ 200.13 Capital expenditures.
Capital expenditures means expendi-
tures to acquire capital assets or ex-
penditures to make additions, improve-
ments, modifications, replacements,
rearrangements, reinstallations, ren-
ovations, or alterations to capital as-
sets that materially increase their
value or useful life.
§ 200.14 Claim.
Claim means, depending on the con-
text, either:
(a) A written demand or written as-
sertion by one of the parties to a Fed-
eral award seeking as a matter of
right:
(1) The payment of money in a sum
certain;
(2) The adjustment or interpretation
of the terms and conditions of the Fed-
eral award; or
(3) Other relief arising under or relat-
ing to a Federal award.
(b) A request for payment that is not
in dispute when submitted.
82
Closeout means the process by which
the Federal awarding agency or pass -
through entity determines that all ap-
plicable administrative actions and all
required work of the Federal award
have been completed and takes actions
as described in § 200.343 Closeout.
§ 200.17 Cluster of programs.
Cluster of programs means a grouping
of closely related programs that share
common compliance requirements. The
types of clusters of programs are re-
search and development (R &D), student
financial aid (SFA), and other clusters.
"Other clusters" are as defined by OMB
in the compliance supplement or as
designated by a state for Federal
awards the state provides to its sub -
recipients that meet the definition of a
cluster of programs. When designating
an "other cluster," a state must iden-
tify the Federal awards included in the
cluster and advise the subrecipients of
compliance requirements applicable to
the cluster, consistent with §200.331
Requirements for pass- through enti-
ties, paragraph (a). A cluster of pro-
grams must be considered as one pro-
gram for determining major programs,
as described in §200.518 Major program
determination, and, with the exception
of R &D as described in §200.501 Audit
requirements, paragraph (c), whether a
program- specific audit may be elected.
§200.18 Cognizant agency for audit.
Cognizant agency for audit means the
Federal agency designated to carry out
the responsibilities described in
§200,513 Responsibilities, paragraph (a).
The cognizant agency for audit is not
necessarily the same as the cognizant
agency for indirect costs. A list of cog-
nizant agencies for audit may be found
at the FAC Web site.
ATTACHMENT ..... ..........
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PAGES
OMB Guidance
§ 200.19 Cognizant agency for indirect
costs.
Cognizant agency for indirect costs
means the Federal agency responsible
for reviewing, negotiating, and approv-
ing cost allocation plans or indirect
cost proposals developed under this
part on behalf of all Federal agencies.
The cognizant agency for indirect cost
is not necessarily the same as the cog-
nizant agency for audit. For assign-
ments of cognizant agencies see the
following:
(a) For IHEs: Appendix III to Part
200 — Indirect (F &A) Costs Identifica-
tion and Assignment, and Rate Deter-
mination for Institutions of Higher
Education (IHEs), paragraph 0.11.
(b) For nonprofit organizations: Ap-
pendix IV to Part 200 — Indirect (F &A)
Costs Identification and Assignment,
and Rate Determination for Nonprofit
Organizations, paragraph C.12.
(e) For state and local governments:
Appendix V to Part 200 —State /Local
Governmentwide Central Service Cost
Allocation Plans, paragraph F.1.
(d) For Indian tribes: Appendix VII to
Part 200 — States and Local Govern-
ment and Indian Tribe Indirect Cost
Proposal, paragraph D.1.,
(78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 20141
§200.20 Computing devices.
Computing devices means machines
used to acquire, store, analyze, process,
and publish data and other information
electronically, including accessories
(or "peripherals ") for printing, trans-
mitting and receiving, or storing elec-
tronic information. See also § §200.94
Supplies and 200.58 Information tech-
nology systems.
§ 200.21 Compliance supplement.
Compliance supplement means Appen-
dix XI to Part 200 — Compliance Supple-
ment (previously known 'as the Cir-
cular A -133 Compliance Supplement).
§200.22 Contract.
Contract means a legal instrument by
which a non - Federal entity purchases
property or services needed to carry
out the project or program under a
Federal award. The term as used in
this part does not include a legal in-
83
§ 200.25
strument, even if the non - Federal enti-
ty considers it a contract, when the
substance of the transaction meets the
definition of a Federal award or
subaward (see §200.92 Subaward).
§ 200.23 Contractor.
Contractor means an entity that re-
ceives a contract as defined in §200.22
Contract.
§200.24 Cooperative agreement.
Cooperative agreement means a legal
instrument of financial assistance be-
tween a Federal awarding agency or
pass- through entity and a non - Federal
entity that, consistent with 31 U.S.C.
6302 -6305:
(a) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value from the
Federal awarding agency or pass -
through entity to the non - Federal enti-
ty to carry out a public purpose au-
thorized by a law of the United States
(see 31 U.S.C. 6101(3)); and not to ac-
quire property or services for the Fed-
eral Government or pass- through enti-
ty's direct benefit or use;
(b) Is distinguished from a grant in
that it provides for substantial involve-
ment between the Federal awarding
agency or pass- through entity and the
non - Federal entity in carrying out the
activity contemplated by the Federal
award.
(c) The term does not include:
(1) A cooperative research and devel-
opment agreement as defined in 15
U.S.C. 3710a; or
(2) An agreement that provides only:
(i) Direct United States Government
cash assistance to an individual;
(ii) A subsidy;
(iii) A loan;
(iv) A loan guarantee; or
(v)Insurance.
§200.25 Cooperative audit resolution.
Cooperative audit resolution means the
use of audit follow -up techniques which
promote prompt corrective action by
improving communication, fostering
collaboration, promoting trust, and de-
veloping an understanding between the
Federal agency and the non - Federal en-
tity. This approach is based upon:
ATTACHMENT ......2........
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§ 200.26
(a) A strong commitment by Federal
agency and non - Federal entity leader-
ship to program integrity;
(b) Federal agencies strengthening
partnerships and working coopera-
tively with non - Federal entities and
their auditors; and non - Federal enti-
ties and their auditors working coop-
eratively with Federal agencies;
(e) A focus on current conditions and
corrective action going forward;
(d) Federal agencies offering appro-
priate relief for past noncompliance
when audits show prompt corrective
action has occurred; and
(e) Federal agency leadership sending
a clear message that continued failure
to correct conditions identified by au-
dits which are likely to cause improper
payments, fraud, waste, or abuse is un-
acceptable and will result in sanctions.
§200.26 Corrective action.
Corrective action means action taken
by the auditee that:
(a) Corrects identified deficiencies;
(b) Produces recommended improve-
ments; or
(c) Demonstrates that audit findings
are either invalid or do not warrant
auditee action.
§ 200.27 Cost allocation plan.
Cost allocation plan means central
service cost allocation plan or public
assistance cost allocation plan.
§200.28 Cost objective.
Cost objective means a program, func-
tion, activity, award, organizational
subdivision, contract, or work unit for
which cost data are desired and for
which provision is made to accumulate
and `measure the cost of processes,
products, jobs, capital projects, etc. A
cost objective may be a major function
of the non - Federal entity, a particular
service or project, a Federal award, or
an indirect (Facilities & Administra-
tive (F &A)) cost activity, as described
in Subpart E --Cost Principles of this
Part. See also § §200.44 Final cost objec-
tive and 200.60 Intermediate cost objec-
tive.
§ 200.29 Cost sharing or matching.
Cost sharing or matching means the
portion of project costs not paid by
Federal funds (unless otherwise author-
84
2 CFR Ch. II (1 -1 -15 Edition)
ized by Federal statute). See also
§ 200.306 Cost sharing or matching.
§200.30 Crosscutting audit finding.
Cross - cutting audit finding means an
audit finding where the same under-
lying condition or issue affects Federal
awards of more than one Federal
awarding agency or pass- through enti-
ty.
§ 200.31 Disallowed costs.
Disallowed costs means those charges
to a Federal award that the Federal
awarding agency or pass- through enti-
ty determines to be unallowable, in ac-
cordance with the applicable Federal
statutes, regulations, or the terms and
conditions of the Federal award.
§ 200.32 [Reserved]
§ 200.33 Equipment.
Equipment means tangible personal
property (including information tech-
nology systems) having a useful life of
more than one year and a per -unit ac-
quisition cost which equals or exceeds
the lesser of the capitalization level es-
tablished by the non - Federal entity for
financial statement purposes, or $5,000.
See also §§200.12 Capital assets, 200.20
Computing devices, 200.48 General pur-
pose equipment, 200.58 Information
technology systems, 200.89 Special pur-
pose equipment, and 200.94 Supplies.
§ 200.34 Expenditures.
Expenditures means charges made by
a non - Federal entity to a project or
program for which a Federal award was
received.
(a) The charges may be reported on a
cash or accrual basis, as long as the
methodology is disclosed and is con-
sistently applied.
(b) For reports prepared on a cash
basis, expenditures are the sum of:
(1) Cash disbursements for direct
charges for property and services;
(2) The amount of indirect expense
charged;
(3) The value of third -party in -kind
contributions applied; and
(4) The amount of cash advance pay-
ments and payments made to sub -
recipients.
ATTACHMENT ....D ...........
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OMB Guidance
(c) For reports prepared on an ac-
crual basis, expenditures are the sum
of:
(1) Cash disbursements for direct
charges for property and services;
(2) The amount of indirect expense
incurred;
(3) The value of third -party in -kind
contributions applied; and
(4) The net increase or decrease in
the amounts owed by the non - Federal
entity for:
(i) Goods and other property re-
ceived;
(ii) Services performed by employees,
contractors, subrecipients, and other
payees; and
(iii) Programs for which no current
services or performance are required
such as annuities, insurance claims, or
other benefit payments.
§200.35 Federal agency.
Federal agency means an "agency" as
defined at 5 U.S.C. 551(1) and further
clarified by 5 U.S.C. 552(f).
§200.36 Federal Audit Clearinghouse
(FAC).
PAC means the clearinghouse des-
ignated by OMB as the repository of
record where non - Federal entities are
required to transmit the reporting
packages required by Subpart F —Audit
Requirements of this part. The mailing
address of the FAC is Federal Audit
Clearinghouse, Bureau of the Census,
1201 E. 10th Street, Jeffersonville, IN
47132 and the web address is: http: //har-
vester.census.gov /sac% Any future up-
dates to the location of the FAC may
be found at the OMB Web site.
§ 200.37 Federal awarding agency.
Federal awarding agency means the
Federal agency that provides a Federal
award directly to a non - Federal entity.
§ 200.38 Federal award.
Federal award has the meaning, de-
pending on the context, in either para-
graph (a) or (b) of this section:
(a)(1) The Federal financial assist-
ance that a non- Federal entity receives
directly from a Federal awarding agen-
cy or indirectly from a pass- through
entity, as described in §200.101 Applica-
bility; or
85
§ 200.40
(2) The cost- reimbursement contract
under the Federal Acquisition Regula-
tions that a non - Federal entity re-
ceives directly from a Federal award-
ing agency or indirectly from a pass -
through entity, as described in §200.101
Applicability.
(b) The instrument setting forth the
terms and conditions. The instrument
is the grant agreement, cooperative
agreement, other agreement for assist-
ance covered in paragraph (b) of §200.40
Federal financial assistance, or the
cost - reimbursement contract awarded
under the Federal Acquisition Regula-
tions.
(c) Federal award does not include
other contracts that a Federal agency
uses to buy goods or services from a
contractor or a contract to operate
Federal Government owned, contractor
operated facilities (GOCOs).
(d) See also definitions of Federal fi-
nancial assistance, grant agreement,
and cooperative agreement.
§ 200.39 Federal award date.
Federal award date means the date
when the Federal award is signed by
the authorized official of the Federal
awarding agency.
§ 200.40 Federal financial assistance.
(a) For grants and cooperative agree-
ments, Federal financial assistance
means assistance that non - Federal en-
tities receive or administer in the form
of:
(1) Grants;
(2) Cooperative agreements;
(3) Non -cash contributions or dona-
tions of property (including donated
surplus property);
(4) Direct appropriations;
(5) Food commodities; and.
(6) Other financial assistance (except
assistance listed in paragraph (b) of
this section).
(b) For Subpart F —Audit Require-
ments of this part, Federal financial as-
sistance also includes assistance that
non - Federal entities receive or admin-
ister in the form of:
(1) Loans;
(2) Loan Guarantees;
(3) Interest subsidies; and
(4) Insurance.
A- rTACHMENT .... P..........
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§ 200.41
(c) Federal financial assistance does
not include amounts received as reim-
bursement for services rendered to in-
dividuals as described in §200.502 Basis
for determining Federal awards ex-
pended, paragraph (h) and (i) of this
part.
§ 200.41 Federal interest.
Federal interest means, for purposes of
§200.329 Reporting on real property or
when used in connection with the ac-
quisition or improvement of real prop-
erty, equipment, or supplies under a
Federal award, the dollar amount that
is the product of the'
(a) Federal share of total project
costs; and
(b) Current fair market value of the
property, improvements, or both, to
the extent the costs of acquiring or im-
proving the property were included as
project costs.
§ 200.42 Federal program.
Federal program means:
(a) All Federal awards which are as-
signed a single number in the CFDA.
(b) When no CFDA number is as-
signed, all Federal awards to non -Fed-
eral entities from the same agency
made for the same purpose must be
combined and considered one program.
(c) Notwithstanding paragraphs (a)
and (b) of this definition, a cluster of
programs. The types of clusters of pro-
grams are:
(1) Research and development (R &D);
(2) Student financial aid (SFA); and
(3) "Other clusters," as described in
the definition of Cluster of Programs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§ 200.43 Federal share.
Federal share means the portion of
the total project costs that are paid by
Federal funds.
§200.44 Final cost objective.
Final cost objective means a cost ob-
jective which has allocated to it both
direct and indirect costs and, in the
non - Federal entity's accumulation sys-
tem, is one of the final accumulation
points, such as a particular award, in-
ternal project, or other direct activity
of a non - Federal entity. See also
86
2 CFR Ch. II (1 -1 -15 Edition)
§ §200.28 Cost objective and 200.60 Inter-
mediate cost objective.
§ 200.45 Fixed amount awards.
Fixed amount awards means a type of
grant agreement under which the Fed-
eral awarding agency or pass- through
entity provides a specific level of sup-
port without regard to actual costs in-
curred under the Federal award. This
type of Federal award reduces some of
the administrative burden and record -
keeping requirements for both the non -
Federal entity and Federal awarding
agency or pass- through entity. Ac-
countability is based primarily on per-
formance and results. See § §200.201 Use
of grant agreements (including fixed
amount awards), cooperative agree-
ments, and contracts, paragraph (b)
and 200.332 Fixed amount subawards.
§ 200.46 Foreign public entity.
Foreign public entity means:
(a) A foreign government or foreign
governmental entity;
(b) A public international organiza-
tion, which is an organization entitled
to enjoy privileges, exemptions, and
immunities as an international organi-
zation under the International Organi-
zations Immunities Act (22 U.S.C. 288 -
288f);
(c) An entity owned (in whole or in
part) or controlled by a foreign govern-
ment; or
(d) Any other entity consisting whol-
ly or partially of one or more foreign
governments or foreign governmental
entities.
§ 200.47 Foreign organization.
Foreign organization means an entity
that is:
(a) A public or private organization
located in a country other than the
United States and its territories that is
subject to the laws of the country in
which it is located, irrespective of the
citizenship of project staff or place of
performance;
(b) A private nongovernmental orga-
nization located in a country other
than the United States that solicits
and receives cash contributions from
the general public;
(c) A charitable organization located
in a country other than the United
=PAGE MENT p..........
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States that is nonprofit and tax ex-
empt under the laws of its country of
domicile and operation, and is not a
university, college, accredited degree -
granting institution of education, pri-
vate foundation, hospital, organization
engaged exclusively in research or sci-
entific activities, church, synagogue,
mosque or other similar entities orga-
nized primarily for religious purposes;
or
(d) An organization located in a
country other than the United States
not recognized as a Foreign Public En-
tity.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76880, Dec. 19, 2014]
§200.48 General purpose equipment.
General purpose equipment means
equipment which is not limited to re-
search, medical, scientific or other
technical activities. Examples include
office equipment and furnishings, mod-
ular offices, telephone networks, infor-
mation technology equipment and sys-
tems, air conditioning equipment, re-
production and printing equipment,
and motor vehicles. See also Equip-
ment and Special Purpose Equipment.
§200.49 Generally Acce ted Account-
ing Principles (GAAPF
GAAP has the meaning specified in
accounting standards issued by the
Government Accounting Standards
Board (GASB) and the Financial Ac-
counting Standards Board (FASB).
§200.50 Generally Accepted Govern-
ment Auditing Standards ( GAGAS).
GALAS, also known as the Yellow
Book, means generally accepted gov-
ernment auditing standards issued by
the Comptroller General of the United
States, which are applicable to finan-
cial audits.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76880, Dec. 19, 2014]
§ 200.51 Grant agreement.
Grant agreement means a legal instru-
ment of financial assistance between a
Federal awarding agency or pass -
through entity and a non - Federal enti-
ty that, consistent with 31 U.S.C. 6302,
6304:
§ 200.54
(a) Is used to enter into a relation-
ship the principal purpose of which is
to transfer anything of value from the
Federal awarding agency or pass -
through entity to the non - Federal enti-
ty to carry out a public purpose au-
thorized by a law of the United States
(see 31 U.S.C. 6101(3)); and not to ac-
quire property or services for the Fed-
eral awarding agency or pass- through
entity's direct benefit or use;
(b) Is distinguished from a coopera-
tive agreement in that it does not pro-
vide for substantial involvement be-
tween the Federal awarding agency or
pass- through entity and the non -Fed-
eral entity in carrying out the activity
contemplated by the Federal award.
(c) Does not include an agreement
that provides only:
(1) Direct United States Government
cash assistance to an individual;
(2) A subsidy;
(3) A loan;
(4) A loan guarantee; or
(5)Insurance.
§ 200.52 Hospital.
Hospital means a facility licensed as
• hospital under the law of any state or
• facility operated as a hospital by the
United States, a state, or a subdivision
of a state.
87
§200.53 Improper payment.
(a) Improper payment means any pay-
ment that should not have been made
or that was made in an incorrect
amount (including overpayments and
underpayments) under statutory, con-
tractual, administrative, or other le-
gally applicable requirements; and
(b) Improper payment includes any
payment to an ineligible party, any
payment for an ineligible good or serv-
ice, any duplicate payment, any pay-
ment for a good or service not received
(except for such payments where au-
thorized by law), any payment that
does not account for credit for applica-
ble discounts, and any payment where
insufficient or lack of documentation
prevents a reviewer from discerning
whether a payment was proper.
§200.54 Indian tribe (or "federally rec-
ognized Indian tribe ").
Indian tribe means any Indian tribe,
band, nation, or other organized group
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§ 200.55
or community, including any Alaska
Native village or regional or village
corporation as defined in or established
pursuant to the Alaska Native Claims
Settlement Act (43 U.S.C. Chapter 33),
which is recognized as eligible for the
special programs and services provided
by the United States to Indians be-
cause of their status as Indians (25
U.S.C. 450b(e)). See annually published
Bureau of Indian Affairs list of Indian
Entities Recognized and Eligible to Re-
ceive Services.
§200.55 Institutions of Higher Edu-
cation MlEs).
IHE is defined at 20 U.S.C. 1001.
§ 200.56 Indirect (facilities & adminis-
trative (F &A)) costs.
Indirect (F &A) costs means those costs
incurred for a common or joint purpose
benefitting more than one cost objec-
tive, and not readily assignable to the
cost objectives specifically benefitted,
without effort disproportionate to the
results achieved. To facilitate equi-
table distribution of indirect expenses
to the cost objectives served, it may be
necessary to establish a number of
pools of indirect (F &A) costs. Indirect
(F &A) cost pools must be distributed to
benefitted cost objectives on bases that
will produce an equitable result in con-
sideration of relative benefits derived.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§ 200.57 Indirect cost rate proposal.
Indirect cost rate proposal means the
documentation prepared by a non -Fed-
eral entity to substantiate its request
for the establishment of an indirect
cost rate as described in Appendix III
to Part 200 — Indirect (F &A) Costs Iden-
tification and Assignment, and Rate
Determination for Institutions of High-
er Education (IHEs) through Appendix
VII to Part 200 — States and Local Gov-
ernment and Indian Tribe Indirect Cost
Proposals of this part, and Appendix IX
to Part 200 — Hospital Cost Principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
88
2 CFR Ch. II (1 -1 -15 Edition)
§ 200.58 Information technology sys-
tems.
Information technology systems means
computing devices, ancillary equip-
ment, software, firmware, and similar
procedures, services (including support
services), and related resources. See
also § §200.20 Computing devices and
200.33 Equipment.
§ 200.59 Intangible property.
Intangible property means property
having no physical existence, such as
trademarks, copyrights, patents and
patent applications and property, such
as loans, notes and other debt instru-
ments, lease agreements, stock and
other instruments of property owner-
ship (whether the property is tangible
or intangible).
§200.60 Intermediate cost objective.
Intermediate cost objective means a
cost objective that is used to accumu-
late indirect costs or service center
costs that are subsequently allocated
to one or more indirect cost pools or
final cost objectives. See also §200.28
Cost objective and §200.44 Final cost
objective.
§ 200.61 Internal controls.
Internal controls means a process, im-
plemented by a non - Federal entity, de-
signed to provide reasonable assurance
regarding the achievement of objec-
tives in the following categories:
(a) Effectiveness and efficiency of op-
erations;
(b) Reliability of reporting for inter-
nal and external use; and
(c) Compliance with applicable laws
and regulations.
§200.62 Internal control over compli-
ance requirements for Federal
awards.
Internal control over compliance re-
quirements for Federal awards means a
process implemented by a non - Federal
entity designed to provide reasonable
assurance regarding the achievement
of the following objectives for Federal
awards:
(a) Transactions are properly re-
corded and accounted for, in order to:
(1) Permit the preparation of reliable
financial statements and Federal re-
ports;
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C0]ikyif -KeInC I'R
(2) Maintain accountability over as-
sets; and
(3) Demonstrate compliance with
Federal statutes, regulations, and the
terms and conditions of the Federal
award;
(b) Transactions are executed in com-
pliance with;
(1) Federal statutes, regulations, and
the terms and conditions of the Federal
award that could have a direct and ma-
terial effect on a Federal program; and
(2) Any other Federal statutes and
regulations that are identified in the
Compliance Supplement; and
(c) Funds, property, and other assets
are safeguarded against loss from un-
authorized use or disposition.
§ 200.63 Loan.
Loan means a Federal loan or loan
guarantee received or administered by
a non - Federal entity, except as used in
the definition of §200.80 Program in-
come.
(a) The term "direct loan" means a
disbursement of funds by the Federal
Government to a non - Federal borrower
under a contract that requires the re-
payment of such funds with or without
interest. The term includes the pur-
chase of, or participation in, a loan
made by another lender and financing
arrangements that defer payment for
more than 90 days, including the sale of
a Federal Government asset on credit
terms. The term does not include the
acquisition of a federally guaranteed
loan in satisfaction of default claims or
the price support loans of the Com-
modity Credit Corporation.
(b) The term "direct loan obligation"
means a binding agreement by a Fed-
eral awarding agency to make a direct
loan when specified conditions are ful-
filled by the borrower.
(c) The term "loan guarantee" means
any Federal Government guarantee, in-
surance, or other pledge with respect
to the payment of all or a part of the
principal or interest on any debt obli-
gation of a non - Federal borrower to a
non - Federal lender, but does not in-
clude the insurance of deposits, shares,
or other withdrawable accounts in fi-
nancial institutions.
(d) The term "loan guarantee com-
mitment" means a binding agreement
by a Federal awarding agency to make
89
§ 200.67
a loan guarantee when specified condi-
tions are fulfilled by the borrower, the
lender, or any other party to the guar-
antee agreement.
§200.64 Local government.
Local government means any unit of
government within a state, including a:
(a) County;
(b) Borough;
(c) Municipality;
(d) City;
(e) Town;
(f) Township;
(g) Parish;
(h) Local public authority, including
any public housing agency under the
United States Housing Act of 1937;
(i) Special district;
(j) School district;
(k) Intrastate district;
(1) Council of governments, whether
or not incorporated as a nonprofit cor-
poration under state law; and
(m) Any other agency or instrumen-
tality of a multi -, regional, or intra-
state or local government.
§ 200.66 Major program.
Major program means a Federal pro-
gram determined by the auditor to be a
major program in accordance with
§200.518 Major program determination
or a program identified as a major pro-
gram by a Federal awarding agency or
pass- through entity in accordance with
§200.503 Relation to other audit re-
quirements, paragraph (e).
§200.66 Management decision.
Management decision means the eval-
uation by the Federal awarding agency
or pass- through entity of the audit
findings and corrective action plan and
the issuance of a written decision to
the auditee as to what corrective ac-
tion is necessary.
§200.67 Micro-purchase.
Micro - purchase means a purchase of
supplies or services using simplified ac-
quisition procedures, the aggregate
amount of which does not exceed the
micro - purchase threshold. Micro -pur-
chase procedures comprise a subset of a
non - Federal entity's small purchase
procedures. The non - Federal entity
uses such procedures in order to expe-
dite the completion of its lowest - dollar
ATTACHMENT ......2........
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§ 200.68
small purchase transactions and mini-
mize the associated administrative
burden and cost. The micro- purchase
threshold is set by the Federal Acquisi-
tion Regulation at 48 CFR Subpart 2.1
(Definitions). It is $3,000 except as oth-
erwise discussed in Subpart 2.1 of that
regulation, but this threshold is peri-
odically adjusted for inflation.
§200.68 Modified Total Direct Cost
(MTDC).
MTDC means all direct salaries and
wages, applicable fringe benefits, mate-
rials and supplies, services, travel, and
up to the first $25,000 of each subaward
(regardless of the period of perform-
ance of the subawards under the
award). MTDC excludes equipment,
capital expenditures, charges for pa-
tient care, rental costs, tuition remis-
sion, scholarships and fellowships, par-
ticipant support costs and the portion
of each subaward in excess of $25,000.
Other items may only be excluded
when necessary to avoid a serious in-
equity in the distribution of indirect
costs, and with the approval of the cog-
nizant agency for indirect costs.
[79 FR 75660, Dec. 19, 2014]
§200.69 Non - Federal entity.
Non - Federal entity means a state,
local government, Indian tribe, institu-
tion of higher education (IHE), or non-
profit organization that carries out a
Federal award as a recipient or sub -
recipient.
§200.70 Nonprofit organization.
Nonprofit organization means any cor-
poration, trust, association, coopera-
tive, or other organization, not includ-
ing IHEs, that:
(a) Is operated primarily for sci-
entific, educational, service, chari-
table, or similar purposes in the public
interest;
(b) Is not organized primarily for
profit; and
(c) Uses net proceeds to maintain,
improve, or expand the operations of
the organization.
§ 200.71 Obligations.
When used in connection with a non -
Federal entity's utilization of funds
under a Federal award, obligations
90
2 CFR Ch. II (1 -1 -15 Edition)
means orders placed for property and
services, contracts and subawards
made, and similar transactions during
a given period that require payment by
the non- Federal entity during the same
or a future period,
§200.72 Office of Management and
Budget (OMB).
OMB means the Executive Office of
the President, Office of Management
and Budget.
§ 200.73 Oversight agency for audit.
Oversight agency for audit means the
Federal awarding agency that provides
the predominant amount of funding di-
rectly to a non - Federal entity not as-
signed a cognizant agency for audit.
When there is no direct funding, the
Federal awarding agency which is the
predominant source of pass- through
funding must assume the oversight re-
sponsibilities. The duties of the over-
sight agency for audit and the process
for any reassignments are described in
§ 200.513 Responsibilities, paragraph (b).
§ 200.74 Pass - through entity.
Pass - through entity means a non-Fed-
eral entity that provides a subaward to
a subrecipient to carry out part of a
Federal program.
§ 200.75 Participant support costs.
Participant support costs means direct
costs for items such as stipends or sub-
sistence allowances, travel allowances,
and registration fees paid to or on be-
half of participants or trainees (but not
employees) in connection with con-
ferences, or training projects.
§200.76 Performance goal.
Performance goal means a target level
of performance expressed as a tangible,
measurable objective, against which
actual achievement can be compared,
including a goal expressed as a quan-
titative standard, value, or rate. In
some instances (e.g., discretionary re-
search awards), this may be limited to
the requirement to submit technical
performance reports (to be evaluated in
accordance with agency policy).
§ 200.77 Period of performance.
Period of performance means the time
during which the non - Federal entity
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OMB Guidance
may incur new obligations to carry out
the work authorized under the Federal
award. The Federal awarding agency or
pass- through entity must include start
and end dates of the period of perform-
ance in the Federal award (see §§ 200.210
Information contained in a Federal
award paragraph (a)(5) and 200.331 Re-
quirements for pass- through entities,
paragraph (a)(1)(iv)).
§200.78 Personal property.
Personal property means property
other than real property. It may be
tangible, having physical existence, or
intangible.
§ 200.79 Personally Identifiable Infor-
mation (PH).
PH means information that can be
used to distinguish or trace an individ-
ual's identity, either alone or when
combined with other personal or iden-
tifying information that is linked or
linkable to a specific individual. Some
information that is considered to be
PII is available in public sources such
as telephone books, public Web sites,
and university listings. This type of in-
formation is considered to be Public
PII and includes, for example, first and
last name, address, work telephone
number, email address, home telephone
number, and general educational cre-
dentials. The definition of PH is not
anchored to any single category of in-
formation or technology. Rather, it re-
quires a case -by -case assessment of the
specific risk that an individual can be
identified. Non -PII can become PII
whenever additional information is
made publicly available, in any me-
dium and from any source, that, when
combihed with other available infor-
mation, could be used to identify an in-
dividual.
§200.80 Program income.
Program income means gross income
earned by the non - Federal entity that
is directly generated by a supported ac-
tivity or earned as a result of the Fed-
eral award during the period of per-
formance except as provided in §200.307
paragraph (f). (See §200.77 Period of
performance.) Program income in-
cludes but is not limited to income
from fees for services performed, the
use or rental or real or personal prop-
91
§ 200.84
erty acquired under Federal awards,
the sale of commodities or items fab-
ricated under a Federal award, license
fees and royalties on patents and copy-
rights, and principal and interest on
loans made with Federal award funds.
Interest earned on advances of Federal
funds is not program income. Except as
otherwise provided in Federal statutes,
regulations, or the terms and condi-
tions of the Federal award, program in-
come does not include rebates, credits,
discounts, and interest earned on any
of them. See also §200,407 Prior written
approval (prior approval), See also 35
U.S.C. 200 -212 "Disposition of Rights in
Educational Awards" applies to inven-
tions made under Federal awards.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§ 200.81 Property.
Property means real property or per -
sonal property.
§200.82 Protected Personally Identifi-
able Information (Protected PII).
Protected PH means an individual's
first name or first initial and last name
in combination with any one or more
of types of information, including, but
not limited to, social security number,
passport number, credit card numbers,
clearances, bank numbers, biometrics,
date and place of birth, mother's maid-
en name, criminal, medical and finan-
cial records, educational transcripts.
This does not include PII that is re-
quired by law to be disclosed. (See also
§ 200.79 Personally Identifiable Informa-
tion (PII)).
§200.83 Project cost.
Project cost means total allowable
costs incurred under a Federal award
and all required cost sharing and vol-
untary committed cost sharing, includ-
ing third -party contributions.
§200.84 Questioned cost.
Questioned cost means a cost that is
questioned by the auditor because of an
audit finding:
(a) Which resulted from a violation
or possible violation of a statute, regu-
lation, or the terms and conditions of a
Federal award, including for funds used
to match Federal funds;
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§ 200.85
(b) Where the costs, at the time of
the audit, are not supported by ade-
quate documentation; or
(c) Where the costs incurred appear
unreasonable and do not reflect the ac-
tions a prudent person would take in
the circumstances.
§ 200.85 Real property.
Real property means land, including
land improvements, structures and ap-
purtenances thereto, but excludes
moveable machinery and equipment.
§ 200.86 Recipient.
Recipient means a non - Federal entity
that receives a Federal award directly
from a Federal awarding agency to
carry out an activity under a Federal
program. The term recipient does not
include subrecipients. See also §200.69
Non - Federal entity.
§200.87 Research and Development
(R &D).
R&D means all research activities,
both basic and applied, and all develop-
ment activities that are performed by
non - Federal entities. The term re-
search also includes activities involv-
ing the training of individuals in re-
search techniques where such activities
utilize the same facilities as other re-
search and development activities and
where such activities are not included
in the instruction function.
"Research" is defined as a system-
atic study directed toward fuller sci-
entific knowledge or understanding of
the subject studied. "Development" is
the systematic use of knowledge and
understanding gained from research di-
rected toward the production of useful
matef ials, devices, systems, or meth-
ods, including design and development
of prototypes and processes.
§200.88 Simplified acquisition thresh-
old.
Simplified acquisition threshold means
the dollar amount below which a non -
Federal entity may purchase property
or services using small purchase meth-
ods. Non - Federal entities adopt small
purchase procedures in order to expe-
dite the purchase of items costing less
than the simplified acquisition thresh-
old. The simplified acquisition thresh-
old is set by the Federal Acquisition
92
2 CFR Ch. II (1 -1 -15 Edition)
Regulation at 48 CFR Subpart 2.1 (Defi-
nitions) and in accordance with 41
U.S.C. 1908. As of the publication of
this part, the simplified acquisition
threshold is $150,000, but this threshold
is periodically adjusted for inflation.
(Also see definition of §200.67 Micro-
purchase.)
§200.89 Special purpose equipment.
Special purpose equipment means
equipment which is used only for re-
search, medical, scientific, or other
technical activities. Examples of spe-
cial purpose equipment include micro-
scopes, x -ray machines, surgical instru-
ments, and spectrometers. See also
§§200.33 Equipment and 200.48 General
purpose equipment.
§ 200.90 State.
State means any state of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, U.S.
Virgin Islands, Guam, American
Samoa, the Commonwealth of the
Northern Mariana Islands, and any
agency or instrumentality thereof ex-
clusive of local governments.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§ 200.91 Student Financial Aid (SFA).
SFA means Federal awards under
those programs of general student as-
sistance, such as those authorized by
Title IV of the Higher Education Act of
1965, as amended, (20 U.S.C. 1070- 1099d),
which are administered by the U.S. De-
partment of Education, and similar
programs provided by other Federal
agencies. It does not include Federal
awards under programs that provide
fellowships or similar Federal awards
to students on a competitive basis, or
for specified studies or research.
§ 200.92 Subaward.
Subaward means an award provided
by a pass- through entity to a sub -
recipient for the subrecipient to carry
out part of a Federal award received by
the pass - through entity. It does not in-
clude payments to a contractor or pay-
ments to an individual that is a bene-
ficiary of a Federal program. A
subaward may be provided through any
form of legal agreement, including an
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agreement that the pass- through enti-
ty considers a contract.
§ 200.93 Subrecipient.
Subrecipient means a non - Federal en-
tity that receives a subaward from a
pass- through entity to carry out part
of a Federal program; but does not in-
clude an individual that is a bene-
ficiary of such program. A subrecipient
may also be a recipient of other Fed-
eral awards directly from a Federal
awarding agency.
§ 200.94 Supplies.
Supplies means all tangible personal
property other than those described in
§200.33 Equipment. A computing device
is a supply if the acquisition cost is
less than the lesser of the capitaliza-
tion level established by the non -Fed-
eral entity for financial statement pur-
poses or $5,000, regardless of the length
of its useful life. See also §§200.20 Com-
puting devices and 200.33 Equipment.
§ 200.96 Termination.
Termination means the ending of a
Federal award, in whole or in part at
any time prior to the planned end of
period of performance.
§200.96 Third -party in -kind contribu-
tions.
Third -party in -kind contributions
means the value of non -cash contribu-
tions (i.e., property or services) that —
(a) Benefit a federally assisted
project or program; and
(b) Are contributed by non - Federal
third parties, without charge, to a non -
Federal entity under a Federal award.
§200.97 Unliquidated obligations.
Unliquidated obligations means, for fi-
nancial reports prepared on a cash
basis, obligations incurred by the non -
Federal entity that have not been paid
(liquidated). For reports prepared on an
accrual expenditure basis, these are ob-
ligations incurred by the non - Federal
entity for which an expenditure has
not been recorded.
§ 200.98 Unobligated balance.
Unobligated balance means the
amount of funds under a Federal award
that the non - Federal entity has not ob-
ligated. The amount is computed by
93
§ 200.1 00
subtracting the cumulative amount of
the non - Federal entity's unliquidated
obligations and expenditures of funds
under the Federal award from the cu-
mulative amount of the funds that the
Federal awarding agency or pass -
through entity authorized the non -Fed-
eral entity to obligate.
§ 200.99 Voluntary committed cost
sharing.
Voluntary committed cost sharing
means cost sharing specifically pledged
on a voluntary basis in the proposal's
budget or the Federal award on the
part of the non - Federal entity and that
becomes a binding requirement of Fed-
eral award.
Subpart B— General Provisions
§200.100 Purpose.
(a)(1) This part establishes uniform
administrative requirements, cost
principles, and audit requirements for
Federal awards to non - Federal entities,
as described in §200.101 Applicability.
Federal awarding agencies must not
impose additional or inconsistent re-
quirements, except as provided in
§§200.102 Exceptions and 200.210 Infor-
mation contained in a Federal award,
or unless specifically required by Fed-
eral statute, regulation, or Executive
Order.
(2) This part provides the basis for a
systematic and periodic collection and
uniform submission by Federal agen-
cies of information on all Federal fi-
nancial assistance programs to the Of-
fice of Management and Budget (OMB).
It also establishes Federal policies re-
lated to the delivery of this informa-
tion to the public, including through
the use of electronic media. It pre-
scribes the manner in which General
Services Administration (GSA), OMB,
and Federal agencies that administer
Federal financial assistance programs
are to carry out their statutory respon-
sibilities under the Federal Program
Information Act (31 U.S.C. 6101 - 6106).
(b) Administrative requirements. Sub-
parts B through D of this part set forth
the uniform administrative require-
ments for grant and cooperative agree-
ments, including the requirements for
Federal awarding agency management
of Federal grant programs before the
ATTACHMENT ...... .........
PAGE ...! ]..... OF ...... PAGES
§ 200. 101
Federal award has been made, and the
requirements Federal awarding agen-
cies may impose on non - Federal enti-
ties in the Federal award.
(c) Cost Principles. Subpart F—Cost
Principles of this part establishes prin-
ciples for determining the allowable
costs incurred by non - Federal entities
under Federal awards. The principles
are for the purpose of cost determina-
tion and are not intended to identify
the circumstances or dictate the extent
of Federal Government participation in
the financing of a particular program
or project. The principles are designed
to provide that Federal awards bear
their fair share of cost recognized
under these principles except where re-
stricted or prohibited by statute.
(d) Single Audit Requirements and
Audit Follow -up. Subpart F —Audit Re-
quirements of this part is issued pursu-
ant to the Single Audit Act Amend-
ments of 1996, (31 U.S.C. 7501 - 7507). It
sets forth standards for obtaining con-
sistency and uniformity among Federal
agencies for the audit of non - Federal
entities expending Federal awards.
These provisions also provide the poli-
cies and procedures for Federal award-
ing agencies and pass- through entities
when using the results of these audits.
(e) For OMB guidance to Federal
awarding agencies on Challenges and
Prizes, please see M -10-11 Guidance on
the Use of Challenges and Prizes to
94
2 CFR Ch. II (1 -1 -15 Edition)
Promote Open Government, issued
March 8, 2010, or its successor.
§200.101 Applicability.
(a) General applicability to Federal
agencies. The requirements established
in this part apply to Federal agencies
that make Federal awards to non -Fed-
eral entities. These requirements are
applicable to all costs related to Fed-
eral awards.
(b)(1) Applicability to different types of
Federal awards. The following table de-
scribes what portions of this part apply
to which types of Federal awards. The
terms and conditions of Federal awards
(including this part) flow down to sub -
awards to subrecipients unless a par-
ticular section of this part or the terms
and conditions of the Federal award
specifically indicate otherwise. This
means that non - Federal entities must
comply with requirements in this part
regardless of whether the non - Federal
entity is a recipient or subrecipient of
a Federal award. Pass- through entities
must comply with the requirements de-
scribed in Subpart D —Post Federal
Award Requirements of this part,
§§200.330 Subrecipient and contractor
determinations through 200.332 Fixed
amount Subawards, but not any re-
quirements in this part directed to-
wards Federal awarding agencies un-
less the requirements of this part or
the terms and conditions of the Federal
award indicate otherwise.
ATTACHMENT ..... Q..........
PAGE ... ..... OF `'.. PAGES
OMB Guidance
§ 200. 101
(2) Federal award of cost - reimbursement
contract under the FAR to a non - Federal
entity. When a non- Federal entity is
awarded a cost - reimbursement con-
tract, only Subpart D --Post Federal
Award Requirements of this part,
§§200.330 Subrecipient and contractor
determinations through 200.332 Fixed
amount Subawards (in addition to any
FAR related requirements for
subaward monitoring), Subpart F_
Cost Principles of this part and Sub-
part F —Audit Requirements of this
95
part are incorporated by reference into
the contract. However, when the Cost
Accounting Standards (CAS) are appli-
cable to the contract, they take prece-
dence over the requirements of this
part except for Subpart F —Audit Re-
quirements of this part when they are
in conflict. In addition, costs that are
made unallowable under 10 U.S.C.
2324(e) and 41 U.S,C. 4304(a) as described
in the FAR subpart 31.2 and subpart
31.603 are always unallowable. For re-
quirements other than those covered in
ATTACHMENT ....... ....:e.:;
PAGE ... t�..... OF ... :.. PAGES
ista C:must be tea ongwtt t e�ot er: rotiisous:o .i s;sactron:
The following portions of
Are apphcable'to the following types
aF] eaeraI AWardS (e p its noted
AreSiOT a4plicnble,to: fha following types ofPederai
the kart:
I..
rnparagrdphs (d) and'(e)) belowv,
)iwefds:
Subpar -A- Acronyms and
�eftnitions .
Subpiut B —, General Provi-
lions, except fora §200:111
English Language; 200.112
Conflict of Interest;
_All,
200 ;113 Mandatory:
Disclosure's` "
, Agreement's for loans; loan guarantees, interest
subsidies] aaAinsuran6e,.
§200.711 Engltth 1 an-
—(yobt reimtinrsement coatracEs awarded underthe
gunge, 200.712 Conflict of
Grant agreements and' cooperative
agreements,
Federal Acquisition Regulations and'oost -,
reimbursement subcontractsunderAtie contracts.
Interest, and 200.113Man-
datorybiscloeures
4ixed- price contracts and sgbcontraets awarded
underlho`ke feral Acquisition Regulation whenever
cost analysis is petforni. v4 or the contract requiretkho
detemunazsoitiornegofietion of costs;!
AgYeemeptsfor. loaus,'loan'guarantaes, interest
subsidies, aria insurance„
Cost- reimbprsement'cbntragts warded onaer:the
Subparts.C;D;.exeept for
- -Grant agreements acid cooperative
Federal Acquisition Regulatlons and cost -,
Subreeipieat 4onitoring.
agreements.
reuabursement subcontracts under these contracts.
and Management
= Fixed- price.contracfs and.subcon(racts awarded
under the Federal Acquisitlon Regulation whenever,
cost analysis.; is performed or the contract requires;ihe
.. . . .. .. ..... _,.._
., _ .,
dell 'atios_.Qrnagotint pa o£ costs.:.
SubpartD —Post .e erat .
Award Requirements, sub
iecipientM6nitopngand,
—AIt
1t$aliagetutn{
Giant'agreemeilts an. ; cooperative
agreements, except those providittg
food .commodities:
—= Cost,relmbursetnent contracts _
awarded undertho:Pede'M_ Acqutsi-
Grant.agrapments:and cooperative agreamtpts
ttonRegulattons,arrd egst ==
pr6viahig €cod comngodities.
.Mrn itisement subc6ntrhm under
-Fixed amgianE A" 8
SabpsttE— Costpn`nciples
bt;ie:contractsinacoordancawith
: ; AgreementCforloan3 ,loanguariaiipes,.ietetest
the FllIt.
subsi$1as,'rtitsirance.
Fixed - price contracts and subcon-
. —; Pederal'awards to hospitals:
tracts awarded under the Federal Ac-
(see Appendix IXHospital Cost Principles).
quisitlgn Regulation whenever cost
analysis is,perfomted,ortfie contract
require$ the deteimmation or'negotia-
Subpart —AU it Require=
—All.
inents: `
(2) Federal award of cost - reimbursement
contract under the FAR to a non - Federal
entity. When a non- Federal entity is
awarded a cost - reimbursement con-
tract, only Subpart D --Post Federal
Award Requirements of this part,
§§200.330 Subrecipient and contractor
determinations through 200.332 Fixed
amount Subawards (in addition to any
FAR related requirements for
subaward monitoring), Subpart F_
Cost Principles of this part and Sub-
part F —Audit Requirements of this
95
part are incorporated by reference into
the contract. However, when the Cost
Accounting Standards (CAS) are appli-
cable to the contract, they take prece-
dence over the requirements of this
part except for Subpart F —Audit Re-
quirements of this part when they are
in conflict. In addition, costs that are
made unallowable under 10 U.S.C.
2324(e) and 41 U.S,C. 4304(a) as described
in the FAR subpart 31.2 and subpart
31.603 are always unallowable. For re-
quirements other than those covered in
ATTACHMENT ....... ....:e.:;
PAGE ... t�..... OF ... :.. PAGES
§200.101
Subpart D —Post Federal Award Re-
quirements of this part, §§200.330 Sub -
recipient and contractor determina-
tions through 200.332 Fixed amount
Subawards, Subpart E —Cost Principles
of this part and Subpart F —Audit Re-
quirements of this part, the terms of
the contract and the FAR apply.
(3) With the exception of Subpart F—
Audit Requirements of this part, which
is required by the Single Audit Act, in
any circumstances where the provi-
sions of Federal statutes or regulations
differ from the provisions of this part,
the provision of the Federal statutes or
regulations govern. This includes, for
agreements with Indian tribes, the pro-
visions of the Indian Self- Determina-
tion and Education and Assistance Act
(ISDEAA), as amended, 25 U.S.0 450 -
458ddd-2.
(c) Federal awarding agencies may
apply subparts A through E of this part
to for - profit entities, foreign public en-
tities, or foreign organizations, except
where the Federal awarding agency de-
termines that the application of these
subparts would be inconsistent with
the international obligations of the
United States or the statutes or regu-
lations of a foreign government.
(d) Except for §200.202 Requirement
to provide public notice of Federal fi-
nancial assistance programs and
§ §200.330 Subrecipient and contractor
determinations through 200.332 Fixed
amount Subawards of Subpart D —Post
Federal Award Requirements of this
part, the requirements in Subpart C-
Pre- Federal Award Requirements and
Contents of Federal Awards, Subpart
D —Post Federal Award Requirements
of this part, and Subpart E —Cost Prin-
ciples of this part do not apply to the
following programs:
(1) The block grant awards author-
ized by the Omnibus Budget Reconcili-
ation Act of 1981 (including Community
Services, except to the extent that the
cost and accounting standards of OMB
apply to subrecipients of Community
Services Block Grant funds pursuant to
42 U.S.C.9916(a)(1)(B);
(2) Federal awards to local education
agencies under 20 U.S.C. 7702- 7703b,
(portions of the Impact Aid program);
(3) Payments under the Department
of Veterans Affairs' State Home Per
Diem Program (38 U.S.C. 1741); and
96
2 CFR Ch. II (1 -1 -15 Edition)
(4) Federal awards authorized under
the Child Care and Development. Block
Grant Act of 1990, as amended:
(i) Child Care and Development Block
Grant (42 U.S.C. 9858)
(ii) Child Care Mandatory and Match-
ing Funds of the Child Care and Devel-
opment Fund (42 U.S.C. 9858)
(e) Except for §200.202 Requirement
to provide public notice of Federal fi-
nancial assistance programs the guid-
ance in Subpart C —Pre- Federal Award
Requirements and Contents of Federal
Awards of this part does not apply to
the following programs:
(1) Entitlement Federal awards to
carry out the following programs of the
Social Security Act:
(i) Temporary Assistance to Needy
Families (title IV -A of the Social Secu-
rity Act, 42 U.S.C. 601 -619);
(ii) Child Support Enforcement and
Establishment of Paternity (title IV -D
of the Social Security Act, 42 U.S.C.
651- 669b);
(iii) Foster Care and Adoption Assist-
ance (title IV -E of the Act, 42 U.S.C.
670-679c);
(iv) Aid to the Aged, Blind, and Dis-
abled (titles I, X, XIV, and XVI -AABD
of the Act, as amended);
(v) Medical Assistance (Medicaid)
(title XIX of the Act, 42 U.S.C. 1396 -
1396w-5) not including the State Med-
icaid Fraud Control program author-
ized by section 1903(a)(6)(B) of the So-
cial Security Act (42 U.S.C.
1396b(a)(6)(B)); and
(vi) Children's Health Insurance Pro-
gram (title XXI of the Act, 42 U.S.C.
1397aa- 1397mm).
(2) A Federal award for an experi-
mental, pilot, or demonstration project
that is also supported by a Federal
award listed in paragraph (e)(1) of this
section;
(3) Federal awards under subsection
412(e) of the Immigration and Nation-
ality Act and subsection 501(a) of the
Refugee Education Assistance Act of
1980 (Pub. L. 96 -422, 94 Stat. 1809), for
cash assistance, medical assistance,
and supplemental security income ben-
efits to refugees and entrants and the
administrative costs of providing the
assistance and benefits (8 U.S.C.
1522(e));
ATTACHMENT ..... ......
PAGE .... ... OF ...I'.. PAGES
OMB Guidance
(4) Entitlement awards under the fol-
lowing programs of The National
School Lunch Act:
(i) National School Lunch Program
(section 4 of the Act, 42 U.S.C. 1753),
(ii) Commodity Assistance (section 6
of the Act, 42 U.S.C. 1755),
(iii) Special Meal Assistance (section
11 of the Act, 42 U.S.C. 1759a),
(iv) Summer Food Service Program
for Children (section 13 of the Act, 42
U.S.C. 1761), and
(v) Child and Adult Care Food Pro-
gram .(section 17 of the Act, 42 U.S.C.
1766).
(5) Entitlement awards under the fol-
lowing programs of The Child Nutri-
tion Act of 1966:
(i) Special Milk Program (section 3 of
the Act, 42 U.S.C. 1772),
(ii) School Breakfast Program (sec-
tion 4 of the Act, 42 U.S.C. 1773), and
(iii) State Administrative Expenses
(section 7 of the Act, 42 U.S.C. section
1776).
(6) Entitlement awards for State Ad-
ministrative Expenses under The Food
and Nutrition Act of 2008 "(section 16 of
the Act, 7 U.S.C. 2025).
(7) Non- discretionary Federal awards
under the following non - entitlement
programs:
(i) Special Supplemental Nutrition
Program for Women, Infants and Chil-
dren (section 17 of the Child Nutrition
Act of 1966) 42 U.S.C, section 1786;
(ii) The Emergency Food Assistance
Programs (Emergency Food Assistance
Act of 1983) 7 U.S.C, section 7501 note;
and
(iii) Commodity Supplemental Food
Program (section 5 of the Agriculture
and Consumer Protection Act of 1973) 7
U.S.C: section 612c note.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75880, Dec. 19, 2014]
§ 200.102 Exceptions.
(a) With the exception of Subpart F—
Audit Requirements of this part, OMB
may allow exceptions for classes of
Federal awards or non - Federal entities
subject to the requirements of this part
when exceptions are not prohibited by
statute. However, in the interest of
maximum uniformity, exceptions from
the requirements of this part will be
permitted only in unusual cir-
cumstances. Exceptions for classes of
97
§ 200.103
Federal awards or non - Federal entities
will be published on the OMB Web site
at www.whitehouse.gov/omb.
(b) Exceptions on a case -by -case basis
for individual non - Federal entities may
be authorized by the Federal awarding
agency or cognizant agency for indirect
costs, except where otherwise required
by law or where OMB or other approval
is expressly required by this part.
(c) The Federal awarding agency may
apply more restrictive requirements to
a class of Federal awards or non -Fed-
era] entities when approved by OMB, or
when, required by Federal statutes or
regulations, except for the require-
ments in Subpart F —Audit Require-
ments of this part. A Federal awarding
agency may apply less restrictive re-
quirements when making fixed amount
awards as defined in Subpart A —Acro-
nyms and Definitions of this part, ex-
cept for those requirements imposed by
statute or in Subpart F —Audit Re-
quirements of this part.
(d) On a case -by -case basis, OMB will
approve new strategies for Federal
awards when proposed by the Federal
awarding agency in accordance with
OMB guidance (such as M- 13-17) to de-
velop additional evidence relevant to
addressing important policy challenges
or to promote cost - effectiveness in and
across Federal programs. Proposals
may draw on the innovative program
designs discussed in M -13-17 to expand
or improve the use of effective prac-
tices in delivering Federal financial as-
sistance while also encouraging inno-
vation in service delivery. Proposals
submitted to OMB in accordance with
M -13-17 may include requests to waive
requirements other than those in Sub-
part F —Audit Requirements of this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75881, Dec. 19, 2014]
§ 200.103 Authorities.
This part is issued under the fol-
lowing authorities.
(a) Subpart B— General Provisions of
this part through Subpart D —Post Fed-
eral Award Requirements of this part
are authorized under 31 U.S.C. 503 (the
Chief Financial Officers Act, Functions
of the Deputy Director for Manage-
ment), 31 U.S.C. 1111 (Improving Econ-
omy and Efficiency of the United
ATTACHMENT ..... D..........
PAGE .. 2:�..... OF ..1�1t. PAGES
§ 200.104
States Government), 41 U.S.C. 1101 -1131
(the Office of Federal Procurement
Policy Act), Reorganization Plan No. 2
of 1970, and Executive Order 11541
( "Prescribing the Duties of the Office
of Management and Budget and the Do-
mestic Policy Council in the Executive
Office of the President "), the Single
Audit Act Amendments of 1996, (31
U.S.C. 7501 - 7507), as well as The Federal
Program Information Act (Public Law
95-220 and Public Law 98 -169, as amend-
ed, codified at 31 U.S.C. 6101 - 6106).
(b) Subpart E—Cost Principles of this
part is authorized under the Budget
and Accounting Act of 1921, as amend-
ed; the Budget and Accounting Proce-
dures Act of 1950, as amended (31 U.S.C.
1101 - 1125); the Chief Financial Officers
Act of 1990 (31 U.S.C. 503 -504); Reorga-
nization Plan No. 2 of 1970; and Execu-
tive Order No. 11541, "Prescribing the
Duties of the Office of Management
and Budget and the Domestic Policy
Council in the Executive Office of the
President."
(c) Subpart F —Audit Requirements
of this part is authorized under the
Single Audit Act Amendments of 1996,
(31 U.S.C. 7501-7507).
§ 200.104 Supersession.
As described in §200.110 Effective /ap-
plicability date, this part supersedes
the following OMB guidance documents
and regulations under Title 2 of the
Code of Federal,Regulatibns:
(a) A -21, "Cost Principles for Edu-
cational Institutions" (2 CFR part 220);
(b) A -87, "Cost Principles for State,
Local and Indian Tribal Governments"
(2 CFR part 225) and also FEDERAL RD, G-
isTER notice 51 FR 552 (January 6, 1986);
(c) `A -89, "Federal Domestic Assist-
ance Program Information ";
(d) A -102, "Grant Awards and Cooper-
ative Agreements with State and Local
Governments ";
(e) A -110, "Uniform Administrative
Requirements for Awards and Other
Agreements with Institutions of Higher
Education, Hospitals, and Other Non-
profit Organizations" (codified at 2
CFR 215);
(f) A -122, "Cost Principles for Non -
Profit Organizations" (2 CFR part 230);
(g) A -133, "Audits of States, Local
Governments and Non - Profit Organiza-
tions "; and
98
2 CFR Ch. II (1 -1 -15 Edition)
(h) Those sections of A -50 related to
audits performed under Subpart F—
Audit Requirements of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75882, Dec. 19, 20141
§ 200.105 Effect on other issuances.
For Federal awards subject to this
part, all administrative requirements,
program manuals, handbooks and other
non - regulatory materials that are in-
consistent with the requirements of
this part must be superseded upon im-
plementation of this part by the Fed-
eral agency, except to the extent they
are required by statute or authorized
in accordance with the provisions in
§ 200.102 Exceptions.
§ 200.106 Agency implementation.
The specific requirements and re-
sponsibilities of Federal agencies and
non - Federal entities are set forth in
this part. Federal agencies making
Federal awards to non - Federal entities
must implement the language in the
Subpart C —Pre- Federal Award Re-
quirements and Contents of Federal
Awards of this part through Subpart
F —Audit Requirements of this part in
codified regulations unless different
provisions are required by Federal stat-
ute or are approved by OMB.
§ 200.107 OMB responsibilities.
OMB will review Federal agency reg-
ulations and implementation of this
part, and will provide interpretations
of policy requirements and assistance
to ensure effective and efficient imple-
mentation. Any exceptions will be sub-
ject to approval by OMB. Exceptions
will only be made in particular cases
where adequate justification is pre-
sented.
§200.108 Inquiries.
Inquiries concerning this part may be
directed to the Office of Federal Finan-
cial Management Office of Manage-
ment and Budget, in Washington, DC.
Non - Federal entities' inquiries should
be addressed to the Federal awarding
agency, cognizant agency for indirect
costs, cognizant or oversight agency
for audit, or pass- through entity as ap-
propriate.
A1M ...I..� .....
PACPAGE .
ES
OMB Guidance
§ 200.109 Review date.
OMB will review this part at least
every five years after December 26,
2013.
§200.110 Effective /applicability date.
(a) The standards set forth in this
part which affect administration of
Federal awards issued by Federal
awarding agencies become effective
once implemented by Federal awarding
agencies or when any future amend-
ment to this part becomes final. Fed-
eral awarding agencies must imple-
ment the policies and procedures appli-
cable to Federal awards by promul-
gating a regulation to be effective by
December 26, 2014 unless different pro-
visions are required by statute or ap-
proved by OMB. For the procurement
standards in §§200.317-200,326, non -Fed-
eral entities may continue to comply
with the procurement standards in pre-
vious OMB guidance (superseded by
this part as described in §200.104) for
one additional fiscal year after this
part goes into effect. If a non - Federal
entity chooses to use the previous pro-
curement standards for an additional
fiscal year before adopting the procure-
ment standards in this part, the non -
Federal entity must document this de-
cision in their internal procurement
policies.
(b) The standards, set forth in Sub-
part F —Audit Requirements of this
part and any other standards which
apply directly to Federal agencies will
be effective December 26, 2013 and will
apply to audits of fiscal years begin-
ning on or after December 26, 2014.
[78 FR 78608, Dec, 26, 2013, as amended at 79
FR 75882, Dec. 19, 20141
§200.111 English language.
(a) All Federal financial assistance
announcements and Federal award in-
formation must be in the English lan-
guage. Applications must be submitted
in the English language and must be in
the terms of U.S. dollars. If the Federal
awarding agency receives applications
in another currency, the Federal
awarding agency will evaluate the ap-
plication by converting the foreign cur-
rency to United States currency using
the date specified for receipt of the ap-
plication.
99
§ 200.200
(b) Non - Federal entities may trans-
late the Federal award and other docu-
ments into another language. In the
event of inconsistency between any
terms and conditions of the Federal
award and any translation into another
language, the English language mean-
ing will control. Where a significant
portion of the non - Federal entity's em-
ployees who are working on the Fed-
eral award are not fluent in English,
the non - Federal entity must provide
the Federal award in English and the
language(s) with which employees are
more familiar.
§ 200.112 Conflict of interest.
The Federal awarding agency must
establish conflict of interest policies
for Federal awards. The non - Federal
entity must disclose in writing any po-
tential conflict of interest to the Fed-
eral awarding agency or pass- through
entity in accordance with applicable
Federal awarding agency policy.
§ 200.113 Mandatory disclosures.
The non - Federal entity or applicant
for a Federal award must disclose, in a
timely manner, in writing to the Fed-
eral awarding agency or pass- through
entity all violations of Federal crimi-
nal law involving fraud, bribery, or
gratuity violations potentially affect-
ing the Federal award. Failure to make
required disclosures can result in any
of the remedies described in §200.338
Remedies for noncompliance, including
suspension or debarment. (See also 2
CFR part 180 and 31 U.S.C. 3321).
Subpart C— Pre - Federal Award
Requirements and Contents of
Federal Awards
§200.200 Purpose.
(a) Sections 200,201 Use of grant
agreements (including fixed amount
awards), cooperative agreements, and
contracts through 200.208 Certifications
and representations prescribe instruc-
tions and other pre -award matters to
be used in the announcement and appli-
cation process.
(b) Use of §§ 200.203 Notices of funding
opportunities, 200.204 Federal awarding
agency review of merit of proposals,
200.205 Federal awarding agency review
ATTACHMENT .....!a.........
PAGE ...L:.... OF ...! LL PAGES
§ 200.201
of risk posed by applicants, and 200.207
Specific conditions, is required only for
competitive Federal awards, but may
also be used by the Federal awarding
agency for non - competitive awards
where appropriate or where required by
Federal statute.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76882, Dec. 19, 20141
§ 200.201 Use of grant agreements (in-
cluding fixed amount awards), co-
operative agreements, and con-
tracts.
(a) The Federal awarding agency or
pass- through entity must decide on the
appropriate instrument for the Federal
award (i.e., grant agreement, coopera-
tive agreement, or contract) in accord-
ance with the Federal Grant and Coop-
erative Agreement Act (31 U.S.C. 6301-
08).
(b) Fixed Amount Awards. In addi-
tion to the, options described in para-
graph (a) of this section, Federal
awarding agencies, or pass - through en-
tities as permitted in §200.332 Fixed
amount subawards, may use fixed
amount awards (see §200.45 Fixed
amount awards) to which the following
conditions apply:
(1) The Federal award amount is ne-
gotiated using the cost principles (or
other pricing information) as a guide,
The Federal awarding agency or pass -
through entity may use fixed amount
awards if the project scope is specific
and if adequate cost, historical, or unit
pricing data is available to establish a
fixed amount award based on a reason-
able estimate of actual cost. Payments
are based on meeting specific require-
ments of the Federal award, Account-
ability is based on performance and re-
sults. Except in the case of termination
before completion of the Federal
award, there is no governmental review
of the actual costs incurred by the non -
Federal entity in performance of the
award. Some of the ways in which the
Federal award may be paid include, but
are not limited to:
(i) In several partial payments, the
amount of each agreed upon in ad-
vance, and the "milestone" or event
triggering the payment also agreed
upon in advance, and set forth in the
Federal award;
2 CFR Ch. II (1 -1 -15 Edition)
(ii) On a unit price .basis, for a de-
fined unit or units, at a defined price or
prices, agreed to in advance of perform-
ance of the Federal award and set forth
in the Federal award; or,
(iii) In one payment at Federal award
completion.
(2) A fixed amount award cannot be
used in programs which require manda-
tory cost sharing or match.
(3) The non - Federal entity must cer-
tify in writing to the Federal awarding
agency or pass - through entity at the
end of the Federal award that the
project or activity was completed or
the level of effort was expended, If the
required level of activity or effort was
not carried out, the amount of the Fed-
eral award must be adjusted.
(4) Periodic reports may be estab-
lished for each Federal award.
(5) Changes in principal investigator,
project leader, project partner, or scope
of effort must receive the prior written
approval of the Federal awarding agen-
cy or pass- through entity.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76882, Dec. 19, 2014]
§200.202 Requirement to provide pub-
lic notice of Federal financial as-
sistance programs.
(a) The Federal awarding agency
must notify the public of Federal pro-
grams in the Catalog of Federal Do-
mestic Assistance (CFDA), maintained
by the General Services Administra-
tion (GSA).
(1) The CFDA, or any OMB -des-
ignated replacement, is the single, au-
thoritative, governmentwide com-
prehensive source of Federal financial
assistance program information pro-
duced by the executive branch of the
Federal Government.
(2) The information that the Federal
awarding agency must submit to GSA
for approval by OMB is listed in para-
graph (b) of this section. GSA must
prescribe the format for the submis-
sion.
(3) The Federal awarding agency may
not award Federal financial assistance
without assigning it to a program that
has been included in the CFDA as re-
quired in this section unless there are
exigent circumstances requiring other-
wise, such as timing requirements im-
posed by statute.
100
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OMB Guidance
(b) For each program that awards
discretionary Federal awards, non -dis-
cretionary Federal awards, loans, in-
surance, or any other type of Federal
financial assistance, the Federal
awarding agency must submit the fol-
lowing information to GSA:
(1) Program Description, Purpose,
Goals and Measurement. A brief sum-
mary of the statutory or regulatory re-
quirements of the program and its in-
tended outcome. Where appropriate,
the Program Description, Purpose,
Goals, and Measurement should align
with the strategic goals and objectives
within the Federal awarding agency's
performance plan and should support
the Federal awarding agency's per-
formance measurement, management,
and reporting as required by Part 6 of
OMB Circular A -11;
(2) Identification of whether the pro-
gram makes Federal awards on a dis-
cretionary basis or the Federal awards
are prescribed by Federal statute, such
as in the case of formula grants.
(3) Projected total amount of funds
available for the program. Estimates
based on previous year funding are ac-
ceptable if current appropriations are
not available at the time of the sub-
mission;
(4) Anticipated Source of Available
Funds: The statutory authority for
funding the program and, to the extent
possible, agency, sub - agency, or, if
known, the specific program unit that
will issue the Federal awards, and asso-
ciated funding identifier (e.g., Treasury
Account Symbol(s));
(5) General Eligibility Requirements:
The statutory, regulatory or other eli-
gibility factors or considerations that
determine the applicant's qualification
for Federal awards under the program
(e.g., type of non- Federal entity); and
(6) Applicability of Single Audit Re-
quirements as required by Subpart F—
Audit Requirements of this part.
§200.203 Notices of funding opportuni-
ties.
For competitive grants and coopera-
tive agreements, the Federal awarding
agency must announce specific funding
opportunities by providing the fol-
lowing information in a public notice:
(a) Summary Information in Notices of
Funding Opportunities. The Federal
§ 200.203
awarding agency must display the fol-
lowing information posted on the OMB -
designated governmentwide Web site
for finding and applying for Federal fi-
nancial assistance, in a location pre-
ceding the full text of the announce-
ment:
(1) Federal Awarding Agency Name;
(2) Funding Opportunity Title;
(3) Announcement Type (whether the
funding opportunity is the initial an-
nouncement of this funding oppor-
tunity or a modification of a pre -
viously announced opportunity);
(4) Funding Opportunity Number (re-
quired, if applicable). If the Federal
awarding agency has assigned or will
assign a number to the funding oppor-
tunity announcement, this number
must be provided;
(5) Catalog of Federal Financial As-
sistance (CFDA) Number(s);
(6) Key Dates. Key dates include due
dates for applications or Executive
Order 12372 submissions, as well as for
any letters of intent or pre- applica-
tions. For any announcement issued
before a program's application mate-
rials are available, key dates also in-
clude the date on which those mate-
rials will be released; and any other ad-
ditional information, as deemed appli-
cable by the relevant Federal awarding
agency.
(b) The Federal awarding agency
must generally make all funding op-
portunities available for application
for at least 60 calendar days. The Fed-
eral awarding agency may make a de-
termination to have a less than 60 cal-
endar day availability period but no
funding opportunity should be avail-
able for less than 30 calendar days un-
less exigent circumstances require as
determined by the Federal awarding
agency head or delegate.
(c) Full Text or Funding Opportunities.
The Federal awarding agency must in-
clude the following information in the
full text of each funding opportunity.
For specific instructions on the con-
tent required in this section, refer to
Appendix I to Part 200 —Full Text of
Notice of Funding Opportunity to this
part.
(1) Full programmatic description of
the funding opportunity.
(2) Federal award information, in-
cluding sufficient information to help
101
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§ 200.204
an applicant make an informed deci-
sion about whether to submit an appli-
cation. (See also §200.414 Indirect
(F &A) costs, paragraph (c)(4)).
(3) Specific eligibility information,
including any factors or priorities that
affect an applicant's or its applica-
tion's eligibility for selection.
(4) Application Preparation and Sub-
mission Information, including the ap-
plicable submission dates and time.
(5) Application Review Information
including the criteria and process to be
used to evaluate applications. See also
§§200.204 Federal awarding agency re-
view of merit proposals and 200.205 Fed-
eral awarding agency review of risk
posed by applicants. See also 2 CFR
part 27 (forthcoming at time of publi-
cation).
(6) Federal Award Administration In-
formation. See also §200.210 Informa- systems
tion contained in a Federal award. agement
[78 FR 78608, Dec. 26, 2013, as amended at 79 standards prescribed in this part;
FR 75882, Dec. 19, 2014] (3) History of performance The appli-
2 CFR Ch. II (1 -1 -15 Edition)
place a framework for evaluating the
risks posed by applicants before they
receive Federal awards. This evalua-
tion may incorporate results of the
evaluation of the applicant's eligibility
or the quality of its application. If the
Federal awarding agency determines
that a Federal award will be made, spe-
cial conditions that correspond to the
degree of risk assessed may be applied
to the Federal award. Criteria to be
evaluated must be described in the an-
nouncement of funding opportunity de-
scribed in §200.203 Notices of funding
opportunities.
(c) In evaluating risks posed by appli-
cants, the Federal awarding agency
may use a risk -based approach and
may consider any items such as the fol-
lowing:'
(1) Financial stability;
(2) Quality of management
and ability to meet the man
§ 200.204 Federal awarding agency re-
view of merit of proposals.
For competitive grants or coopera-
tive agreements, unless prohibited by
Federal statute, the Federal awarding
agency must design and execute a
merit review process for applications.
This process must be described or in-
corporated by reference in the applica-
ble funding opportunity (see Appendix I
to this part, Full text of the Funding
Opportunity.) See also §200.203 Notices
of funding opportunities.
§200.205 Federal awarding agency re-
view of risk posed by applicants.
(a) Prior to making a Federal award,
the Federal awarding agency is re-
quired by 31 U.S.C. 3321 and 41 U.S.C.
2313 note to review information avail-
able through any OMB - designated re-
positories of governmentwide eligi-
bility qualification or financial integ-
rity information, such as SAM Exclu-
sions and "Do Not Pay ". See also sus-
pension and debarment requirements
at 2 CFR part 180 as well as individual
Federal agency suspension and debar-
ment regulations in title 2 of the Code
of Federal Regulations.
(b) In addition, for competitive
grants or cooperative agreements, the
Federal awarding agency must have in
cant's record in managing Federal
awards, if it is a prior recipient of Fed-
eral awards, including timeliness of
compliance with applicable reporting
requirements, conformance to the
terms and conditions of previous Fed-
eral awards, and if applicable, the ex-
tent to which any previously awarded
amounts will be expended prior to fu-
ture awards;
(4) Reports and findings from audits
performed under Subpart F —Audit Re-
quirements of this part or the reports
and findings of any other available au-
dits; and
(5) The applicant's ability to effec-
tively implement statutory, regu-
latory, or other requirements imposed
on non- Federal entities.
(d) In addition to this review, the
Federal awarding agency must comply
with the guidelines on governmentwide
suspension and debarment in 2 CFR
part 180, and must require non - Federal
entities to comply with these provi-
sions. These provisions restrict Federal
awards, subawards and contracts with
certain parties that are debarred, sus-
pended or otherwise excluded from or
ineligible for participation in Federal
programs or activities.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75882, Dec. 19, 2014]
102
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OMB Guidance
§ 200.206 Standard application re-
quirements.
(a) Paperwork clearances. The Federal
awarding agency may only use applica-
tion information collections approved
by OMB under the Paperwork Reduc-
tion Act of 1995 and OMB's imple-
menting regulations in 5 CFR part 1320,
Controlling Paperwork Burdens on the
Public. Consistent with these require-
ments, OMB will authorize additional
information collections only on a lim-
ited basis.
(b) If applicable, the Federal award-
ing agency may inform applicants and
recipients that they do not need to pro-
vide certain information otherwise re-
quired by the relevant information col-
lection.
§200.207 Specific conditions.
(a) The Federal awarding agency of
pass - through entity may impose addi-
tional specific award conditions as
needed, in accordance with paragraphs
(b) and (c) of this section, under the
following circumstances:
(1) Based on the criteria set forth in
§200.205 Federal awarding agency re-
view of risk posed by applicants;
(2) When an applicant or recipient
has a history of failure to comply with
the general or specific terms and condi-
tions of a Federal award;
(3) When an applicant or recipient
fails to meet expected performance
goals as described in , §200.210 Informa-
tion contained in a Federal award; or
(4) When an applicant or recipient is
not otherwise responsible.
(b) These additional Federal award
conditions may include items such as
the following:
(1) Requiring payments as reimburse-
ments rather than advance payments;
(2) Withholding authority to proceed
to the next phase until receipt of evi-
dence of acceptable performance within
a given period of performance;
(3) Requiring additional, more de-
tailed financial reports;
(4) Requiring additional project mon-
itoring;
(5) Requiring the non - Federal entity
to obtain technical or management as-
sistance; or
(6) Establishing additional prior ap-
provals.
§200.210
(c) The Federal awarding agency or
pass- through entity must notify the
applicant or non - Federal entity as to:
(1) The nature of the additional re-
quirements;
(2) The reason why the additional re-
quirements are being imposed;
(3) The nature of the action needed to
remove the additional requirement, if
applicable;
(4) The time allowed for completing
the actions if applicable, and
(5) The method for requesting recon-
sideration of the additional require-
ments imposed.
(d) Any specific conditions must be
promptly removed once the conditions
that prompted them have been cor-
rected.
[79 FR 75882, Dec. 19, 2014]
§200.208 Certifications and represen.
tations.
Unless prohibited by Federal statutes
or regulations, each Federal awarding
agency or pass- through entity is au-
thorized to require the non - Federal en-
tity to submit certifications and rep-
resentations required by Federal stat-
utes, or regulations on an annual basis.
Submission may be required more fre-
quently if the non - Federal entity fails
to meet a requirement of a Federal
award.
§200.209 Pre -award costs.
For requirements on costs incurred
by the applicant prior to the start date
of the period of performance of the
Federal award, see §200.458 Pre -award
costs.
§200.210 Information contained in a
Federal award.
A Federal award must include the
following information:
(a) General Federal Award Information.
The Federal awarding agency must in-
clude the following general Federal
award information in each Federal
award:
(1) Recipient name (which must
match the name associated with its
unique entity identifier as defined at 2
CFR 25.315);
(2) Recipient's unique entity identi-
fier;
(3) Unique Federal Award Identifica-
tion Number (FAIN);
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§ 200.2 10
(4) Federal Award Date (see §200.39
Federal award date);
(5) Period of Performance Start and
End Date;
(6) Amount of Federal Funds Obli-
gated by this action;
(7) Total Amount of Federal Funds
Obligated;
(8) Total Amount of the Federal
Award;
(9) Budget Approved by the Federal
Awarding Agency;
(10) Total Approved Cost Sharing or
Matching, where applicable;
(11) Federal award project descrip-
tion, (to comply with statutory re-
quirements (e.g., FFATA));
(12) Name of Federal awarding agen-
cy and contact information for award-
ing official,
(13) CFDA Number and Name;
(14) Identification of whether the
award is R &D; and
(15) Indirect cost rate for the Federal
award (including if the de minimis rate
is charged per §200.414 Indirect (F &A)
costs).
(b) General Terms and Conditions (1)
Federal awarding agencies must incor-
porate the following general terms and
conditions either in the Federal award
or by reference, as applicable:
(i) Administrative requirements im-
plemented by the Federal awarding
agency as specified in this part.
(ii) National policy requirements.
These include statutory, executive
order, other Presidential directive, or
regulatory requirements that apply by
specific reference and are not program -
specific. See §200.300 Statutory and na-
tional policy requirements.
(2) The Federal award must include
wording to incorporate, by reference,
the applicable set of general terms and
conditions. The reference must be to
the Web site at which the Federal
awarding agency maintains the general
terms and conditions.
(3) If a non - Federal entity requests a
copy of the full text of the general
terms and conditions, the Federal
awarding agency must provide it.
(4) Wherever the general terms and
conditions are publicly available, the
Federal awarding agency must main-
tain an archive of previous versions of
the general terms and conditions, with
2 CFR Ch. II (1 -1 -15 Edition)
effective dates, for use by the non -Fed-
eral entity, auditors, or others.
(c) Federal Awarding Agency, Program,
or Federal Award Specific Terms and
Conditions. The Federal awarding agen-
cy may include with each Federal
award any terms and conditions nec-
essary to communicate requirements
that are in addition to the require-
ments outlined in the Federal awarding
agency's general terms and conditions.
Whenever practicable, these specific
terms and conditions also should be
shared on a public Web site and in no-
tices of funding opportunities (as out-
lined in §200.203 Notices of funding op-
portunities) in addition to being in-
cluded in a Federal award. See also
§200.206 Standard application require-
ments.
(d) Federal Award Performance Goals.
The Federal awarding agency must in-
clude in the Federal award an indica-
tion of the timing and scope of ex-
pected performance by the non - Federal
entity as related to the outcomes in-
tended to be achieved by the program.
In some instances (e.g., discretionary
, research awards), this may be limited
to the requirement to submit technical
performance reports (to be evaluated in
accordance with Federal awarding
agency policy). Where appropriate, the
Federal award may include specific
performance goals, indicators, mile-
stones, or expected outcomes (such as
outputs, or services performed or pub-
lic impacts of any of these) with an ex-
pected timeline for accomplishment.
Reporting requirements must be clear-
ly articulated such that, where appro-
priate, performance during the execu-
tion of the Federal award has a stand-
ard against which non - Federal entity
performance can be measured. The
Federal awarding agency may include
program - specific requirements, as ap-
plicable. These requirements should be
aligned with agency strategic goals,
strategic objectives or performance
goals that are relevant to the program.
See also OMB Circular A -11, Prepara-
tion, Submission and Execution of the
Budget Part 6 for definitions of stra-
tegic objectives and performance goals.
(e) Any other information required
by the Federal awarding agency.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75882, Dec. 19, 2014]
104
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E 2
OMB Guidance
§200.211 Public access to Federal
award information.
(a) In accordance with statutory re-
quirements for Federal spending trans-
parency (e.g., FFATA), except as noted
in this section, for applicable Federal
awards the Federal awarding agency
must announce all Federal awards pub-
licly and publish the required informa-
tion on a publicly available OMB -des-
ignated governmentwide Web site (at
time of publication,
www. USAspending.gov).
(b) Nothing in this section may be
construed as requiring the publication
of information otherwise exempt under
the Freedom of Information Act (5
U.S.0 552), or controlled unclassified
information pursuant to Executive
Order 13556.
§ 200.212 Suspension and debarment.
Non - federal entities and contractors
are subject to the non - procurement de-
barment and suspension regulations
implementing Executive Orders 12549
and 12689, 2 CFR part 180. These regula-
tions restrict awards, subawards, and
contracts with certain parties that are
debarred, suspended, or otherwise ex-
cluded from or ineligible for participa-
tion in Federal assistance programs or
activities.
[79 FR 76883, Dec. 19, 2014]
Subpart D —Post Federal Award
Requirements
STANDARDS FOR FINANCIAL AND
PROGRAM MANAGEMENT
§ 200.300 Statutory and national policy
requirements.
(a) The Federal awarding agency
must manage and administer the Fed-
eral award in a manner so as to ensure
that Federal funding is expended and
associated programs are implemented
in full accordance with U.S. statutory
and public policy requirements: includ-
ing, but not limited to, those pro-
tecting public welfare, the environ-
ment, and prohibiting discrimination.
The Federal awarding agency must
communicate to the non - Federal enti-
ty all relevant public policy require-
ments, including those in general ap-
propriations provisions, and incor-
§ 200.301
porate them either directly or by ref-
erence in the terms and conditions of
the Federal award.
(b) The non - Federal entity is respon-
sible for complying with all require-
ments of the Federal award. For all
Federal awards, this includes the provi-
sions of FFATA, which includes re-
quirements on executive compensation,
and also requirements implementing
the Act for the non - Federal entity at 2
CFR part 25 Financial Assistance Use
of Universal Identifier and Central
Contractor Registration and 2 CFR
part 170 Reporting Subaward and Exec-
utive Compensation Information. See
also statutory requirements for whis-
tleblower protections at 10 U.S.C. 2409,
41 U.S.C. 4712, and 10 U.S.C. 2324, 41
U.S.C. 4304 and 4310.
§ 200.301 Performance measurement.
The Federal awarding agency must
require the recipient to use OMB -ap-
proved standard information collec-
tions when providing financial and per-
formance information. As appropriate
and in accordance with above men-
tioned information collections, the
Federal awarding agency must require
the recipient to relate financial data to
performance accomplishments of the
Federal award. Also, in accordance
with above mentioned standard infor-
mation collections, and when applica-
ble, recipients must also provide cost
information to demonstrate cost effec-
tive practices (e.g., through unit cost
data). The recipient's performance
should be measured in a way that will
help the Federal awarding agency and
other non - Federal entities to improve
program outcomes, share lessons
learned, and spread the adoption of
promising practices. The Federal
awarding agency should provide recipi-
ents with clear performance goals, in-
dicators, and milestones as described in
§200.210 Information contained in a
Federal award. Performance reporting
frequency and content should be estab-
lished to not only allow the Federal
awarding agency to understand the re-
cipient progress but also to facilitate
identification of promising practices
among recipients and build the evi-
dence upon which the Federal awarding
105
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§ 200.302
agency's program and performance de-
cisions are made.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75863, Dec. 19, 2014]
§ 200.302 Financial management.
(a) Each state must expend and ac-
count for the Federal award in accord-
ance with state laws and procedures for
expending and accounting for the
state's own funds. In addition, the
state's and the other non - Federal enti-
ty's financial management systems, in-
cluding records documenting compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award, must be sufficient
to permit the preparation of reports re-
quired by general and program- specific
terms and conditions; and the tracing
of funds to a level of expenditures ade-
quate to establish that such funds have
been used according to the Federal
statutes, regulations, and the terms
and conditions of the Federal award.
See also § 200.450 Lobbying.
(b) The financial management sys-
tem of each non - Federal entity must
provide for the following (see also
§ §200.333 Retention requirements for
records, 200.334 Requests for transfer of
records, 200.335 Methods for collection,
transmission and storage of informa-
tion, 200.336 Access to records, and
200.337 Restrictions on public access to
records):
(1) Identification, in its accounts, of
all Federal awards received and ex-
pended and the Federal programs under
which they were received. Federal pro-
gram and Federal award identification
must include, as applicable, the CFDA
title and number, Federal award identi-
fication number and year, name of the
Federal agency, and name of the pass -
through entity, if any.
(2) Accurate, current, and complete
disclosure of the financial results of
each Federal award or program in ac-
cordance with the reporting require-
ments set forth in §§200.327 Financial
reporting and 200.328 Monitoring and
reporting program performance. If a
Federal awarding agency requires re-
porting on an accrual basis from a re-
cipient that maintains its records on
other than an accrual basis, the recipi-
ent must not be required to establish
an accrual accounting system. This re-
2 CFR Ch. II (1 -1 -15 Edition)
cipient may develop accrual data for
its reports on the basis of an analysis
of the documentation on hand. Simi-
larly, a pass - through entity must not
require a subrecipient to establish an
accrual accounting system and must
allow the subrecipient to develop ac-
crual data for its reports on the basis
of an analysis of the documentation on
hand.
(3) Records that identify adequately
the source and application of funds for
federally- funded activities. These
records must contain information per-
taining to Federal awards, authoriza-
tions, obligations, unobligated bal-
ances, assets, expenditures, income and
interest and be supported by source
documentation.
(4) Effective control over, and ac-
countability for, all funds, property,
and other assets. The non - Federal enti-
ty must adequately safeguard all assets
and assure that they are used solely for
authorized purposes. See §200.303 Inter-
nal controls.
(5) Comparison of expenditures with
budget amounts for each Federal
award.
(6) Written procedures to implement
the requirements of § 200.305 Payment.
(7) Written procedures for deter-
mining the allowability of costs in ac-
cordance with Subpart E—Cost Prin-
ciples of this part and the terms and
conditions of the Federal award.
§ 200.303 Internal controls.
The non - Federal entity must:
(a) Establish and maintain effective
internal control over the Federal
award that provides reasonable assur-
ance that the non - Federal entity is
managing the Federal award in compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award. These internal con-
trols should be in compliance with
guidance in "Standards for Internal
Control in the Federal Government"
issued by the Comptroller General of
the United States or the "Internal Con-
trol Integrated Framework ", issued by
the Committee of Sponsoring Organiza-
tions of the Treadway Commission
(COSO).
(b) Comply with Federal statutes,
regulations, and the terms and condi-
tions of the Federal awards.
106
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(c) Evaluate and monitor the non -
Federal entity's compliance with stat-
utes, regulations and the terms and
conditions of Federal awards.
(d) Take prompt action when in-
stances of noncompliance are identified
including noncompliance identified in
audit findings.,
(e) Take reasonable measures to safe-
guard protected personally identifiable
information and other information the
Federal awarding agency or pass -
through entity designates as sensitive
or the non - Federal entity considers
sensitive consistent with applicable
Federal, state, local, and tribal laws re-
garding privacy and obligations of con-
fidentiality.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76883, Dec. 19, 2014)
§ 200.304 Bonds.
The Federal awarding agency may in-
clude a provision on bonding, insur-
ance, or both in the following cir-
cumstances:
(a) Where the Federal Government
guarantees or insures the repayment of
money borrowed by the recipient, the
Federal awarding agency, at its discre-
tion, may require adequate bonding
and insurance if the bonding and insur-
ance requirements of the non - Federal
entity are not deemed adequate to pro-
tect the interest of the Federal Govern-
ment.
(b) The Federal awarding agency may
require adequate fidelity bond coverage
where the non - Federal entity lacks suf-
ficient coverage to protect the Federal
Government's interest.
(c) Where bonds are required in the
situations described above, the bonds
must be obtained from companies hold-
ing certificates of authority as accept-
able sureties, as prescribed in 31 CFR
Part 223, "Surety Companies Doing
Business with the United States."
§ 200.305 Payment.
(a) For states, payments are gov-
erned by Treasury -State CMIA agree-
ments and default procedures codified
at 31 CFR Part 205 "Rules and Proce-
dures for Efficient Federal -State Funds
Transfers" and TFM 4A -2000 Overall
Disbursing Rules for All Federal Agen-
cies.
§ 200.305
(b) For non - Federal entities other
than states, payments methods must
minimize the time elapsing between
the transfer of funds from the United
States Treasury or the pass- through
entity and the disbursement by the
non - Federal entity whether the pay-
ment is made by electronic funds
transfer, or issuance or redemption of
checks, warrants, or payment by other
means. See also §200.302 Financial
management paragraph (b)(6). Except
as noted elsewhere in this part, Federal
agencies must require recipients to use
only OMB - approved standard govern -
mentwide information collection re-
quests to request payment.
(1) The non - Federal entity must be
paid in advance, provided it maintains
or demonstrates the willingness to
maintain both written procedures that
minimize the time elapsing between
the transfer of funds and disbursement
by the non - Federal entity, and finan-
cial management systems that meet
the standards for fund control and ac-
countability as established in this part.
Advance payments to a non - Federal en-
tity must be limited to the minimum
amounts needed and be timed to be in
accordance with the actual, immediate
cash requirements of the non - Federal
entity in carrying out the purpose of
the approved program or project. The
timing and amount of advance pay-
ments must be as close as is adminis-
tratively feasible to the actual dis-
bursements by the non - Federal entity
for direct program or project costs and
the proportionate share of any allow-
able indirect costs. The non - Federal
entity must make timely payment to
contractors in accordance with the
contract provisions.
(2) Whenever possible, advance pay-
ments must be consolidated to cover
anticipated cash needs for all Federal
awards made by the Federal awarding
agency to the recipient.
(i) Advance payment mechanisms in-
clude, but are not limited to, Treasury
check and electronic funds transfer and
must comply with applicable guidance
in 31 CFR part 208.
(ii) Non - Federal entities must be au-
thorized to submit requests for advance
payments and reimbursements at least
monthly when electronic fund transfers
are not used, and as often as they like
107
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§ 200.305
when electronic transfers are used, in
accordance with the provisions of the
Electronic Fund Transfer Act (15
U.S.C. 1693- 1693r).
(3) Reimbursement is the preferred
method when the requirements in para-
graph (b) cannot be met, when the Fed-
eral awarding agency sets a specific
condition per §200.207 Specific condi-
tions, or when the non - Federal entity
requests payment by reimbursement.
This method may be used on any Fed-
eral award for construction, or if the
major portion of the construction
project is accomplished through pri-
vate market financing or Federal
loans, and the Federal award con-
stitutes a minor portion of the project.
When the reimbursement method is
used, the Federal awarding agency or
pass- through entity must make pay-
ment within 30 calendar days after re-
ceipt of the billing, unless the Federal
awarding agency or pass- through enti-
ty reasonably believes the request to
be improper.
(4) If the non - Federal entity cannot
meet the criteria for advance payments
and the Federal awarding agency or
pass- through entity has determined
that reimbursement is not feasible be-
cause the non - Federal entity lacks suf-
ficient working capital, the Federal
awarding agency or pass- through enti-
ty may provide cash on a working cap-
ital advance basis. Under this proce-
dure, the Federal awarding agency or
pass- through entity must advance cash
payments to the non - Federal entity to
cover its estimated disbursement needs
for an initial period generally geared
to the non - Federal entity's disbursing
cycle: Thereafter, the Federal award-
ing agency or pass- through entity must
reimburse the non - Federal entity for
its actual cash disbursements. Use of
the working capital advance method of
payment requires that the pass -
through entity provide timely advance
payments to any subrecipients in order
to meet the subrecipient's actual cash
disbursements. The working capital ad-
vance method of payment must not be
used by the pass- through entity if the
reason for using this method is the un-
willingness or inability of the pass -
through entity to provide timely ad-
vance payments to the subrecipient to
2 CFR Ch. If (1 -1 -15 Edition)
meet the subrecipient's actual cash dis-
bursements.
(5) Use of resources before requesting
cash advance payments. To the extent
available, the non - Federal entity must
disburse funds available from program
income (including repayments to a re-
volving fund), rebates, refunds, con-
tract settlements, audit recoveries, and
interest earned on such funds before re-
questing additional cash payments.
(6) Unless otherwise required by Fed-
eral statutes, payments for allowable
costs by non - Federal entities must not
be withheld at any time during the pe-
riod of performance unless the condi-
tions of §§200.207 Specific conditions,
Subpart D —Post Federal Award Re-
quirements of this part, 200.338 Rem-
edies for Noncompliance, or one or
more of the following applies:
(i) The non - Federal entity has failed
to comply with the project objectives,
Federal statutes, regulations, or the
terms and conditions of the Federal
award.
(ii) The non - Federal entity is delin-
quent in a debt to the United States as
defined in OMB Guidance A -129, "Poli-
cies for Federal Credit Programs and
Non -Tax Receivables." Under such con-
ditions, the Federal awarding agency
or pass- through entity may, upon rea-
sonable notice, inform the non - Federal
entity that payments must not be
made for obligations incurred after a
specified date until the conditions are
corrected or the indebtedness to the
Federal Government is liquidated.
(iii) A payment withheld for failure
to comply with Federal award condi-
tions, but without suspension of the
Federal award, must be released to the
non - Federal entity upon subsequent
compliance. When a Federal award is
suspended, payment adjustments will
be made in accordance with §200.342 Ef-
fects of suspension and termination.
(iv) A payment must not be made to
a non - Federal entity for amounts that
are withheld by the non - Federal entity
from payment to contractors to assure
satisfactory completion of work. A
payment must be made when the non -
Federal entity actually disburses the
withheld funds to the contractors or to
escrow accounts established to assure
satisfactory completion of work.
108
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(7) Standards governing the use of
banks and other institutions as deposi-
tories of advance payments under Fed-
eral awards are as follows.
(i) The Federal awarding agency and
pass- through entity must not require
separate depository accounts for funds
provided to a non - Federal entity or es-
tablish any eligibility requirements for
depositories for funds provided to the
non - Federal entity. However, the non -
Federal entity must be able to account
for the receipt, obligation and expendi-
ture of funds.
(ii) Advance payments of Federal
funds must be deposited and main-
tained in insured accounts whenever
possible.
(8) The non - Federal entity must
maintain advance payments of Federal
awards in interest- bearing accounts,
unless the following apply.
(i) The non - Federal entity receives
less than $120,000 in Federal awards per
year.
(ii) The best reasonably available in-
terest- bearing account would not be ex-
pected to earn interest in excess of $500
per year on Federal cash balances.
(iii) 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.
(iv) A foreign government or banking
system prohibits or precludes interest
bearing accounts.
(9) Interest earned amounts up to $500
per year may be retained by the non -
Federal entity for administrative ex-
pense. Any additional interest earned
on Federal advance payments deposited
in interest- bearing accounts must be
remitted annually to the Department
of Health and Human Services Pay-
ment Management System (PMS)
through an electronic medium using ei-
ther Automated Clearing House (ACH)
network or a Fedwire Funds Service
payment. Remittances must include
pertinent information of the payee and
nature of payment in the memo area
(often referred to as "addenda records"
by Financial Institutions) as that will
assist in the timely posting of inter-
ested earned on federal funds. Perti-
nent details include the Payee Account
Number (PAN) if the payment origi-
nated from PMS, or Agency informa-
§ 200.306
tion if the payment originated from
ASAP, NSF or another federal agency
payment system. The remittance must
be submitted as follows:
(i) For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit Gateway -
ACH Receiver St. Paul, MN
(ii) For Fedwire Returns *:
Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal Reserve
Bank Treas NYC /Funds Transfer Division
New York, NY
(* Please note organization initiating pay-
ment is likely to incur a charge from your
Financial Institution for this type of pay-
ment)
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve Bank
of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street, New
York, NY 10013 USA
Payment Details (Line 70): Agency
Name (abbreviated when possible) and ALC
Agency POC: Michelle Haney, (301) 492 -5065
(iv) For recipients that do not have
electronic remittance capability,
please make check ** payable to: "The
Department of Health and Human
Services."
Mail Check to Treasury approved lockbox:
HHS Program Support, Center, P.O. Box
530231, Atlanta, GA 30353-0231
( ** Please allow 4-6 weeks for processing of a
payment by check to be applied to the appro-
priate PMS account)
(v) Any additional information/in-
structions may be found on the PMS
Web site at http: / /Www.dpm.psc.gov /.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75883, Dec. 19, 2014]
§200.306 Cost sharing or matching.
(a) Under Federal research proposals,
voluntary committed cost sharing is
not expected. It cannot be used as a
factor during the merit review of appli-
cations or proposals, but may be con-
sidered if it is both in accordance with
Federal awarding agency regulations
and specified in a notice of funding op-
portunity. Criteria for considering vol-
untary committed cost sharing and
109
ATTACHMENT
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§ 200.306
any other program policy factors that
may be used to determine who may re-
ceive a Federal award must be explic-
itly described in the notice of funding
opportunity. See also § §200.414 Indirect
(F &A) costs, 200.203 Notices of funding
opportunities, and Appendix I to Part
200 —Full Text of Notice of Funding Op-
portunity.
(b) For all Federal awards, any
shared costs or matching funds and all
contributions, including cash and third
party in -kind contributions, must be
accepted as part of the non - Federal en-
tity's cost sharing or matching when
such contributions meet all of the fol-
lowing criteria:
(1) Are verifiable from the non -Fed-
eral entity's records;
(2) Are not included as contributions
for any other Federal award;
(3) Are necessary and reasonable for
accomplishment of project or program
objectives;
(4) Are allowable under Subpart I —
Cost Principles of this part;
(5) Are not paid by the Federal Gov-
ernment under another Federal award,
except where the Federal statute au-
thorizing a program specifically pro-
vides that Federal funds made avail-
able for such program can be applied to
matching or cost sharing requirements
of other Federal programs;
(6) Are provided for in the approved
budget when required by the Federal
awarding agency; and
(7) Conform to other provisions of
this part, as applicable.
(c) Unrecovered indirect costs, in-
cluding indirect costs on cost sharing
or matching may be included as part of
cost sharing or matching only with the
prior approval of the Federal awarding
agency. Unrecovered indirect cost
means the difference between the
amount charged to the Federal award
and the amount which could have been
charged to the Federal award under the
non - Federal entity's approved nego-
tiated indirect cost rate.
(d) Values for non - Federal entity
contributions of services and property
must be established in accordance with
the cost principles in Subpart F—Cost
Principles. If a Federal awarding agen-
cy authorizes the non - Federal entity to
donate buildings or land for construc-
tion/facilities acquisition projects or
2 CFR Ch. II (1 -1 -15 Edition)
long -term use, the value of the donated
property for cost sharing or matching
must be the lesser of paragraphs (d)(1)
or (2) of this section.
(1) The value of the remaining life of
the property recorded in the non -Fed-
eral entity's accounting records at the
time of donation.
(2) The current fair market value.
However, when there is sufficient jus-
tification, the Federal awarding agen-
cy may approve the use of the current
fair market value of the donated prop-
erty, even if it exceeds the value de-
scribed in (1) above at the time of dona-
tion.
(e) Volunteer services furnished by
third -party 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 third -party volunteer serv-
ices must be consistent with those paid
for similar work by the non - Federal en-
tity. In those instances in which the
required skills are not found in the
non - Federal entity, rates must be con-
sistent with those paid for similar
work in the labor market in which the
non - Federal entity competes for the
kind of services involved. In either
case, paid fringe benefits that are rea-
sonable, necessary, allocable, and oth-
erwise allowable may be included in
the valuation.
(f) When a third -party organization
furnishes the services of an employee,
these services must be valued at the
employee's regular rate of pay plus an
amount of fringe benefits that is rea-
sonable, necessary, allocable, and oth-
erwise allowable, and indirect costs at
either the third -party organization's
approved federally negotiated indirect
cost rate or, a rate in accordance with
§200.414 Indirect (F &A) costs, para-
graph (d), provided these services em-
ploy the same skill(s) for which the
employee is normally paid. Where do-
nated services are treated as indirect
costs, indirect cost rates will separate
the value of the donated services so
that reimbursement for the donated
services will not be made.
110
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(g) Donated property from third par-
ties may include such items as equip-
ment, office supplies, laboratory sup-
plies, or workshop and classroom sup-
plies. Value assessed to donated prop-
erty included in the cost sharing or
matching share must not exceed the
fair market value of the property at
the time of the donation.
(h) The method used for determining
cost sharing or matching for third -
party- donated equipment, buildings
and land for which title passes to the
non - Federal entity may differ accord-
ing to the purpose of the Federal
award, if paragraph (h)(1) or (2) of this
section applies.
(1) If the purpose of the Federal
award is to assist the non- Federal enti-
ty in the acquisition of equipment,
buildings or land, the aggregate value
of the donated property may be
claimed as cost sharing or matching.
(2) If the purpose of the Federal
award is to support activities that re-
quire the use of equipment, buildings
or land, normally only depreciation
charges for equipment and buildings
may be made. However, the fair market
value of equipment or other capital as-
sets and fair rental charges for land
may be allowed, provided that the Fed-
eral awarding agency has approved the
charges. See also §200.420 Consider-
ations for selected items of cost.
(i) The value of donated property
must be determined in accordance with
the usual accounting policies of the
non - Federal entity, with the following
qualifications:
(1) The value of donated land and
buildings must not exceed its fair mar-
ket value at the time of donation to
the nbn- Federal entity as established
by an independent appraiser (e.g., cer-
tified real property appraiser or Gen-
eral Services Administration rep-
resentative) and certified by a respon-
sible official of the non - Federal entity
as required by the Uniform Relocation
Assistance and Real Property Acquisi-
tion Policies Act of 1970, as amended,
(42 U.S.C. 4601 -4655) (Uniform Act) ex-
cept as provided in the implementing
regulations at 49 CPR part 24.
(2) The value of donated equipment
must not exceed the fair market value
of equipment of the same age and con-
dition at the time of donation.
§ 200.307
(3) The value of donated space must
not exceed the fair rental value of com-
parable space as established by an inde-
pendent appraisal of comparable space
and facilities in a privately -owned
building in the same locality.
(4) The value of loaned equipment
must not exceed its fair rental value.
(j) For third -party in -kind contribu-
tions, the fair market value of goods
and services must be documented and
to the extent feasible supported by the
same methods used internally by the
non - Federal entity.
(k) For IHEs, see also OMB memo-
randum M- 01-06, dated January 5, 2001,
Clarification of OMB A -21 Treatment
of Voluntary Uncommitted Cost Shar-
ing and Tuition Remission Costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75883, Dec. 19, 2014]
§ 200.307 Program income.
(a) General. Non - Federal entities are
encouraged to earn income to defray
program costs where appropriate.
(b) Cost of generating program income.
If authorized by Federal regulations or
the Federal award, costs incidental to
the generation of program income may
be deducted from gross income to de-
termine program income, provided
these costs have not been charged to
the Federal award.
(c) Governmental revenues. Taxes, spe-
cial assessments, levies, fines, and
other such revenues raised by a non -
Federal entity are not program income
unless the revenues are specifically
identified in the Federal award or Fed-
eral awarding agency regulations as
program income.
(d) Property. Proceeds from the sale
of real property, equipment, or supplies
are not program income; such proceeds
will be handled in accordance with the
requirements of Subpart D —Post Fed-
eral Award Requirements of this part,
Property Standards §§ 200.311 Real prop-
erty, 200.313 Equipment, and 200.314
Supplies, or as specifically identified in
Federal statutes, regulations, or the
terms and conditions of the Federal
award.
(e) Use of program income. If the Fed-
eral awarding agency does not specify
in its regulations or the terms and con-
ditions of the Federal award, or give
prior approval for how program income
111
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§ 200.309
is to be used, paragraph (e)(1) of this
section must apply. For Federal awards
made to IHEs and nonprofit research
institutions, if the Federal awarding
agency does not specify in its regula-
tions or the terms and conditions of
the Federal award how program income
is to be used, paragraph (e)(2) of this
section must apply. In specifying alter-
natives to paragraphs (e)(1) and (2) of
this section, the Federal awarding
agency may distinguish between in-
come earned by the recipient and in-
come earned by subrecipients and be-
tween the sources, kinds, or amounts
of income. When the Federal awarding
agency authorizes the approaches in
paragraphs (e)(2) and (3) of this section,
program income in excess of any
amounts specified must also be de-
ducted from expenditures.
(1) Deduction. Ordinarily program in-
come must be deducted from total al-
lowable costs to determine the net al-
lowable costs. Program income must be
used for current costs unless the Fed-
eral awarding agency authorizes other-
wise. Program income that the non -
Federal entity did not anticipate at the
time of the Federal award must be used
to reduce the Federal award and non -
Federal entity contributions rather
than to increase the funds committed
to the project.
(2) Addition. With prior approval of
the Federal awarding agency (except
for IHEs and nonprofit research insti-
tutions, as described in paragraph (e) of
this section) program income may be
added to the Federal award by the Fed-
eral agency and the non - Federal enti-
ty. The program income must be used
for the purposes and under the condi-
tions of the Federal award.
(3) Cost sharing or matching. With
prior approval of the Federal awarding
agency, program income may be used
to meet the cost sharing or matching
requirement of the Federal award. The
amount of the Federal award remains
the same.
(f) Income after the period of perform-
ance. There are no Federal require-
ments governing the disposition of in-
come earned after the end of the period
of performance for the Federal award,
unless the Federal awarding agency
regulations or the terms and condi-
tions of the Federal award provide oth-
2 CFR Ch. II (1 -1 -15 Edition)
erwise. The Federal awarding agency
may negotiate agreements with recipi-
ents regarding appropriate uses of in-
come earned after the period of per-
formance as part of the grant closeout
process. See also §200.343 Closeout.
(g) Unless the Federal statute, regu-
lations, or terms and conditions for the
Federal award provide otherwise, the
non - Federal entity,has no obligation to
the Federal awarding agency with re-
spect to program income earned from
license fees and royalties for copy-
righted material, patents, patent appli-
cations, trademarks, and inventions
made under a Federal award to which
37 CFR part 401, "Rights to Inventions
Made by Nonprofit Organizations and
Small Business Firms Under Govern-
ment Awards, Contracts and Coopera-
tive Agreements" is applicable.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76884, Dec. 19, 2014]
§ 200.308 Revision of budget and pro-
gram plans.
(a) The approved budget for the Fed-
eral award summarizes the financial
aspects of the project or program as ap-
proved during the Federal award proc-
ess. It may include either the Federal
and non - Federal share (see §200.43 Fed-
eral share) or only the Federal share,
depending upon Federal awarding agen-
cy requirements. It must be related to
performance for program evaluation
purposes whenever appropriate.
(b) Recipients are required to report
deviations from budget or project scope
or objective, and request prior approv-
als from Federal awarding agencies for
budget and program plan revisions, in
accordance with this section.
(c) For non - construction Federal
awards, recipients must request prior
approvals from Federal awarding agen-
cies for one or more of the following
program or budget - related reasons:
(1) Change in the scope or the objec-
tive 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 the Federal
award.
(3) The disengagement from the
project for more than three months, or
a 25 percent reduction in time devoted
112
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to the project, by the approved project
director or principal investigator.
(4) The inclusion, unless waived by
the Federal awarding agency, of costs
that require prior approval in accord-
ance with Subpart E —Cost Principles
of this part or 45 CFR part 75 Appendix
IX, "Principles for Determining Costs
Applicable to Research and Develop-
ment under Awards and Contracts with
Hospitals," or 48 CFR part 31, "Con-
tract Cost Principles and Procedures,"
as applicable.
(5) The transfer of funds budgeted for
participant support costs as defined in
§200.75 Participant support costs to
other categories of expense.
(6) Unless described in the applica-
tion and funded in the approved Fed-
eral awards, the subawarding, transfer-
ring or contracting out of any work
under a Federal award, including fixed
amount subawards as described in
§200.332 Fixed amount subawards. This
provision does not apply to the acquisi-
tion of supplies, material, equipment
or general support services.
(7) Changes in the approved cost -
sharing or matching provided by the
non - Federal entity. No other prior ap-
proval requirements for specific items
may be imposed unless an exception
has been approved by OMB. See also
§§200.102 Exceptions and 200.407 Prior
written approval (prior approval).
(8) The need arises for additional
Federal funds to complete the project.
(d) Except for requirements listed in
paragraph (c)(1) of this section, the
Federal awarding agency is authorized,
at its option, to waive prior written ap-
provals required by paragraph (c) this
section. Such waivers may include au-
thorizing recipients to do any one or
more of the following:
(1) Incur project costs 90 calendar
days before the Federal awarding agen-
cy makes the Federal award. Expenses
more than 90 calendar days pre -award
require prior approval of the Federal
awarding agency. All costs incurred be-
fore the Federal awarding agency
makes the Federal award are at the re-
cipient's risk (i.e., the Federal award-
ing agency is under no obligation to re-
imburse such costs if for any reason
the recipient does not receive a Federal
award or if the Federal award is less
than anticipated and inadequate to
§ 200.308
cover such costs). See also §200.458 Pre -
award costs.
(2) Initiate a one -time extension of
the period of performance by up to 12
months unless one or more of the con-
ditions outlined in paragraphs (d)(2)(i)
through (iii) of this section apply. For
one -time extensions, the recipient
must notify the Federal awarding
agency in writing with the supporting
reasons and revised period of perform-
ance at least 10 calendar days before
the end of the period of performance
specified in the Federal award. This
one -time extension may not be exer-
cised merely for the purpose of using
unobligated balances. Extensions re-
quire explicit prior Federal awarding
agency approval when:
(i) The terms and conditions of the
Federal award prohibit the extension.
(ii) The extension requires additional
Federal funds.
(iii) The extension involves any
change in the approved objectives or
scope of the project.
(3) Carry forward unobligated bal-
ances to subsequent periods of perform-
ance.
(4) For Federal awards that support
research, unless the Federal awarding
agency provides otherwise in the Fed-
eral award or in the Federal awarding
agency's regulations, the prior ap-
proval requirements described in para-
graph (d) are automatically waived
(i.e., recipients need not obtain such
prior approvals) unless one of the con-
ditions included in paragraph (d)(2) ap-
plies.
(e) The Federal awarding agency
may, at its option, restrict the transfer
of funds among direct cost categories
or programs, functions and activities
for Federal awards in which the Fed-
eral share of the project exceeds the
Simplified Acquisition Threshold and
the cumulative amount of such trans-
fers exceeds or is expected to exceed 10
percent of the total budget as last ap-
proved by the Federal awarding agen-
cy. The Federal awarding agency can-
not permit a transfer that would cause
any Federal appropriation to be used
for purposes other than those con-
sistent with the appropriation.
(f) All other changes to non- construc-
tion budgets, except for the changes de-
scribed in paragraph (c) of this section,
113
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§ 200.309
do not require prior approval (see also
§200.407 Prior written approval (prior
approval)).
(g) For construction Federal awards,
the recipient must request prior writ-
ten approval promptly from the Fed-
eral awarding agency for budget revi-
sions whenever paragraph (g)(1), (2), or
(3) of this section applies.
(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.
(3) A revision is desired which in-
volves specific costs for which prior
written approval requirements may be
imposed consistent with applicable
OMB cost principles listed in Subpart
E—Cost Principles of this part.
(4) No other prior approval require-
ments for budget revisions may be im-
posed unless an exception has been ap-
proved by OMB,
(5) When a Federal awarding agency
makes a Federal award that provides
support for construction and non -con-
struction work, the Federal awarding
agency may require the recipient to ob-
tain prior approval from the Federal
awarding agency before making any
fund or budget transfers between the
two types of work supported.
(h) When requesting approval for
budget revisions, the recipient must
use the same format for budget infor-
mation that was used in the applica-
tion, unless the Federal awarding agen-
cy indicates a letter of request suffices.
(i) Within 30 calendar days from the
date of receipt of the request for budg-
et revisions, the Federal awarding
agency must review the request and
notify the recipient whether the budget
revisions have been approved. If the re-
vision is still under consideration at
the end of 30 calendar days, the Federal
awarding agency must inform the re-
cipient in writing of the date when the
recipient may expect the decision.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 2014]
§ 200.309 Period of performance.
A non - Federal entity may charge to
the Federal award only allowable costs
incurred during the period of perform-
ance (except as described in §200,461
Publication and printing costs) and
2 CFR Ch. II (1 -1 -16 Edition)
any costs incurred before the Federal
awarding agency or pass- through enti-
ty made the Federal award that were
authorized by the Federal awarding
agency or pass- through entity.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 2014]
PROPERTY STANDARDS
§200.310 Insurance coverage.
The non - Federal entity must, at a
minimum, provide the equivalent in-
surance coverage for real property and
equipment acquired or improved with
Federal funds as provided to property
owned by the non- Federal entity. Fed-
erally -owned property need not be in-
sured unless required by the terms and
conditions of the Federal award.
§ 200.311 Real property.
(a) Title. Subject to the obligations
and conditions set forth in this section,
title to real property acquired or im-
proved under a Federal award will vest
upon acquisition in the non - Federal en-
tity.
(b) Use. Except as otherwise provided
by Federal statutes or by the Federal
awarding agency, real property will be
used for the originally authorized pur-
pose as long as needed for that purpose,
during which time the non - Federal en-
tity must not dispose of or encumber
its title or other interests.
(c) Disposition. When real property is
no longer needed for the originally au-
thorized purpose, the non - Federal enti-
ty must obtain disposition instructions
from the Federal awarding agency or
pass- through entity. The instructions
must provide for one of the following
alternatives:
(1) Retain title after compensating
the Federal awarding agency. The
amount paid to the Federal awarding
agency will be computed by applying
the Federal awarding agency's percent-
age of participation in the cost of the
original purchase (and costs of any im-
provements) to the fair market value
of the property. However, in those situ-
ations where the non - Federal entity is
disposing of real property acquired or
improved with a Federal award and ac-
quiring replacement real property
under the same Federal award, the net
proceeds from the disposition may be
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used as an offset to the cost of the re-
placement property.
(2) Sell the property and compensate
the Federal awarding agency. The
amount due to the Federal awarding
agency will be calculated by applying
the Federal awarding agency's percent -
age of participation in the cost of the
original purchase (and cost of any im-
provements) to the proceeds of the sale
after deduction of any actual and rea-
sonable selling and fixing -up expenses.
If the Federal award has not been
closed out, the net proceeds from sale
may be offset against the original cost
of the property. When the non - Federal
entity is directed to sell property, sales
procedures must be followed that pro-
vide for competition to the extent
practicable and result in the highest
possible return.
(3) Transfer title to the Federal
awarding agency or to a third party
designated/approved by the Federal
awarding agency. The non - Federal en-
tity is entitled to be paid an amount
calculated by applying the non - Federal
entity's percentage of participation in
the purchase of the real property (and
cost of any improvements) to the cur-
rent fair market value of the property.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 20141
§ 200.312 Federally -owned and exempt
property.
(a) Title to federally -owned property
remains vested in the Federal Govern-
ment. The non - Federal entity must
submit annually an inventory listing of
federally -owned property in its custody
to the Federal awarding agency. Upon
completion of the Federal award or
when the property is no longer needed,
the non - Federal entity must report the
property to the Federal awarding agen-
cy for further Federal agency utiliza-
tion.
(b) If the Federal awarding agency
has no further need for the property, it
must declare the property excess and
report it for disposal to the appropriate
Federal disposal authority, unless the
Federal awarding agency has statutory
authority to dispose of the property by
alternative methods (e.g., the author-
ity provided by the Federal Technology
Transfer Act (15 U.S.C. 3710 (1)) to do-
nate research equipment to edu-
§ 200.313
cational and non - profit organizations
in accordance with Executive Order
12999, "Educational Technology: Ensur-
ing Opportunity for All Children in the
Next Century. "). The Federal awarding
agency must issue appropriate instruc-
tions to the non - Federal entity.
(c) Exempt federally -owned property
means property acquired under a Fed-
eral award where the Federal awarding
agency has chosen to vest title to the
property to the non - Federal entity
without further obligation to the Fed-
eral Government, based upon the ex-
plicit terms and 'conditions of the Fed-
eral award. The Federal awarding agen-
cy may exercise this option when stat-
utory authority exists. Absent statu-
tory authority and specific terms and
conditions of the Federal award, title
to exempt federally -owned property ac-
quired under the Federal award re-
mains with the Federal Government.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 20141
§ 200.313 Equipment.
See also §200,439 Equipment and
other capital expenditures.
(a) Title. Subject to the obligations
and conditions set forth in this section,
title to equipment acquired under a
Federal, award will vest upon acquisi-
tion in the non - Federal entity. Unless
a statute specifically authorizes the
Federal agency to vest title in the non -
Federal entity without further obliga-
tion to the Federal Government, and
the Federal agency elects to do so, the
title must be a conditional title. Title
must vest in the non - Federal entity
subject to the following conditions:
(1) Use the equipment for the author-
ized purposes of the project during the
period of performance, or until the
property is no longer needed for the
purposes of the project.
(2) Not encumber the property with-
out approval of the Federal awarding
agency or pass- through entity.
(3) Use and dispose of the property in
accordance with paragraphs (b), (c) and
(e) of this section.
(b) A state must use, manage and dis-
pose of equipment acquired under a
Federal award by the state in accord-
ance with state laws and procedures.
Other non - Federal entities must follow
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§ 200.313
paragraphs (c) through (e) of this sec-
tion.
(c) Use. (1) Equipment must be used
by the non - Federal entity in the pro-
gram or project for which it was ac-
quired as long as needed, whether or
not the project or program continues
to be supported by the Federal award,
and the non - Federal entity must not
encumber the property without prior
approval of the Federal awarding agen-
cy. When no longer needed for the
original program or project, the equip-
ment may be used in other activities
supported by the Federal awarding
agency, in the following order of pri-
ority:
(i) Activities under a Federal award
from the Federal awarding agency
which funded the original program or
project, then
(ii) Activities under Federal awards
from other Federal awarding agencies.
This includes consolidated equipment
for information technology systems.
(2) During the time that equipment is
used on the project or program for
which it was acquired, the non - Federal
entity must also make equipment
available for use on other projects or
programs currently or previously sup-
ported by the Federal Government,
provided that such use will not inter-
fere with the work on the projects or
program for which it was originally ac-
quired. First preference for other use
must be given to other programs or
projects supported by Federal awarding
agency that financed the equipment
and second preference must be given to
programs or projects under Federal
awards from other Federal awarding
agencies. Use for non - federally- funded
programs or projects is also permis-
sible. User fees should be considered if
appropriate.
(3) Notwithstanding the encourage-
ment in §200.307 Program income to
earn program income, the non - Federal
entity must not use equipment ac-
quired with the Federal award to pro-
vide services for a fee that is less than
private companies charge for equiva-
lent services unless specifically author-
ized by Federal statute for as long as
the Federal Government retains an in-
terest in the equipment.
(4) When acquiring replacement
equipment, the non - Federal entity may
2 CFR Ch. II (1 -1 -15 Edition)
use the equipment to be replaced as a
trade -in or sell the property and use
the proceeds to offset the cost of the
replacement property.
(d) Management requirements. Proce-
dures for managing equipment (includ-
ing replacement equipment), whether
acquired in whole or in part under a
Federal award, until disposition takes
place will, as a minimum, meet the fol-
lowing requirements:
(1) Property records must be main-
tained that include a description of the
property, a serial number or other
identification number, the source of
funding for the property (including the
FAIN), who holds title, the acquisition
date, and cost of the property, percent-
age of Federal participation in the
project costs for the Federal award
under which the property was acquired,
the location, use and condition of the
property, and any ultimate disposition
data including the date of disposal and
sale price of the property.
(2) A physical inventory of the prop-
erty must be taken and the results rec-
onciled with the property records at
least once every two years.
(3) A control system must be devel-
oped to ensure adequate safeguards to
prevent loss, damage, or theft of the
property. Any loss, damage, or theft
must be investigated.
(4) Adequate maintenance procedures
must be developed to keep the property
in good condition.
(5) If the non - Federal entity is au-
thorized or required to sell the prop-
erty, proper sales procedures must be
established to ensure the highest pos-
sible return.
(e) Disposition. When original or re-
placement equipment acquired under a
Federal award is no longer needed for
the original project or program or for
other activities currently or previously
supported by a Federal awarding agen-
cy, except as otherwise provided in
Federal statutes, regulations, or Fed-
eral awarding agency disposition in-
structions, the non - Federal entity
must request disposition instructions
from the Federal awarding agency if
required by the terms and conditions of
the Federal award. Disposition of the
equipment will be made as follows, in
accordance with Federal awarding
agency disposition instructions:
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(1) Items of equipment with a current
per unit fair market value of $5,000 or
less may be retained, sold or otherwise
disposed of with no further obligation
to the Federal awarding agency.
(2) Except as provided in § 200.312 Fed-
erally -owned and exempt property,
paragraph (b), or if the Federal award-
ing agency fails to provide requested
disposition instructions within 120
days, items of equipment with a cur-
rent per -unit fair - market value in ex-
cess of $5,000 may be retained by the
non - Federal entity or sold. The Federal
awarding agency is entitled to an
amount calculated by multiplying the
current market value or proceeds from
sale by the Federal awarding agency's
percentage of participation in the cost
of the original purchase. If the equip-
ment is sold, the Federal awarding
agency may permit the non - Federal en-
tity to deduct and retain from the Fed-
eral share $500 or ten percent of the
proceeds, whichever is less, for its sell-
ing and handling expenses.
(3) The non - Federal entity may
transfer title to the property to the
Federal Government or to an eligible
third party provided that, in such
cases, the non - Federal entity must be
entitled to compensation for its attrib-
utable percentage of the current fair
market value of the property.
(4) In cases where a non - Federal enti-
ty fails to take appropriate disposition
actions, the Federal awarding agency
may direct the non - Federal entity to
take disposition actions.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 2014]
§ 200.314 Supplies.
See `also §200.453 Materials and sup-
plies costs, including costs of com-
puting devices.
(a) Title to supplies will vest in the
non - Federal entity upon acquisition. If
there is a residual inventory of unused
supplies exceeding $5,000 in total aggre-
gate value upon termination or com-
pletion of the project or program and
the supplies are not needed for any
other Federal award, the non - Federal
entity must retain the supplies for use
on other activities or sell them, but
must, in either case, compensate the
Federal Government for its share. The
amount of compensation must be com-
§ 200.315
puted in the same manner as for equip-
ment. See §200.313 Equipment, para-
graph (e)(2) for the calculation method-
ology.
(b) As long as the Federal Govern-
ment retains an interest in the sup-
plies, the non - Federal entity must not
use supplies acquired under a Federal
award to provide services to other or-
ganizations for a fee that is less than
private companies charge for equiva-
lent services, unless specifically au-
thorized by Federal statute.
§200.315 Intangible property.
(a) Title to intangible property (see
§200.59 Intangible property) acquired
under a Federal award vests upon ac-
quisition in the non - Federal entity.
The non - Federal entity must use that
property for the originally- authorized
purpose, and must not encumber the
property without approval of the Fed-
eral awarding agency. When no longer
needed for the originally authorized
purpose, disposition of the intangible
property must occur in accordance
with the provisions in §200.313 Equip-
ment paragraph (e).
(b) The non - Federal entity may copy-
right any work that is subject to copy-
right and was developed, or for which
ownership was acquired, under a Fed-
eral award. The Federal awarding agen-
cy reserves a royalty -free, nonexclu-
sive and irrevocable right to reproduce,
publish, or otherwise use the work for
Federal purposes, and to authorize oth-
ers to do so.
(c) The non - Federal entity is subject
to applicable regulations governing
patents and inventions, including gov-
ernmentwide 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
Awards, Contracts and Cooperative
Agreements."
(d) The Federal Government has the
right to:
(1) Obtain, reproduce, publish, or oth-
erwise use the data produced under a
Federal award; and
(2) Authorize others to receive, repro-
duce, publish, or otherwise use such
data for Federal purposes.
(e) Freedom of Information Act
(FOIA).
117
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§ 200.316
(1) In response to a Freedom of Infor-
mation Act TOIA) request for research
data relating to published research
findings produced under a Federal
award that were used by the Federal
Government in developing an agency
action that has the force and effect of
law, the Federal awarding agency must
request, and the non - Federal entity
must provide, within a reasonable
time, the research data so that they
can be made available to the public
through the procedures established
under the FOIA. If the Federal award-
ing agency obtains the research data
solely in response to a FOIA request,
the Federal awarding agency may
charge the requester a reasonable fee
equaling the full incremental cost of
obtaining the research data. This fee
should reflect costs incurred by the
Federal agency and the non - Federal en-
tity. This fee is in addition to any fees
the Federal awarding agency may as-
sess under the FOIA (5 U.S.C.
552(a)(4)(A)).
(2) Published research findings means
when:
(i) Research findings are published in
a peer- reviewed scientific or technical
journal; or
(ii) A Federal agency publicly and of-
ficially cites the research findings in
support of an agency action that has
the force and effect of law. "Used by
the Federal Government in developing
an agency action that has the force and
effect of law" is defined as when an
agency publicly and officially cites the
research findings in support of an agen-
cy action that has the force and effect
of law.
(3) Research data means the recorded
factual material commonly accepted in
the scientific community as necessary
to validate research findings, but not
any of the following: preliminary anal-
yses, drafts of scientific papers, plans
for future research, peer reviews, or
communications with colleagues. This
"recorded" material excludes physical
objects (e.g., laboratory samples). Re-
search data also do not include:
(i) Trade secrets, commercial infor-
mation, materials necessary to be held
confidential by a researcher until they
are published, or similar information
which is protected under law; and
2 CFR Ch. II (1 -1 -15 Edition)
(ii) Personnel and medical informa-
tion and similar information the dis-
closure of which would constitute a
clearly unwarranted invasion of per-
sonal privacy, such as information that
could be used to identify a particular
person in a research study.
[78 FR 78608, Dec, 26, 2013, as amended at 79
FR 75884, Dec. 19, 2014]
§ 200.316 Property trust relationship.
Real property, equipment, and intan-
gible property, that are acquired or im-
proved with a Federal award must be
held in trust by the non - Federal entity
as trustee for the beneficiaries of the
project or program under which the
property was acquired or improved.
The Federal awarding agency may re-
quire the non - Federal entity to record
liens or other appropriate notices of
record to indicate that personal or real
property has been acquired or improved
with a Federal award and that use and
disposition conditions apply to the
property.
PROCUREMENT STANDARDS
§ 200.317 Procurements by states.
When procuring property and serv-
ices under a Federal award, a state
must follow the same policies and pro-
cedures it uses for procurements from
its non - Federal funds. The state will
comply with § 200.322 Procurement of
recovered materials and ensure that
every purchase order or other contract
includes any clauses required by sec-
tion §200.326 Contract provisions. All
other non - Federal entities, including
subrecipients of a state, will follow
§§200.318 General procurement stand-
ards through 200.326 Contract provi-
sions.
§200.318 General procurement stand-
ards.
(a) The non - Federal entity must use
its own documented procurement pro-
cedures which reflect applicable State,
local, and tribal laws and regulations,
provided that the procurements con-
form to applicable Federal law and the
standards identified in this part.
(b) Non - Federal entities must main-
tain oversight to ensure that contrac-
tors perform in accordance with the
118
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terms, conditions, and specifications of
their contracts or purchase orders.
(c)(1) The non- Federal entity must
maintain written standards of conduct
covering conflicts of interest and gov-
erning the actions of its employees en-
gaged in the selection, award and ad-
ministration of contracts. No em-
ployee, officer, or agent may partici-
pate in the selection, award, or admin-
istration of a contract supported by a
Federal award if he or she has a real or
apparent conflict of interest. Such a
conflict of interest would arise when
the employee, officer, or agent, any
member of his or her immediate fam-
ily, his or her partner, or an organiza-
tion which employs or is about to em-
ploy any of the parties indicated, here-
in, has a financial or other interest in
or a tangible personal benefit from a
firm considered for a contract. The of-
ficers, employees, and agents of the
non - Federal entity may neither solicit.
nor accept gratuities, favors, or any-
thing of monetary value from contrac-
tors or parties to subcontracts. How-
ever, non - Federal entities may set
standards for situations in which the
financial interest is not substantial or
the gift is an unsolicited item of nomi-
nal value. The standards of conduct
must provide for disciplinary actions
to be applied for violations of such
standards by officers, employees, or
agents of the non - Federal entity.
(2) If the non - Federal entity has a
parent, affiliate, or subsidiary organi-
zation that is not a state, local govern-
ment, or Indian tribe, the non - Federal
entity must also maintain written
standards of conduct covering organi-
zational conflicts of interest. Organiza-
tional` conflicts of interest means that
because of relationships with a parent
company, affiliate, or subsidiary orga-
nization, the non - Federal entity is un-
able or appears to be unable to be im-
partial in conducting a procurement
action involving a related organiza-
tion.
(d) The non - Federal entity's proce-
dures must avoid acquisition of unnec-
essary or duplicative items. Consider-
ation should be given to consolidating
or breaking out procurements to ob-
tain a more economical purchase.
Where appropriate, an analysis will be
made of lease versus purchase alter-
§ 200.318
natives, and any other appropriate
analysis to determine the most eco-
nomical approach,
(e) To foster greater economy and ef-
ficiency, and in accordance with efforts
to promote cost - effective use of shared
services across the Federal Govern-
ment, the non - Federal entity is encour-
aged to enter into state and local inter-
governmental agreements or inter -en-
tity agreements where appropriate for
procurement or use of common or
shared goods and services.
(f) The non - Federal entity is encour-
aged to use Federal excess and surplus
property in lieu of purchasing new
equipment and property whenever such
use is feasible and reduces project
costs.
(g) The non- Federal entity is encour-
aged to use value engineering clauses
in contracts for construction projects
of sufficient size to offer reasonable op-
portunities for cost reductions. Value
engineering is a systematic and cre-
ative analysis of each contract item or
task to ensure that its essential func-
tion is provided at the overall lower
cost.
(h) The non - Federal entity must
award contracts only to responsible
contractors possessing the ability to
perform successfully under the terms
and conditions of a proposed procure-
ment. Consideration will be given to
such matters as contractor integrity,
compliance with public policy, record
of past performance, and financial and
technical resources. See also §200.212
Suspension and debarment.
(i) The non- Federal entity must
maintain records sufficient to detail
the history of procurement. These
records will include' but are not nec-
essarily limited to the following: ra-
tionale for the method of procurement,
selection of contract type, contractor
selection or rejection, and the basis for
the contract price.
(j)(1) The non - Federal entity may use
a time and materials type contract
only after a determination that no
other contract is suitable and if the
contract includes a ceiling price that
the contractor exceeds at its own risk.
Time and materials type contract
means a contract whose cost to a non -
Federal entity is the sum of:
(i) The actual cost of materials; and
119
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§ 200.319
(ii) Direct labor hours charged at
fixed hourly rates that reflect wages,
general and administrative expenses,
and profit.
(2) Since this formula generates an
open -ended contract price, a time -and-
materials contract provides no positive
profit incentive to the contractor for
cost control or labor efficiency. There-
fore, each contract must set a ceiling
price that the contractor exceeds at its
own risk. Further, the non - Federal en-
tity awarding such a contract must as-
sert a high degree of oversight in order
to obtain reasonable assurance that
the contractor is using efficient meth-
ods and effective cost controls.
(k) The non - Federal entity alone
must be responsible, in accordance
with good administrative practice and
sound business judgment, for the set-
tlement of all contractual and adminis-
trative issues arising out of procure-
ments. These issues include, but are
not limited to, source evaluation, pro-
tests, disputes, and claims. These
standards do not relieve the non -Fed-
eral entity of any contractual respon-
sibilities under its contracts. The Fed-
eral awarding agency will not sub-
stitute its judgment for that of the
non - Federal entity unless the matter is
primarily a Federal concern. Viola-
tions of law will be referred to the
local, state, or Federal authority hav-
ing proper jurisdiction.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75884, Dec. 19, 20141
§ 200.319 Competition.
(a) All procurement transactions
must be conducted in a manner pro -
vidink full and open competition con-
sistent with the standards of this sec-
tion. In order to ensure objective con-
tractor performance and eliminate un-
fair competitive advantage, contrac-
tors that develop or draft specifica-
tions, requirements, statements of
work, or invitations for bids or re-
quests for proposals must be excluded
from competing for such procurements.
Some of the situations considered to be
restrictive of competition include but
are not limited to:
(1) Placing unreasonable require-
ments on firms in order for them to
qualify to do business;
2 CFR Ch. II (1 -1 -15 Edition)
(2) Requiring unnecessary experience
and excessive bonding;
(3) Noncompetitive pricing practices
between firms or between affiliated
companies;
(4) Noncompetitive contracts to con-
sultants that are on retainer contracts;
(5) Organizational conflicts of inter-
est;
(6) Specifying only a "brand name"
product instead of allowing "an equal"
product to be offered and describing
the performance or other relevant re-
quirements of the procurement; and
(7) Any arbitrary action in the pro-
curement process.
(b) The non - Federal entity must con-
duct procurements in a manner that
prohibits the use of statutorily or ad-
ministratively imposed state, local, or
tribal geographical preferences in the
evaluation of bids or proposals, except
in those cases where applicable Federal
statutes expressly mandate or encour-
age geographic preference. Nothing in
this section preempts state licensing
laws. When contracting for architec-
tural and engineering (A/E) services,
geographic location may be a selection
criterion provided its application
leaves an appropriate number of quali-
fied firms, given the nature and size of
the project, to compete for the con-
tract.
(c) The non - Federal entity must have
written procedures for procurement
transactions. These procedures must
ensure that all solicitations:
(1) Incorporate a clear and accurate
description of the technical require-
ments for the material, product, or
service to be procured. Such descrip-
tion must not, in competitive procure-
ments, contain features which unduly
restrict competition. The description
may include a statement of the quali-
tative nature of the material, product
or service to be procured and, when
necessary, must set forth those min-
imum essential characteristics and
standards to which it must conform if
it is to satisfy its intended use. De-
tailed product specifications should be
avoided if at all possible. When it is
impractical or uneconomical to make a
clear and accurate description of the
technical requirements, a "brand name
or equivalent" description may be used
as a means to define the performance
120
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or other salient requirements of pro-
curement. The specific features of the
named brand which must be met by of-
fers must be clearly stated; and
(2) Identify all requirements which
the offerors must fulfill and all other
factors to be used in evaluating bids or
proposals.
(d) The non - Federal entity must en-
sure that all prequalified lists of per-
sons, firms, or products which are used
in acquiring goods and services are cur-
rent and include enough qualified
sources to ensure maximum open and
free competition. Also, the non - Federal
entity must not preclude potential bid-
ders from qualifying during the solici-
tation period.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 20141
§200.320 Methods of procurement to
be followed.
The non - Federal entity must use one
of the following methods of procure-
ment.
(a) Procurement by micro - purchases.
Procurement by micro - purchase is the
acquisition of supplies or services, the
aggregate dollar amount of which does
not exceed the micro - purchase thresh-
old (§ 200.67 Micro - purchase). To the ex-
tent practicable, the non - Federal enti-
ty must distribute micro - purchases eq-
uitably among qualified suppliers.
Micro - purchases may be awarded with-
out soliciting competitive quotations if
the non - Federal entity considers the
price to be reasonable.
(b) Procurement by small purchase
procedures. Small purchase procedures
are those relatively simple and infor-
mal procurement methods for securing
services, supplies, or other property
that do not cost more than the Sim-
plified Acquisition Threshold. If small
purchase procedures are used, price or
rate quotations must be obtained from
an adequate number of qualified
sources.
(c) Procurement by sealed bids (for-
mal advertising). Bids are publicly so-
licited and a firm fixed price contract
(lump sum or unit price) is awarded to
the responsible bidder whose bid, con-
forming with all the material terms
and conditions of the invitation for
bids, is the lowest in price. The sealed
bid method is the preferred method for
§ 200.320
procuring construction, if the condi-
tions in paragraph (c)(1) of this section
apply.
(1) In order for sealed bidding to be
feasible, the following conditions
should be present:
(i) A complete, adequate, and real-
istic specification or purchase descrip-
tion is available;
(ii) Two or more responsible bidders
are willing and able to compete effec-
tively for the business; and
(iii) The procurement lends itself to a
firm fixed price contract and the selec-
tion of the successful bidder can be
made principally on the basis of price.
(2) If sealed bids are used, the fol-
lowing requirements apply:
(i) Bids must be solicited from an
adequate number of known suppliers,
providing them sufficient response
time prior to the date set for opening
the bids, for state, local, and tribal
governments, the invitation for bids
must be publically advertised;
(ii) The invitation for bids, which
will include any specifications and per-
tinent attachments, must define the
items or services in order for the bidder
to properly respond;
(iii) All bids will be opened at the
time and place prescribed in the invita-
tion for bids, and for local and tribal
governments, the bids must be opened
publicly;
(iv) A firm fixed price contract award
will be made in writing to the lowest
responsive and responsible bidder.
Where specified in bidding documents,
factors such as discounts, transpor-
tation cost, and life cycle costs must
be considered in determining which bid
is lowest. Payment discounts will only
be used to determine the low bid when
prior experience indicates that such
discounts are usually taken advantage
of; and
(v) Any or all bids may be rejected if
there is a sound documented reason.
(d) Procurement by competitive pro-
posals. The technique of competitive
proposals is normally conducted with
more than one source submitting an
offer,. and either a fixed price or cost -
reimbursement type contract is award-
ed. It is generally used when conditions
are not appropriate for the use of
sealed bids. If this method is used, the
following requirements apply:
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§ 200.321
(1) Requests for proposals must be
publicized and identify all evaluation
factors and their relative importance.
Any response to publicized requests for
proposals must be considered to the
maximum extent practical;
(2) Proposals must be solicited from
an adequate number of qualified
sources;
(3) The non - Federal entity must have
a written method for conducting tech-
nical evaluations of the proposals re-
ceived and for selecting recipients;
(4) Contracts must be awarded to the
responsible firm whose proposal is
most advantageous to the program,
with price and other factors consid-
ered; and
(5) The non - Federal entity may use
competitive proposal procedures for
qualifications -based procurement of ar-
chitectural /engineering (A/E) profes-
sional services whereby competitors'
qualifications are evaluated and the
most qualified competitor is selected,
subject to negotiation of fair and rea-
sonable compensation. The method,
where price is not used as a selection
factor, can only be used in procure-
ment of A/E professional services. It
cannot be used to purchase other types
of services though A/E firms are a po-
tential source to perform the proposed
effort.
(e) [Reserved]
(f) Procurement by noncompetitive
proposals. Procurement by non-
competitive proposals is procurement
through solicitation of a proposal from
only one source and may be used only
when one or more of the following cir-
cumstances apply:
(1) The item is available only from a
single source;
(2) The public exigency or emergency
for the requirement will not permit a
delay resulting from competitive solic-
itation;
(3) The Federal awarding agency or
pass - through entity expressly author-
izes noncompetitive proposals in re-
sponse to a written request from the
non - Federal entity; or
(4) After solicitation of a number of
sources, competition is determined in-
adequate.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75865, Dec. 19, 20141
2 CFR Ch. II (1 -1 -15 Edition)
§200.321 Contracting with small and
minority businesses, women's busi-
ness enterprises, and labor surplus
area firms.
(a) The non - Federal entity must take
all necessary affirmative steps to as-
sure that minority businesses, women's
business enterprises, and labor surplus
area firms are used when possible.
(b) Affirmative steps must include:
(1) Placing qualified small and mi-
nority businesses and women's business
enterprises on solicitation lists;
(2) Assuring that small and minority
businesses, and women's business en-
terprises are solicited whenever they
are potential sources;
(3) Dividing total requirements, when
economically feasible, into smaller
tasks or quantities to permit max-
imum participation by small and mi-
nority businesses, and women's busi-
ness enterprises;
(4) Establishing delivery schedules,
where the requirement permits, which
encourage participation by small and
minority businesses, and women's busi-
ness enterprises;
(5) Using the services and assistance,
as appropriate, of such organizations as
the Small Business Administration and
the Minority Business Development
Agency of the Department of Com-
merce; and
(6) Requiring the prime contractor, if
subcontracts are to be let, to take the
affirmative steps listed in paragraphs
(1) through (5) of this section.
§200.322 Procurement of recovered
materials.
A non - Federal entity that is a state
agency or agency of a political subdivi-
sion of a state and its contractors must
comply with section 6002 of the Solid
Waste Disposal Act, as amended by the
Resource Conservation and Recovery
Act. The requirements of Section 6002
include procuring only items des-
ignated in guidelines of the Environ-
mental Protection Agency (EPA) at 40
CPR part 247 that contain the highest
percentage of recovered materials prac-
ticable, consistent with maintaining a
satisfactory level of competition,
where the purchase price of the item
exceeds $10,000 or the value of the
quantity acquired during the preceding
fiscal year exceeded $10,000; procuring
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solid waste management services in a
manner that maximizes energy and re-
source recovery; and establishing an af-
firmative procurement program for
procurement of recovered materials
identified in the EPA guidelines.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014)
§ 200.323 Contract cost and price.
(a) The non - Federal entity must per-
form a cost or price analysis in connec-
tion with every .procurement action in
excess of the Simplified Acquisition
Threshold including contract modifica-
tions. The method and degree of anal-
ysis is dependent on the facts sur-
rounding the particular procurement
situation, but as a starting point, the
non - Federal entity must make inde-
pendent estimates before receiving bids
or proposals.
(b) The non - Federal entity must ne-
gotiate profit as a separate element of
the price for each contract in which
there is no price competition and in all
cases where cost analysis is performed.
To establish a fair and reasonable prof-
it, consideration must be given to the
complexity of the work to be per-
formed, the risk borne by the con-
tractor, the contractor's investment,
the amount of subcontracting, the
quality of its record of past perform-
ance, and industry profit rates in the
surrounding geographical area for
similar work.
(c) Costs or prices based on estimated
costs for contracts under the Federal
award are allowable only to the extent
that costs incurred or cost estimates
included in negotiated prices would be
allowable for the non - Federal entity
under Subpart E—Cost Principles of
this part. The non - Federal entity may
reference its own cost principles that
comply with the Federal cost prin-
ciples.
(d) The cost plus a percentage of cost
and percentage of construction cost
methods of contracting must not be
used.
§200.324 Federal awarding agency or
pass through entity review.
(a) The non - Federal entity must
make available, upon request of the
Federal awarding agency or pass -
through entity, technical specifica-
§ 200.324
tions on proposed procurements where
the Federal awarding agency or pass -
through entity believes such review is
needed to ensure that the item or serv-
ice specified is the one being proposed
for acquisition. This review generally
will take place prior to the time the
specification is incorporated into a so-
licitation document. However, if the
non - Federal entity desires to have the
review accomplished after a solicita-
tion has been developed, the Federal
awarding agency or pass- through enti-
ty may still review the specifications,
with such review usually limited to the
technical aspects of the proposed pur-
chase.
(b) The non - Federal entity must
make available upon request, for the
Federal awarding agency or pass -
through entity pre- procurement re-
view, procurement documents, such as
requests for proposals or invitations
for bids, or independent cost estimates,
when:
(1) The non - Federal entity's procure=
ment procedures or operation fails to
comply with the procurement stand-
ards in this part;
(2) The procurement is expected, to
exceed the Simplified Acquisition
Threshold 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 ex-
pected to exceed the Simplified Acqui-
sition Threshold, specifies a "brand
name" product;
(4) The proposed, contract is more
than the Simplified Acquisition
Threshold and is to be awarded to
other than the apparent low bidder
under a sealed bid procurement; or
(5) A proposed contract modification
changes the scope of a contract or in-
creases the contract amount by more
than the Simplified Acquisition
Threshold.
(c) The non - Federal entity is exempt
from the pre - procurement review in
paragraph (b) of this section if the Fed-
eral awarding agency or pass- through
entity determines that its procurement
systems comply with the standards of
this part.
(1) The non - Federal entity may re-
quest that its procurement system be
reviewed by the Federal awarding
123
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§ 200.325
agency or pass- through entity to deter-
mine whether its system meets these
standards in order for its system to be
certified. Generally, these reviews
must occur where there is continuous
high - dollar funding, and third party
contracts are awarded on a regular
basis;
(2) The non - Federal entity may self -
certify its procurement system. Such
self- certification must not limit the
Federal awarding agency's right to sur-
vey the system. Under a self- certifi-
cation procedure, the Federal awarding
agency may rely on written assurances
from the non - Federal entity that it is
complying with these standards. The
non - Federal entity must cite specific
policies, procedures, regulations, or
standards as being in compliance with
these requirements and have its system
available for review.
§ 200.325 Bonding requirements.
For construction or facility improve-
ment contracts or subcontracts exceed-
ing the Simplified Acquisition Thresh-
old, the Federal awarding agency or
pass- through entity may accept the
bonding policy and requirements of the
non - Federal entity provided that the
Federal awarding agency or pass -
through entity has made a determina-
tion that the Federal interest is ade-
quately protected. If such a determina-
tion has not been made, the minimum
requirements must be as follows:
(a) A bid guarantee from each bidder
equivalent to five percent of the bid
price. The "bid guarantee" must con-
sist of a firm commitment such as a
bid bond, certified check, or other ne-
gotiable instrument accompanying a
bid as assurance that the bidder will,
upon acceptance of the bid, execute
such contractual documents as may be
required within the time specified.
(b) 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.
(c) A payment bond on the part of the
contractor for 100 percent of the con-
tract price. A "payment bond" is one
executed in connection with a contract
to assure payment as required by law
2 CFR Ch. II (1 -1 -15 Edition)
of all persons supplying labor and ma-
terial in the execution of the work pro-
vided for in the contract.
§ 200.326 Contract provisions.
The non - Federal entity's contracts
must contain the applicable provisions
described in Appendix II to Part 200 —
Contract Provisions for non - Federal
Entity Contracts Under Federal
Awards,
PERFORMANCE AND FINANCIAL
MONITORING AND REPORTING
§ 200.327 Financial reporting.
Unless otherwise approved by OMB,
the Federal awarding agency may so-
licit only the standard, OMB - approved
governmentwide data elements for col-
lection of financial information (at
time of publication the Federal Finan-
cial Report or such future collections
as may be approved by OMB and listed
on the OMB Web site). This informa-
tion must be collected with the fre-
quency required by the terms and con-
ditions of the Federal award, but no
less frequently than annually nor more
frequently than quarterly except in un-
usual circumstances, for example
where more frequent reporting is nec-
essary for the effective monitoring of
the Federal award or could signifi-
cantly affect program outcomes, and
preferably in coordination with per-
formance reporting.
200.323 Monitoring and reporting pro-
gram performance.
(a) Monitoring by the non - Federal enti-
ty. The non - Federal entity is respon-
sible for oversight of the operations of
the Federal award supported activities.
The non - Federal entity must monitor
its activities under Federal awards to
assure compliance with applicable Fed-
eral requirements and performance ex-
pectations are being achieved. Moni-
toring by the non - Federal entity must
cover each program, function or activ-
ity. See also §200.331 Requirements for
pass - through entities.
(b) Non - construction performance re-
ports. The Federal awarding agency
must use standard, OMB - approved data
elements for collection of performance
information (including performance
124
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progress reports, Research Perform-
ance Progress Report, or such future
collections as may be approved by OMB
and listed on the OMB Web site).
(1) The non - Federal entity must sub-
mit performance reports at the inter-
val required by the Federal awarding
agency or pass- through entity to best
inform improvements in program out -
comes and productivity. Intervals must
be no less frequent than annually nor
more frequent than quarterly except in
unusual circumstances, for example
where more frequent reporting is nec-
essary for the effective monitoring of
the Federal award or could signifi-
cantly affect program outcomes. An-
nual reports must be due 90 calendar
days after the reporting period; quar-
terly or semiannual reports must be
due 30 calendar days after the report-
ing period. Alternatively, the Federal
awarding agency or pass- through enti-
ty may require annual reports before
the anniversary dates of multiple year
Federal awards. The final performance
report will be due 90 calendar days
after the period of performance end
date. If a justified request is submitted
by a non - Federal entity, the Federal
agency may extend the due date for
any performance report.
(2) The non - Federal entity must sub-
mit performance reports using OMB -
approved governmentwide standard in-
formation collections when providing
performance information. As appro-
priate in accordance with above men-
tioned information collections, these
reports will contain, for each Federal
award, brief information on the fol-
lowing unless other collections are ap-
proved by OMB:
(i) A comparison of actual accom-
plishments to the objectives of the
Federal award established for the pe-
riod. Where the accomplishments of
the Federal award can be quantified, a
computation of the cost (for example,
related to units of accomplishment)
may be required if that information
will be useful. Where performance
trend data and analysis would be in-
formative to the Federal awarding
agency program, the Federal awarding
agency should include this as a per-
formance reporting requirement.
(ii) The reasons why established
goals were not met, if appropriate.
§ 200.329
(iii) Additional pertinent information
including, when appropriate, analysis
and explanation of cost overruns or
high unit costs.
(c) Construction performance reports.
For the most part, onsite technical in-
spections and certified percentage of
completion data are relied on heavily
by Federal awarding agencies and pass -
through entities to monitor progress
under Federal awards and subawards
for construction. The Federal awarding
agency may require additional per-
formance reports only when considered
necessary.
(d) Significant developments. Events
may occur between the scheduled per-
formance reporting dates that have sig-
nificant impact upon the supported ac-
tivity. In such cases, the non - Federal
entity must inform the Federal award-
ing agency or pass- through entity as
soon as the following types of condi-
tions become known:
(1) Problems, delays, or adverse con-
ditions which will materially impair
the ability to meet the objective of the
Federal award. This disclosure must in-
clude a statement of the action taken,
or contemplated, and any assistance
needed to resolve the situation.
(2) Favorable developments which en-
able meeting time schedules and objec-
tives sooner or at less cost than antici-
pated or producing more or different
beneficial results than originally
planned.
(e) The Federal awarding agency may
make site visits as warranted by pro-
gram needs.
(f) The Federal awarding agency may
waive any performance report required
by this part if not needed.
§ 200.329 Reporting on real property.
The Federal awarding agency or pass -
through entity must require a non-Fed-
eral entity to submit reports at least
annually on the status of real property
in which the Federal Government re-
tains an interest, unless the Federal in-
terest in the real property extends 15
years or longer. In those instances
where the Federal interest attached is
for a period of 15 years or more, the
Federal awarding agency or pass -
through entity, at its option, may re-
quire the non - Federal entity to report
at various multi -year frequencies (e.g.,
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§ 200.330
every two years or every three years,
not to exceed a five -year reporting pe-
riod; or a Federal awarding agency or
pass- through entity may require an-
nual reporting for the first three years
of a Federal award and thereafter re-
quire reporting every five years).
SUBRECIPIENT MONITORING AND
MANAGEMENT
§ 200.330 Subrecipient and contractor
determinations.
The non - Federal entity may concur-
rently receive Federal awards as a re-
cipient, a subrecipient, and a con-
tractor, depending on the substance of
its agreements with Federal awarding
agencies and pass- through entities.
Therefore, a pass- through entity must
make case -by -case determinations
whether each agreement it makes for
the disbursement of Federal program
funds casts the party receiving the
funds in the role of a subrecipient or a
contractor. The Federal awarding
agency may supply and require recipi-
ents to comply with additional guid-
ance to support these determinations
provided such guidance does not con-
flict with this section.
(a) Subrecipients. A subaward is for
the purpose of carrying out a portion of
a Federal award and creates a Federal
assistance relationship with the sub-
recipient. See §200.92 Subaward. Char-
acteristics which support the classi-
fication of the nqn- Federal entity as a
subrecipient include when the non -Fed-
eral entity:
(1) Determines who is eligible to re-
ceive what Federal assistance;
(2) Has its performance measured in
relatfon to whether objectives of a Fed-
eral program were met;
(3) Has responsibility for pro-
grammatic decision making;
(4) Is responsible for adherence to ap-
plicable Federal program requirements
specified in the Federal award; and
(5) In accordance with its agreement,
uses the Federal. funds to carry out a
program for a public purpose specified
in authorizing statute, as opposed to
providing goods or services for the ben-
efit of the pass- through entity.
(b) Contractors. A contract is for the
purpose of obtaining goods and services
for the non - Federal entity's own use
2 CFR Ch. II (1 -1 -15 Edition)
and creates a procurement relationship
with the contractor. See §200.22 Con-
tract. Characteristics indicative of a
procurement relationship between the
non - Federal entity and a contractor
are when the non - Federal entity re-
ceiving the Federal funds:
(1) Provides the goods and services
within normal business operations;
(2) Provides similar goods or services
to many different purchasers;
(3) Normally operates in a competi-
tive environment;
(4) Provides goods or services that
are ancillary to the operation of the
Federal program; and
(5) Is not subject to compliance re-
quirements of the Federal program as a
result of the agreement, though similar
requirements may apply for other rea-
sons.
(c) Use of judgment in making deter-
mination. In determining whether an
agreement between a pass- through en-
tity and another non - Federal entity
casts the latter as a subrecipient or a
contractor, the substance of the rela-
tionship is more important than the
form of the agreement. All of the char-
acteristics listed above may not be
present in all cases, and the pass -
through entity must use judgment in
classifying each agreement as a
subaward or a procurement contract.
§ 200.331 Requirements for pass-
through entities.
All pass- through entities must:
(a) Ensure that every subaward is
clearly identified to the subrecipient as
a subaward and includes the following
information at the time of the
subaward and if any of these data ele-
ments change, include the changes in
subsequent subaward modification.
When some of this information is not
available, the pass- through entity
must provide the best information
available to describe the Federal award
and subaward. Required information
includes:
(1) Federal Award Identification.
(i) Subrecipient name (which must
match the name associated with its
unique entity identifier);
(ii) Subrecipient's unique entity
identifier;
(iii) Federal Award Identification
Number (FAIN);
126
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(iv) Federal Award Date (see § 200.39
Federal award date);
(v) Subaward Period of Performance
Start and End Date;
(vi) Amount of Federal Funds Obli-
gated by this action;
(vii) Total Amount of Federal Funds
Obligated to the subrecipient;
(viii) Total Amount of the Federal
Award;
(ix) Federal award project descrip-
tion, as required to be responsive to
the Federal Funding Accountability
and Transparency Act (FFATA);
(x) Name of Federal awarding agency,
pass- through entity, and contact infor-
mation for awarding official,
(xi) CFDA Number and Name; the
pass - through entity must identify the
dollar amount made available under
each Federal award and the CFDA
number at time of disbursement;
(xii) Identification of whether the
award is R &D; and
(xiii) Indirect cost rate for the Fed-
eral award (including if the de minimis
rate is charged per §200.414 Indirect
(F &A) costs).
(2) All requirements imposed by the
pass- through entity on the sub-
recipient so that the Federal award is
used in accordance with Federal stat-
utes, regulations and the terms and
conditions of the Federal award.
(3) Any additional requirements that
the pass- through entity imposes on the
subrecipient in order for the pass -
through entity to meet its own respon-
sibility to the Federal awarding agency
including identification of any required
financial and performance reports;
(4) An approved federally recognized
indirect cost rate negotiated between
the subrecipient and the Federal Gov-
ernment or, if no such rate exists, ei-
ther a rate negotiated between the
pass- through entity and the sub-
recipient (in compliance with this
part), or a de minimis indirect cost
rate as defined in §200.414 Indirect
(F &A) costs, paragraph (f) of this part.
(5) A requirement that the sub-
recipient permit the pass- through enti-
ty and auditors to have access to the
subrecipient's records and financial
statements as necessary for the pass -
through entity to meet the require-
ments of this part; and
§ 200.331
(6) Appropriate terms and conditions
concerning closeout of the subaward.
(b) Evaluate each subrecipient's risk
of noncompliance with Federal stat-
utes, regulations, and the terms and
conditions of the subaward for purposes
of determining the appropriate sub-
recipient monitoring described in para-
graphs (d) and (e) of this section, which
may include consideration of such fac-
tors as:
(1) The subrecipient's prior experi-
ence with the same or similar sub -
awards;
(2) The results of previous audits in-
cluding whether or not the sub-
recipient receives a Single Audit in ac-
cordance with Subpart F —Audit Re-
quirements of this part, and the extent
to which the same or similar subaward
has been audited as a major program;
(3) Whether the subrecipient has new
personnel or new or substantially
changed systems; and
(4) The extent and results of Federal
awarding agency monitoring (e.g., if
the subrecipient also receives Federal
awards directly from a Federal award-
ing agency).
(c) Consider imposing specific
subaward conditions upon a sub-
recipient if appropriate as described in
§200.207 Specific conditions.
(d) Monitor the activities of the sub-
recipient as necessary to ensure that
the subaward is used for authorized
purposes, in compliance with Federal
statutes, regulations, and the terms
and conditions of the subaward; and
that subaward performance goals are
achieved. Pass - through entity moni-
toring of the subrecipient must in-
clude:
(1) Reviewing financial and perform-
ance reports required by the pass -
through entity.
(2) Following -up and ensuring that
the subrecipient takes timely and ap-
propriate action on all deficiencies per-
taining to the Federal award provided
to the subrecipient from the pass -
through entity detected through au-
dits, on -site reviews, and other means.
(3) Issuing a management decision for
audit findings pertaining to the Fed-
eral award provided to the subrecipient
from the pass- through entity as re-
quired by §200.521 Management deci-
sion.
127
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§ 200.332
(e) Depending upon the pass- through
entity's assessment of risk posed by
the subrecipient (as described in para-
graph (b) of this section), the following
monitoring tools may be useful for the
pass- through entity to ensure proper
accountability and compliance with
program requirements and achieve-
ment of performance goals:
(1) Providing subrecipients with
training and technical assistance on
program - related matters; and
(2) Performing on -site reviews of the
subrecipient's program operations;
(3) Arranging for agreed- upon- proce-
dures engagements as described in
§200.425 Audit services.
(f) Verify that every subrecipient is
audited as required by Subpart F—
Audit Requirements of this part when
it is expected that the subrecipient's
Federal awards expended during the re-
spective fiscal year equaled or exceeded
the threshold set forth in § 200.501 Audit
requirements.
(g) Consider whether the results of
the subrecipient's audits, on -site re-
views, or other monitoring indicate
conditions that necessitate adjust-
ments to the pass- through entity's own
records.
(h) Consider taking enforcement ac-
tion against noncompliant subrecipi-
ents as described in §200.338 Remedies
for noncompliance of this part and in
program regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76885, Dec. 19, 20141
§200.332 Fixed amount subawards.
With prior written approval from the
Federal awarding agency, a pass -
through entity may provide subawards
based on fixed amounts up to the Sim-
plified Acquisition Threshold, provided
that the subawards meet the require-
ments for fixed amount awards in
§200.201 Use of grant agreements (in-
cluding fixed amount awards), coopera-
tive agreements, and contracts.
RECORD RETENTION AND ACCESS
§200.333 Retention requirements for
records.
Financial records, supporting docu-
ments, statistical records, and all
other non - Federal entity records perti-
nent to a Federal award must be re-
2 CFR Ch. II (1 -1 -15 Edition)
tained for a period of three years from
the date of submission of the final ex-
penditure report or, for Federal awards
that are renewed quarterly or annu-
ally, from the date of the submission of
the quarterly or annual financial re-
port, respectively, as reported to the
Federal awarding agency or pass -
through entity in the case of a sub-
recipient. Federal awarding agencies
and pass- through entities must not im-
pose any other record retention re-
quirements upon non - Federal entities.
The only exceptions are the following:
(a) If any litigation, claim, or audit
is started before the expiration of the
3 -year period, the records must be re-
tained until all litigation, claims, or
audit findings involving the records
have been resolved and final action
taken.
(b) When the non - Federal entity is
notified in writing by the Federal
awarding agency, cognizant agency for
audit, oversight agency for audit, cog-
nizant agency for indirect costs, or
pass- through entity to extend the re-
tention period.
(c) Records for real property and
equipment acquired with Federal funds
must be retained for 3 years after final
disposition.
(d) When records are transferred to or
maintained by the Federal awarding
agency or pass- through entity, the 3-
year retention requirement is not ap-
plicable to the non - Federal entity.
(e) Records for program income
transactions after the period of per -
formance. In some cases recipients
must report program income after the
period of performance. Where there is
such a requirement, the retention pe-
riod for the records pertaining to the
earning of the program income starts
from the end of the non - Federal enti-
ty's fiscal year in which the program
income is earned.
(f) Indirect cost rate proposals and
cost allocations plans. This paragraph
applies to the following types of docu-
ments and their supporting records: in-
direct cost rate computations or pro-
posals, 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).
128
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(1) If submitted for negotiation. If the
proposal, plan, or other computation is
required to be submitted to the Federal
Government (or to the pass- through
entity) to form the basis for negotia-
tion of the rate, then the 3 -year reten-
tion period for its supporting records
starts from the date of such submis-
sion.
(2) If not submitted for negotiation. If
the proposal, plan, or other computa-
tion is not required to be submitted to
the Federal Government (or to the
pass- through entity) for negotiation
purposes, then the 3 -year retention pe-
riod for the proposal, plan, or computa-
tion and its supporting records starts
from the end of the fiscal year (or
other accounting period) covered by
the proposal, plan, or other computa-
tion.
§200.334 Requests for transfer of
records.
The Federal awarding agency must
request transfer of certain records to
its custody from the non - Federal enti-
ty when it determines that the records
possess long -term retention value.
However, in order to avoid duplicate
recordkeeping, the Federal awarding
agency may make arrangements for
the non - Federal entity to retain any
records that are continuously needed
for joint use.
§200.335 Methods for collection, trans-
mission and storage of information.
In accordance with the May 2013 Ex-
ecutive Order on Making Open and Ma-
chine Readable the New Default for
Government Information, the Federal
awarding agency and the non - Federal
entity` should, whenever practicable,
collect, transmit, and store Federal
award - related information in open and
machine readable formats rather than
in closed formats or on paper. The Fed-
eral awarding agency or pass- through
entity must always provide or accept
paper versions of Federal award - related
information to and from the non -Fed-
eral entity upon request. If paper cop-
ies are submitted, the Federal award-
ing agency or pass- through entity must
not require more than an original and
two copies. When original records are
electronic and cannot be altered, there
is no need to create and retain paper
§ 200.337
copies. When original records are
paper, electronic versions may be sub-
stituted through the use of duplication
or other forms of electronic media pro-
vided that they are subject to periodic
quality control reviews, provide rea-
sonable safeguards against alteration,
and remain readable.
§ 200.336 Access to records.
(a) Records of non - Federal entities.
The Federal awarding agency, Inspec-
tors General, the Comptroller General
of the United States, and the pass -
through entity, or any of their author-
ized representatives, must have • the
right of access to any documents, pa-
pers, or other records of the non -Fed-
eral entity which are pertinent to the
Federal award, in order to make au-
dits, examinations, excerpts, and tran-
scripts. The right also includes timely
and reasonable access to the non -Fed-
eral entity's personnel for the purpose
of interview and discussion related to
such documents.
(b) Only under extraordinary and
rare circumstances would such access
include review of the true name of vic-
tims of a crime. Routine monitoring
cannot be considered extraordinary and
rare circumstances that would neces-
sitate access to this information. When
access to the true name of victims of a
crime is necessary, appropriate steps to
protect this sensitive information must
be taken by both the non - Federal enti-
ty and the Federal awarding agency.
Any such access, other than under a
court order or subpoena pursuant to a
bona fide confidential investigation,
must be approved by the head of the
Federal awarding agency or delegate.
(c) Expiration of right of access. The
rights of access in this section are not
limited to the required retention pe-
riod but last as long as the records are
retained. Federal awarding agencies
and pass- through entities must not im-
pose any other access requirements
upon non - Federal entities.
§200.337 Restrictions on public access
to records.
No Federal awarding agency may
place restrictions on the non - Federal
entity that limit public access to the
records of the non - Federal entity perti-
nent to a Federal award, except for
129
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§ 200.335
protected personally identifiable infor-
mation (PII) or when the Federal
awarding agency can demonstrate that
such records will be kept confidential
and would have been exempted from
disclosure pursuant to the Freedom of
Information Act (5 U.S.C. 552) or con-
trolled unclassified information pursu-
ant to Executive Order 13556 if the
records had belonged to the Federal
awarding agency. The Freedom of In-
formation Act (5 U.S.C. 552) (FOIA)
does not apply to those records that re-
main under a non - Federal entity's con-
trol except as required under §200,315
Intangible property. Unless required by
Federal, state, local, and tribal stat-
ute, non - Federal entities are not re-
quired to permit public access to their
records. The non - Federal entity's
records provided to a Federal agency
generally will be subject to FOIA and
applicable exemptions.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76885, Dec. 19, 2014)
REMEDIES FOR NONCOMPLIANCE
§ 200.338 Remedies for noncompliance.
If a non - Federal entity fails to com-
ply with Federal statutes, regulations
or the terms and conditions of a Fed-
eral award, the Federal awarding agen-
cy or pass- through entity may impose
additional conditions, as described in
§200.207 Specific conditions. If the Fed-
eral awarding agency or pass- through
entity determines that noncompliance
cannot be remedied by imposing addi-
tional conditions, the Federal awarding
agency or pass- through entity may
take one or more of the following ac-
tions, as appropriate in the cir-
cumstances:
(a) Temporarily withhold cash pay-
ments pending correction of the defi-
ciency by the non - Federal entity or
more severe enforcement action by the
Federal awarding agency or pass -
through entity.
(b) 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.
(c) Wholly or partly suspend or ter-
minate the Federal award.
(d) Initiate suspension or debarment
proceedings as authorized under 2 CFR
part 180 and Federal awarding agency
2 CFR Ch. II (1 -1 -15 Edition)
regulations (or in the case of a pass -
through entity, recommend such a pro-
ceeding be initiated by a Federal
awarding agency).
(e) Withhold further Federal awards
for the project or program.
(f) Take other remedies that may be
legally available.
§ 200.339 Termination.
(a) The Federal award may be termi-
nated in whole or in part as follows:
(1) By the Federal awarding agency
or pass- through entity, if a non -Fed-
eral entity fails to comply with the
terms and conditions of a Federal
award;
(2) By the Federal awarding agency
or pass- through entity for cause;
(3) By the Federal awarding agency
or pass- through entity with the con-
sent of the non - Federal entity, in
which case the two parties must agree
upon the termination conditions, in-
cluding the effective date and, in the
case of partial termination, the portion
to be terminated; or
(4) By the non - Federal entity upon
sending to the Federal awarding agen-
cy or pass- through entity written noti-
fication setting forth the reasons for
such termination, the effective date,
and, in the case of partial termination,
the portion to be terminated. However,
if the Federal awarding agency or pass -
through entity determines in the case
of partial termination that the reduced
or modified portion of the Federal
award or subaward will not accomplish
the purposes for which the Federal
award was made, the Federal awarding
agency or pass- through entity may ter-
minate the Federal award in its en-
tirety.
(b) When a Federal award is termi-
nated or partially terminated, both the
Federal awarding agency or pass -
through entity and the non - Federal en-
tity remain responsible for compliance
with the requirements in §§200,343
Closeout and 200.344 Post - closeout ad-
justments and continuing responsibil-
ities.
§200.340 Notification of termination
requirement.
(a) The Federal agency or pass -
through entity must provide to the
130
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non - Federal entity a notice of termi-
nation.
(b) If the Federal award is terminated
for the non - Federal entity's failure to
comply with the Federal statutes, reg-
ulations, or terms and conditions of
the Federal award, the notification
must state that the termination deci-
sion may be considered in evaluating
future applications received from the
non - Federal entity.
(c) Upon termination of a Federal
award, the Federal awarding agency
must provide the information required
under FFATA to the Federal Web site
established to fulfill the requirements
of FFATA, and update or notify any
other relevant governmentwide sys-
tems or entities of any indications of
poor performance as required by 41
U.S.C. 417b and 31 U.S.C.. 3321 and im-
plementing guidance at 2 CFR part 77
(forthcoming at time of publication).
See also the requirements for Suspen-
sion and Debarment at 2 CFR part 180.
(78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§200.341 Opportunities to object, hear-
ings and appeals.
Upon taking any remedy for non-
compliance, the Federal awarding
agency must provide the non - Federal
entity an opportunity to object and
provide information and documenta-
tion challenging the suspension or ter-
mination action, in accordance with
written processes and procedures pub-
lished by the Federal awarding agency.
The Federal awarding agency or pass -
through entity must comply with any
requirements for hearings, appeals or
other administrative proceedings to
which` the non - Federal entity is enti-
tled under any statute or regulation
applicable to the action involved.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.342 Effects of suspension and ter-
mination.
Costs to the non - Federal entity re-
sulting from obligations incurred by
the non - Federal entity during a sus-
pension or after termination of a Fed-
eral award or subaward are not allow-
able unless the Federal awarding agen-
cy or pass- through entity expressly au-
thorizes them in the notice of suspen-
§ 200.343
sion or termination or subsequently.
However, costs during suspension or
after termination are allowable if:
(a) The costs result from obligations
which were properly incurred by the
non - Federal entity before the effective
date of suspension or termination, are
not in anticipation of it; and
(b) The costs would be allowable if
the Federal award was not suspended
or expired normally at the end of the
period of performance in which the ter-
mination takes effect.
CLOSEOUT
§ 200.343 Closeout.
The Federal awarding agency or pass -
through entity will close -out the Fed-
eral award when it determines that all
applicable administrative actions and
all required work of the Federal award
have been completed by the non -Fed-
eral entity. This section specifies the
actions the non - Federal entity and
Federal awarding agency or pass -
through entity must take to complete
this process at the end of the period of
performance.
(a) The non - Federal entity must sub-
mit, no later than 90 calendar days
after the end date of the period of per-
formance, all financial, performance,
and other reports as required by the
terms and conditions of the Federal
award. The Federal awarding agency or
pass- through entity may approve ex-
tensions when requested by the non-
Federal entity.
(b) Unless the Federal awarding agen-
cy or pass- through entity authorizes an
extension, a non - Federal entity must
liquidate all obligations incurred under
the Federal award not later than 90
calendar days after the end date of the
period of performance as specified in
the terms and conditions of the Federal
award.
(c) The Federal awarding agency or
pass- through entity must make prompt
payments to the non - Federal entity for
allowable reimbursable costs under the
Federal award being closed out.
(d) The non - Federal entity must
promptly refund any balances of unob-
ligated cash that the Federal awarding
agency or pass- through entity paid in
131
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§ 200.344
advance or paid and that are not au-
thorized to be retained by the non -Fed-
eral entity for use in other projects.
See OMB Circular A -129 and see
§200.345 Collection of amounts due, for
requirements regarding unreturned
amounts that become delinquent debts.
(e) Consistent with the terms and
conditions of the Federal award, the
Federal awarding agency or pass -
through entity must make a settle-
ment for any upward or downward ad-
justments to the Federal share of costs
after closeout reports are received.
(f) The non - Federal entity must ac-
count for any real and personal prop-
erty acquired with Federal funds or re-
ceived from the Federal Government in
accordance with § §200.310 Insurance
coverage through 200.316 Property trust
relationship and 200.329 Reporting on
real property.
(g) The Federal awarding agency or
pass- through entity should complete
all closeout actions for Federal awards
no later than one year after receipt and
acceptance of all required final reports.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
POST - CLOSEOUT ADJUSTMENTS AND
CONTINUING RESPONSIBILITIES
§ 200.344 Post-closeout adjustments
and continuing responsibilities.
(a) The closeout of a Federal award
does not affect any of the following:
(1) The right of the Federal awarding
agency or pass- through entity to dis-
allow costs and recover funds on the
basis of a later audit or other review.
The Federal awarding agency or pass -
through entity must make any cost
disallowance determination and notify
the non - Federal entity within the
record retention period.
(2) The obligation of the non - Federal
entity to return any funds due as a re-
sult of later refunds, corrections, or
other transactions including final indi-
rect cost rate adjustments.
(3) Audit requirements in Subpart
F —Audit Requirements of this part.
(4) Property management and dis-
position requirements in Subpart D—
Post Federal Award Requirements of
this part, §§200.310 Insurance Coverage
through 200.316 Property trust relation-
ship.
2 CFR Ch. II (1 -1 -15 Edition)
(5) Records retention as required in
Subpart D —Post Federal Award Re-
quirements of this part, §§200.333 Re-
tention requirements for records
through 200.337 Restrictions on public
access to records.
(b) After closeout of the Federal
award, a relationship created under the
Federal award may be modified or
ended in whole or in part with the con-
sent of the Federal awarding agency or
pass- through entity and the non -Fed-
eral entity, provided the responsibil-
ities of the non - Federal entity referred
to in paragraph (a) of this section, in-
cluding those for property management
as applicable, are considered and provi-
sions made for continuing responsibil-
ities of the non - Federal entity, as ap-
propriate,
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
COLLECTION OF AMOUNTS DUE
§ 200.345 Collection of amounts due.
(a) Any funds paid to the non - Federal
entity in excess of the amount to
which the non - Federal entity is finally
determined to be entitled under the
terms of the Federal award constitute
a debt to the Federal Government. If
not paid within 90 calendar days after
demand, the Federal awarding agency
may reduce the debt by:
(1) Making an administrative offset
against other requests for reimburse-
ments;
(2) Withholding advance payments
otherwise due to the non - Federal enti-
ty; or
(3) Other action permitted by Federal
statute.
(b) Except where otherwise provided
by statutes or regulations, the Federal
awarding agency will charge interest
on an overdue debt in accordance with
the Federal Claims Collection Stand-
ards (31 CFR parts 900 through 999). The
date from which interest is computed
is not extended by litigation or the fil-
ing of any form of appeal.
132
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Subpart E—Cost Principles
GENERAL PROVISIONS
§ 200.400 Policy guide.
The application of these cost prin-
ciples is based on the fundamental
premises that:
(a) The non - Federal entity is respon-
sible for the efficient and effective ad-
ministration of the Federal award
through the application of sound man-
agement practices.
(b) The non - Federal entity assumes
responsibility for administering Fed-
eral funds in a manner consistent with
underlying agreements, program objec-
tives, and the terms and conditions of
the Federal award.
(c) The non - Federal entity, in rec-
ognition of its own unique combination
of staff, facilities, and experience, has
the primary responsibility for employ-
ing whatever form of sound organiza-
tion and management techniques may
be necessary in order to assure proper
and efficient administration of the
Federal award.
(d) The application of these cost prin-
ciples should require no significant
changes in the internal accounting
policies and practices of the non -Fed-
eral entity. However, the accounting
practices of the non - Federal entity
must be consistent with these cost
principles and support the accumula-
tion of costs as required by the prin-
ciples, and must provide for adequate
documentation to support costs
charged to the Federal award.
(e) In reviewing, negotiating and ap-
proving cost allocation plans or indi-
rect cost proposals, the cognizant agen-
cy for indirect costs should generally
assure that the non - Federal entity is
applying these cost accounting prin-
ciples on a consistent basis during
their review and negotiation of indirect
cost proposals. Where wide variations
exist in the treatment of a given cost
item by the non - Federal entity, the
reasonableness and equity of such
treatments should be fully considered.
See §200.56 Indirect (facilities & admin-
istrative (F &A)) costs.
(f) For non - Federal entities that edu-
cate and engage students in research,
the dual role of students as both train-
ees and employees (including pre- and
§ 200.401
post - doctoral staff) contributing to the
completion of Federal awards for re-
search must be recognized in the appli-
cation of these principles.
(g) The non - Federal entity may not
earn or keep any profit resulting from
Federal financial assistance, unless ex-
plicitly authorized by the terms and
conditions of the Federal award. See
also § 200.307 Program income.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.401 Application.
(a) General. These principles must be
used in determining the allowable costs
of work performed by the non - Federal
entity under Federal awards. These
principles also must be used by the
non - Federal entity as a guide in the
pricing of fixed -price contracts and
subcontracts where costs are used in
determining the appropriate price. The
principles do not apply to:
(1) Arrangements under which Fed-
eral financing is in the form of loans,
scholarships, fellowships, traineeships,
or other fixed amounts based on such
items as education allowance or pub-
lished tuition rates and fees.
(2) For IHEs, capitation awards,
which are awards based on case counts
or number of beneficiaries according to
the terms and conditions of the Federal
award.
(3) Fixed amount awards. See also
Subpart A— Acronyms and Definitions,
§§200.45 Fixed amount awards and
200.201 Use of grant agreements (includ-
ing fixed amount awards), cooperative
agreements, and contracts.
(4) Federal awards to hospitals (see
Appendix IX to Part 200 — Hospital Cost
Principles).
(5) Other awards under which the
non - Federal entity is not required to
account to the Federal Government for
actual costs incurred.
(b) Federal Contract. Where a Federal
contract awarded to a non - Federal en-
tity is subject to the Cost Accounting
Standards (CAS), it incorporates the
applicable CAS clauses, Standards, and
CAS administration requirements per
the 48 CFR Chapter 99 and 48 CFR part
30 (FAR Part 30). CAS applies directly
to the CAS - covered contract and the
Cost Accounting Standards at 48 CFR.
parts 9904 or 9905 takes precedence over
133
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§ 200.402
the cost principles in this Subpart E—
Cost Principles of this part with re-
spect to the allocation of costs. When a
contract with a non - Federal entity is
subject to full CAS coverage, the al-
lowability of certain costs under the
cost principles will be affected by the
allocation provisions of the Cost Ac-
counting Standards (e.g., CAS 414-48
CFR 9904,414, Cost of Money as an Ele-
ment of the Cost of Facilities Capital,
and CAS 417-48 CFR 9904.417, Cost of
Money as an Element of the Cost of
Capital Assets Under Construction),
apply rather the allowability provi-
sions of §200.449 Interest. In complying
with those requirements, the non -Fed-
eral entity's application of cost ac-
counting practices for estimating, ac-
cumulating, and reporting costs for
other Federal awards and other cost
objectives under the CAS - covered con-
tract still must be consistent with its
cost accounting practices for the CAS -
covered contracts. In all cases, only
one set of accounting records needs to
be maintained for the allocation of
costs by the non - Federal entity.
(c) Exemptions. Some nonprofit orga-
nizations, because of their size and na-
ture of operations, can be considered to
be similar to for- profit entities for pur-
pose of applicability of cost principles.
Such nonprofit organizations must op-
erate under Federal cost principles ap-
plicable to for - profit entities located at
48 CFR 31.2. A listing of these organiza-
tions is contained in Appendix VIII to
Part 200 — Nonprofit Organizations Ex-
empted From Subpart E—Cost Prin-
ciples of this part. Other organizations,
as approved by the cognizant agency
for indirect costs, may be added from
time to time.
BASIC CONSIDERATIONS
§ 200.402 Composition of costs.
Total cost. The total cost of a Federal
award is the sum of the allowable di-
rect and allocable indirect costs less
any applicable credits.
§200.403 Factors affecting allowability
of costs.
Except where otherwise authorized
by statute, costs must meet the fol-
lowing general criteria in order to be
allowable under Federal awards:
2 CFR Ch. 11 (1 -1 -15 Edition)
(a) Be necessary and reasonable for
the performance of the Federal award
and be allocable thereto under these
principles.
(b) Conform to any limitations or ex-
clusions set forth in these principles or
in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and
procedures that apply uniformly to
both federally- financed and other ac-
tivities of the non - Federal entity.
(d) Be accorded consistent treatment.
A cost may not be assigned to a Fed-
eral award as a direct cost if any other
cost incurred for the same purpose in
like circumstances has been allocated
to the Federal award as an indirect
cost.
(e) Be determined in accordance with
generally accepted accounting prin-
ciples (GAAP), except, for state and
local governments and Indian tribes
only, as otherwise provided for in this
part.
(f) Not be included as a cost or used
to meet cost sharing or matching re-
quirements of any other federally -fi-
nanced program in either the current
or a prior period. See also §200.306 Cost
sharing or matching paragraph (b).
(g) Be adequately documented. See
also §§200.300 Statutory and national
policy requirements through 200.309 Pe-
riod of performance of this part.
§200.404 Reasonable costs.
A cost is reasonable if, in its nature
and amount, it does not exceed that
which would be incurred by a prudent
person under the circumstances pre-
vailing at the time the decision was
made to incur the cost. The question of
reasonableness is particularly impor-
tant when the non - Federal entity is
predominantly federally- funded. In de-
termining reasonableness of a given
cost, consideration must be given to.
(a) Whether the cost is of a type gen-
erally recognized as ordinary and nec-
essary for the operation of the non -
Federal entity or the proper and effi-
cient performance of the Federal
award.
(b) The restraints or requirements
imposed by such factors as: sound busi-
ness practices; arm's - length bar-
gaining; Federal, state, local, tribal,
and other laws and regulations; and
134
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OMB. Guidance
terms and conditions of the Federal
award.
(c) Market prices for comparable
goods or services for the geographic
area.
(d) Whether the individuals con-
cerned acted with prudence in the cir-
cumstances considering their respon-
sibilities to the non - Federal entity, its
employees, where applicable its stu-
dents or membership, the public at
large, and the Federal Government.
(e) Whether the non - Federal entity
significantly deviates from its estab-
lished practices and policies regarding
the incurrence of costs, which may
unjustifiably increase the Federal
award's cost.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.405 Allocable costs.
(a) A cost is allocable to a particular
Federal award or other cost objective if
the goods or services involved are
chargeable or assignable to that Fed-
eral award or cost objective in accord -
ance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the
Federal award;
(2) Benefits both the Federal award
and other work of the non - Federal en-
tity and can be distributed in propor-
tions that may be approximated using
reasonable methods; and
(3) Is necessary to the overall oper-
ation of the non - Federal entity and is
assignable in part to the Federal award
in accordance with the principles in
this subpart.
(b) All activities which benefit from
the non - Federal entity's indirect (F &A)
cost, including unallowable activities
and donated services by the non -Fed-
eral entity or third parties, will receive
an appropriate allocation of indirect
costs.
(c) Any cost allocable to a particular
Federal award under the principles pro-
vided for in this part may not be
charged to other Federal awards to
overcome fund deficiencies, to avoid re-
strictions imposed by Federal statutes,
regulations, or terms and conditions of
the Federal awards, or for other rea-
sons. However, this prohibition would
not preclude the non - Federal entity
from shifting costs that are allowable
§ 200.406
under two or more Federal awards in
accordance with existing Federal stat-
utes, regulations, or the terms and con-
ditions of the Federal awards.
(d) Direct cost allocation principles.
If a cost benefits two or more projects
or activities in proportions that can be
determined without undue effort or
cost, the cost must be allocated to the
projects based on the proportional ben-
efit. If a cost benefits two or more
projects or activities in proportions
that cannot be determined because of
the interrelationship of the work in-
volved, then, notwithstanding para-
graph (c) of this section, the costs may
be allocated or transferred to bene-
fitted projects on any reasonable docu-
mented basis. Where the purchase of
equipment or other capital asset is spe-
cifically authorized under a Federal
award, the costs are assignable to the
Federal award regardless of the use
that may be made of the equipment or
other capital asset involved when no
longer needed for the purpose for which
it was originally required. See also
§ §200.310 Insurance coverage through
200.316 Property trust relationship and
200.439 Equipment and other capital ex-
penditures.
(e) If the contract is subject to CAS,
costs must be allocated to the contract
pursuant to the Cost Accounting
Standards. To the extent that CAS is
applicable, the allocation of costs in
accordance with CAS takes precedence
over the allocation provisions in this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§200.406 Applicable credits.
(a) Applicable credits refer to those
receipts or reduction-of-expenditure-
type transactions that offset or reduce
expense items allocable to the Federal
award as direct or indirect (F &A) costs.
Examples of such transactions are: pur-
chase discounts, rebates or allowances,
recoveries or indemnities on losses, in-
surance refunds or rebates, and adjust-
ments of overpayments or erroneous
charges. To the extent that such cred-
its accruing to or received by the non -
Federal entity relate to allowable
costs, they must be credited to the
Federal award either as a cost reduc-
tion or cash refund, as appropriate.
135
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§ 200.407
(b) In some instances, the amounts
received from the Federal Government
to finance activities or service oper-
ations of the non - Federal entity should
be treated as applicable credits. Spe-
cifically, the concept of netting such
credit items (including any amounts
used to meet cost sharing or matching
requirements) must be recognized in
determining the rates or amounts to be
charged to the Federal award. (See
§ §200.436 Depreciation and 200.468 Spe-
cialized service facilities, for areas of
potential application in the matter of
Federal financing of activities.)
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.407 Prior written approval (prior
approval).
Under any given Federal award, the
reasonableness and allocability of cer-
tain items of costs may be difficult to
determine. In order to avoid subse-
quent disallowance or dispute based on
unreasonableness or nonailocability,
the non - Federal entity may seek the
prior written approval of the cognizant
agency for indirect costs or the Federal
awarding agency in advance of the in-
currence of special or unusual costs.
Prior written approval should include
the timeframe or scope of the agree-
ment. The absence of prior written ap-
proval on any element of cost will not,
in itself, affect the reuonableness or
allocability of that element, unless
prior approval is specifically required
for allowability as described under cer-
tain circumstances in the following
sections of this part:
(a) §200.201 Use of grant agreements
(including fixed amount awards), coop-
erative agreements, and contracts,
paragraph (b)(5);
(b) §200.306 Cost sharing or matching;
(c) §200,307 Program income;
(d) §200.308 Revision of budget and
program plans;
(e) § 200.311 Real property;
(f) § 200.313 Equipment;
(g) §200.332 Fixed amount subawards;
(h) §200.413 Direct costs, paragraph
(c);
(i) §200.430 Compensation — personal
services, paragraph (h);
(j) §200.431 Compensation— fringe ben-
efits;
(k) §200.438 Entertainment costs;
2 CFR Ch. II (1 -1 -15 Edition)
(1) §200.439 Equipment and other cap -
ital expenditures;
(m) § 200.440 Exchange rates;
(n) §200.441 Fines, penalties, damages
and other settlements;
(o) §200.442 Fund raising and invest-
ment management costs;
(p) §200.445 Goods or services for per-
sonal use;
(q) § 200.447 Insurance and indem-
nification;
(r) §200.454 Memberships, subscrip-
tions, and professional activity costs,
paragraph (c);
(s) §200,455 Organization costs;
(t) §200,456 Participant support costs;
(u) § 200.458 Pre -award costs;
(v) § 200.462 Rearrangement and re-
conversion costs;
(w) §200.467 Selling and marketing
costs;
(x) §200.470 Taxes (including Value
Added Tax); and
(y) §200.474 Travel costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.408 Limitation on allowance of
costs.
The Federal award may be subject to
statutory requirements that limit the
allowability of costs. When the max-
imum amount allowable under a limi-
tation is less than the total amount de-
termined in accordance with the prin-
ciples in this part, the amount not re-
coverable under the Federal award may
not be charged to the Federal award.
§ 200.409 Special considerations.
In addition to the basic consider-
ations regarding the allowability of
costs highlighted in this subtitle, other
subtitles in this part describe special
considerations and requirements appli-
cable to states, local governments, In-
dian tribes, and IHEs. In addition, cer-
tain provisions among the items of cost
in this subpart, are only applicable to
certain types of non - Federal entities,
as specified in the following sections:
(a) Direct and Indirect (F &A) Costs
( §§ 200.412 Classification of costs
through 200,415 Required certifications)
of this subpart;
(b) Special Considerations for States,
Local Governments and Indian Tribes
136
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OMB Guidance
(§ §200.416 Cost allocation plans and in-
direct cost proposals and 200.417 Inter-
agency service) of this subpart; and
(c) Special Considerations for Insti-
tutions of Higher Education (§§200.418
Costs incurred by states and local gov-
ernments and 200.419 Cost accounting
standards and disclosure statement) of
this subpart.
§ 200.410 Collection of unallowable
costs.
Payments made for costs determined
to be unallowable by either the Federal
awarding agency, cognizant agency for
indirect costs, or pass- through entity,
either as direct or indirect costs, must
be refunded (including interest) to the
Federal Government in accordance
with instructions from the Federal
agency that determined the costs are
unallowable unless Federal statute or
regulation directs otherwise. See also
Subpart D —Post Federal Award Re-
quirements of this part, §§ 200.300 Stat-
utory and national policy requirements
through 200.309 Period of performance.
§200.411 Adjustment of previously ne-
gotiated indirect (F &A) cost rates
containing unallowable costs.
(a) Negotiated indirect (F &A) cost
rates based on a proposal later found to
have included costs that:
(1) Are unallowable as specified by
Federal statutes, regulations or the
terms and conditions of a Federal
award; or
(2) Are unallowable because they are
not allocable to the Federal award(s),
must be adjusted, or a refund must be
made, in accordance with the require -
mentq of this section. These adjust-
ments or refunds are designed to cor-
rect the proposals used to establish the
rates and do not constitute a reopening
of the rate negotiation. The adjust-
ments or refunds will be made regard-
less of the type of rate negotiated (pre-
determined, final, fixed, or provi-
sional).
(b) For rates covering a future fiscal
year of the non - Federal entity, the un-
allowable costs will be removed from
the indirect (F &A) cost pools and the
rates appropriately adjusted.
(c) For rates covering a past period,
the Federal share of the unallowable
costs will be computed for each year
§ 200.413
involved and a cash refund (including
interest chargeable in accordance with
applicable regulations) will be made to
the Federal Government. If cash re-
funds are made for past periods covered
by provisional or fixed rates, appro-
priate adjustments will be made when
the rates are finalized to avoid dupli-
cate recovery of the unallowable costs
by the Federal Government.
(d) For rates covering the current pe-
riod, either a rate adjustment or a re-
fund, as described in paragraphs (b) and
(c) of this section, must be required by
the cognizant agency for indirect costs.
The choice of method must be at the
discretion of the cognizant agency for
indirect costs, based on its judgment as
to which method would be most prac-
tical.
(e) The amount or proportion of unal-
lowable costs included in each year's
rate will be assumed to be the same as
the amount or proportion of unallow-
able costs included in the base year
proposal used to establish the rate.
DIRECT AND INDIRECT (F &A) COSTS
§ 200.412 Classification of costs.
There is no universal rule for
classifying certain costs as either di-
rect or indirect (F &A) under every ac-
counting system. A cost may be direct
with respect to some specific service or
function, but indirect with respect to
the Federal award or other final cost
objective. Therefore, it is essential
that each item of cost incurred for the
same purpose be treated consistently
in like circumstances either as a direct
or an indirect (F &A) cost in order to
avoid possible double- charging of Fed-
eral awards. Guidelines for determining
direct and indirect (F &A) costs charged
to Federal awards are provided in this
subpart.
§ 200.413 Direct costs.
(a) General. Direct costs are those
costs that can be identified specifically
with a particular final cost objective,
such as a Federal award, or other inter-
nally or externally funded activity, or
that can be directly assigned to such
activities relatively easily with a high
degree of accuracy. Costs incurred for
the same purpose in like circumstances
must be treated consistently as either
137
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§ 200.414
direct or indirect (F &A) costs. See also
§200.405 Allocable costs.
(b) Application to Federal awards,
Identification with the Federal award
rather than the nature of the goods and
services involved is the determining
factor in distinguishing direct from in-
direct (F &A) costs of Federal awards.
Typical costs charged directly to a
Federal award are the compensation of
employees who work on that award,
their related fringe benefit costs, the
costs of materials and other items of
expense incurred for the Federal award.
If directly related to a specific award,
certain costs that otherwise would be
treated as indirect costs may also in-
clude extraordinary utility consump-
tion, the cost of materials supplied
from stock or services rendered by spe-
cialized facilities or other institutional
service operations.
(c) The salaries of administrative and
clerical staff should normally be treat-
ed as indirect (F &A) costs. Direct
charging of these costs may be appro-
priate only if all of the following condi-
tions are met:
(1) Administrative or clerical serv-
ices are integral to a project or activ-
ity;
(2) Individuals involved can be spe-
cifically identified with the project or
activity;
(3) Such costs are explicitly included
in the budget or have the prior written
approval of the Federal awarding agen-
cy; and
(4) The costs are not also recovered
as indirect costs.
(d) Minor. items. Any direct cost of
minor amount may be treated as an in-
direct (F &A) cost for reasons of practi-
calitSr where such accounting treat-
ment for that item of cost is consist-
ently applied to all Federal and non -
Federal cost objectives. .
(e) The costs of certain activities are
not allowable as charges to Federal
awards. However, even though these
costs are unallowable for purposes of
computing charges to Federal awards,
they nonetheless must be treated as di-
rect costs for purposes of determining
indirect (F &A) cost rates and be allo-
cated their equitable share of the non -
Federal entity's indirect costs if they
represent activities which:
(1) Include the salaries of personnel,
2 CFR Ch. II (1 -1 -15 Edition)
(2) Occupy space, and
(3) Benefit from the non - Federal enti-
ty's indirect (F &A) costs.
(f) For nonprofit organizations, the
costs of activities performed by the
non - Federal entity primarily as a serv-
ice to members, clients, or the general
public when significant and necessary
to the non - Federal entity's mission
must be treated as direct costs whether
or not allowable, and be allocated an
equitable share of indirect (F &A) costs.
Some examples of these types of activi-
ties include:
(1) Maintenance of membership rolls,
subscriptions, publications, and related
functions. See also §200.454 Member-
ships, subscriptions, and professional
activity costs.
(2) Providing services and informa-
tion to members, legislative or admin-
istrative bodies, or the public. See also
§§200.454 Memberships, subscriptions,
and professional activity costs and
200.450 Lobbying.
(3) Promotion, lobbying, and other
forms of public relations. See also
§§200.421 Advertising and public rela-
tions and 200.450 Lobbying.
(4) Conferences except those held to
conduct the general administration of
the non - Federal entity. See also
§200.432 Conferences.
(5) Maintenance, protection, and in-
vestment of special funds not used in
operation of the non - Federal entity.
See also §200.442 Fund raising and in-
vestment management costs.
(6) Administration of group benefits
on behalf of members or clients, in-
cluding life and hospital insurance, an-
nuity or retirement plans, and finan-
cial aid. See also §200.431 Compensa-
tion— fringe benefits.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§200.414 Indirect (F &A) costs.
(a) Facilities and Administration Classi-
fication. For major IHEs and major
nonprofit organizations, indirect (F &A)
costs must be classified within two
broad categories: "Facilities" and
"Administration." "Facilities" is de-
fined as depreciation on buildings,
equipment and capital improvement,
interest on debt associated with cer-
tain buildings, equipment and capital
improvements, and operations and
138
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OMB Guidance
maintenance expenses. "Administra-
tion" is defined as general administra-
tion and general expenses such as the
director's office, accounting, personnel
and all other types of expenditures not
listed specifically under one of the sub-
categories of "Facilities" (including
cross allocations from other pools,
where applicable). For nonprofit orga-
nizations, library expenses are included
in the "Administration" category; for
institutions of higher education, they
are included in the "Facilities" cat-
egory. Major IHEs are defined as those
required to use the Standard Format
for Submission as noted in Appendix III
to Part 200 — Indirect (F &A) Costs Iden-
tification and Assignment, and Rate
Determination for Institutions of High-
er Education (IHEs) paragraph C. 11.
Major nonprofit organizations are
those which receive more than $10 mil-
lion dollars in direct Federal funding.
(b) Diversity of nonprofit organizations.
Because of the diverse characteristics
and accounting practices of nonprofit
organizations, it is not possible to
specify the types of cost which may be
classified as indirect (F &A) cost in all
situations. Identification with a Fed-
eral award rather than the nature of
the goods and services involved is the
determining factor in distinguishing
direct from indirect (F &A) costs of
Federal awards. However, typical ex-
amples of indirect (F &A) cost for many
nonprofit organizations may include
depreciation on buildings and equip-
ment, the costs of operating and main-
taining facilities, and general adminis-
tration and general expenses, such as
the salaries and expenses of executive
officers, personnel administration, and
accounting.
(c) Federal Agency Acceptance of Nego-
tiated Indirect Cost Rates. (See also
§200.306 Cost sharing or matching.)
(1) The negotiated rates must be ac-
cepted by all Federal awarding agen-
cies. A Federal awarding agency may
use a rate different from the negotiated
rate for a class of Federal awards or a
single Federal award only when re-
quired by Federal statute or regula-
tion, or when approved by a Federal
awarding agency head or delegate
based on documented justification as
described in paragraph (c)(3) of this
section.
§ 200.414
(2) The Federal awarding agency head
or delegate must notify OMB of any ap-
proved deviations.
(3) The Federal awarding agency
must implement, and make publicly
available, the policies, procedures and
general decision making criteria that
their programs will follow to seek and
justify deviations from negotiated
rates.
(4) As required under §200,203 Notices
of funding opportunities, the Federal
awarding agency must include in the
notice of funding opportunity the poli-
cies relating to indirect cost rate reim-
bursement, matching, or cost share as
approved under paragraph (e)(1) of this
section. As appropriate, the Federal
agency should incorporate discussion
of these policies into Federal awarding
agency outreach activities with non -
Federal entities prior to the posting of
a notice of funding opportunity.
(d) Pass - through entities are subject
to the requirements in §200.331 Re-
quirements for pass- through entities,
paragraph (a)(4).
(e) Requirements for development
and submission of indirect (F &A) cost
rate proposals and cost allocation
plans are contained in Appendices III –
VII and Appendix IX as follows:
(1) Appendix III to Part 200 — Indirect
(F &A) Costs Identification and Assign-
ment, and Rate Determination for In-
stitutions of Higher Education (IHEs);
(2) Appendix IV to Part 200 — Indirect
(F &A) Costs Identification and Assign-
ment, and Rate Determination for Non-
profit Organizations;
(3) Appendix V to Part 200 — State/
Local Governmentwide Central Service
Cost Allocation Plans;
(4) Appendix VI to Part 200 — Public
Assistance Cost Allocation Plans;
(b) Appendix VII to Part 200 — States
and Local Government and Indian
Tribe Indirect Cost Proposals; and
(6) Appendix IX to Part 200 — Hospital
Cost Principles.
(f) In addition to the procedures out-
lined in the appendices in paragraph (e)
of this section, any non - Federal entity
that has never received a negotiated
indirect cost rate, except for those non -
Federal entities described in Appendix
VII to Part 200 — States and Local Gov-
ernment and Indian Tribe Indirect Cost
Proposals, paragraph D.l.b, may elect
139
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§ 200.415
to charge a de minimis rate of 10% of
modified total direct costs (MTDC)
which may be used indefinitely.As de-
scribed in §200.403 Factors affecting al-
lowability of costs, costs must be con-
sistently charged as either indirect or
direct costs, but may not be double
charged or inconsistently charged as
both. If chosen, this methodology once
elected must be used consistently for
all Federal awards until such time as a
non - Federal entity chooses to nego-
tiate for a rate, which the non - Federal
entity may apply to do at any time.
(g) Any non - Federal entity that has a
current federally negotiated indirect
cost rate may apply for a one -time ex-
tension of the rates in that agreement
for a period of up to four years. This
extension will be subject to the review
and approval of the cognizant agency
for indirect costs. If an extension is
granted the non - Federal entity may
not request a rate review until the ex-
tension period ends. At the end of the
4 -year extension, the non - Federal enti-
ty must re -apply to negotiate a rate.
Subsequent one -time extensions (up to
four years) are permitted if a renegoti-
ation is completed between each exten-
sion request.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76886, Dec. 19, 2014)
§200.415 Required certifications.
Required certifications include:
(a) To assure that expenditures are
proper and in accordance with the
terms and conditions of the Federal
award and approved project budgets,
the annual and final fiscal reports or
vouchers requesting payment under the
agreements must include a certifi-
cation, signed by an official who is au-
thorized to legally bind the non -Fed-
eral entity, which reads as follows: "By
signing this report, I certify to the best
of my knowledge and belief that the re-
port is true, complete, and accurate,
and the expenditures, disbursements
and cash receipts are for the purposes
and objectives set forth in the terms
and conditions of the Federal award. I
am aware that any false, fictitious, or
fraudulent information, or the omis-
sion of any material fact, may subject
me to criminal, civil or administrative
penalties for fraud, false statements,
false claims or otherwise. (U.S. Code
2 CFR Ch. ii (1 -1 -15 Edition)
Title 18, Section 1001 and Title 31, Sec-
tions 3729 -3730 and 3801 - 3812)."
(b) Certification of cost allocation
plan or indirect (F &A) cost rate pro-
posal. Each cost allocation plan or in-
direct (F &A) cost rate proposal must
comply with the following:
(1) A proposal to establish a cost allo-
cation plan or an indirect (F &A) cost
rate, whether submitted to a Federal
cognizant agency for indirect costs or
maintained on file by the non - Federal
entity, must be certified by the non -
Federal entity using the Certificate of
Cost Allocation Plan or Certificate of
Indirect Costs as set forth in Appen-
dices III through VII, and Appendix IX.
The certificate must be signed on be-
half of the non - Federal entity by an in-
dividual at a level no lower than vice
president or chief financial officer of
the non - Federal entity that submits
the proposal.
(2) Unless the non - Federal entity has
elected the option under §200.414 Indi-
rect (F &A) costs, paragraph (f), the
Federal Government may either dis-
allow all indirect (F &A) costs or uni-
laterally establish such a plan or rate
when the non - Federal entity fails to
submit a certified proposal for estab-
lishing such a plan or rate in accord-
ance with the requirements. Such a
plan or rate may be based upon audited
historical data or such other data that
have been furnished to the cognizant
agency for indirect costs and for which
it can be demonstrated that all unal-
lowable costs have been excluded.
When a cost allocation plan or indirect
cost rate is unilaterally established by
the Federal Government because the
non - Federal entity failed to submit a
certified proposal, the plan or rate es-
tablished will be set to ensure that po-
tentially unallowable costs will not be
reimbursed.
(c) Certifications by non - profit orga-
nizations as appropriate that they did
not meet the definition of a major non-
profit organization as defined in
§200.414 Indirect (F &A) costs, para-
graph (a).
(d) See also §200,450 Lobbying for an-
other required certification.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
140
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SPECIAL CONSIDERATIONS FOR STATES,
LOCAL GOVERNMENTS AND INDIAN
TRIBES
§ 200.416 Cost allocation plans and in-
direct cost proposals.
(a) For states, local governments and
Indian tribes, certain services, such as
motor pools, computer centers, pur-
chasing, accounting, etc., are provided
to operating agencies on a centralized
basis. Since Federal awards are per-
formed within the individual operating
agencies, there needs to be a process
whereby these central service costs can
be identified and assigned to benefitted
activities on a reasonable and con-
sistent basis. The central service cost
allocation plan provides that process.
(b) Individual operating agencies
(governmental department or agency),
normally charge Federal awards for in-
direct costs through an indirect cost
rate. A separate indirect cost rate(s)
proposal for each operating agency is
usually necessary to claim indirect
costs under Federal awards. Indirect
costs include:
(1) The indirect costs originating in
each department or agency of the gov-
ernmental unit carrying out Federal
awards and
(2) The costs of central governmental
services distributed through the cen-
tral service cost allocation plan and
not otherwise treated as direct costs.
(c) The requirements for development
and submission of cost allocation plans
(for central service costs and public as-
sistance programs) and indirect cost .
rate proposals are contained in appen-
dices IV, V and VI to this part.
§ 200.4.17 Interagency service.
The cost of services provided by one
agency to another within the govern-
mental unit may include allowable di-
rect costs of the service plus a pro -
rated share of indirect costs. A stand-
ard indirect cost allowance equal to
ten percent of the direct salary and
wage cost of providing the service (ex-
cluding overtime, shift premiums, and
fringe benefits) may be used in lieu of
determining the actual indirect costs
of the service. These services do not in-
clude centralized services included in
central service cost allocation plans as
described in Appendix V to Part 200—
§ 200.419
State /Local Government and Indian
Tribe -Wide Central Service Cost Allo-
cation Plans.
SPECIAL CONSIDERATIONS FOR
INSTITUTIONS OF HIGHER EDUCATION
§ 200.418 Costs incurred by states and
local governments.
Costs incurred or paid by a state or
local government on behalf of its IHEs
for fringe benefit programs, such as
pension costs and FICA and any other
costs specifically incurred on behalf of,
and in direct benefit to, the IHEs, are
allowable costs of such IHEs whether
or not these costs are recorded in the
accounting records of the institutions,
subject to the following:
(a) The costs meet the requirements
of §§200.402 Composition of costs
through 200.411 Adjustment of pre-
viously negotiated indirect (F &A) cost
rates containing unallowable costs, of
this subpart;
(b) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles in this part; and
(c) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
§200.419 Cost accounting standards
and disclosure statement.
(a) An IHE that receives aggregate
Federal awards totaling $50 million or
more in Federal awards subject to this
part in its most recently completed fis-
cal year must comply with the Cost
Accounting Standards Board's cost ac-
counting standards located at 48 CFR
9905.501, 9905.502, 9905.505, and 9905.506.
CAS - covered contracts awarded to the
IHEs are subject to the CAS require-
ments at 48 CFR 9900 through 9999 and
48 CFR part 30 (FAR Part 30).
(b) Disclosure statement. An IHE that
receives aggregate Federal awards to-
taling $50 million or more subject to
this part during its most recently com-
pleted fiscal year must disclose their
cost accounting practices by filing a
Disclosure Statement (DS -2), which is
reproduced in Appendix III to Part
200 — Indirect (F &A) Costs Identifica-
tion and Assignment, and Rate Deter-
mination for Institutions of Higher
Education (IHEs). With the approval of
141
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§ 200.420
the cognizant agency for indirect costs,
an IHE may meet the DS -2 submission
by submitting the DS-2 for each busi-
ness unit that received $50 million or
more in Federal awards.
(1) The DS -2 must be submitted to
the cognizant agency for indirect costs
with a copy to the IHE's cognizant
agency for audit.
(2) An IHE is responsible for main-
taining an accurate DS -2 and com-
plying with disclosed cost accounting
practices. An IHE must file amend-
ments to the DS-2 to the cognizant
agency for indirect costs six months in
advance of a disclosed practice being
changed to comply with a new or modi-
fied standard, or when a practice is
changed for other reasons. An IHE may
proceed with implementing the change
only if it has not been notified by the
Federal cognizant agency for indirect
costs that either a longer period will be
needed for review or there are concerns
with the potential change within the
six months period. Amendments of a
DS -2 may be submitted at any time.
Resubmission of a complete, updated
DS -2 is discouraged except when there
are extensive changes to disclosed
practices.
(3) Cost and funding adjustments. Cost
adjustments must be made by the cog-
nizant agency for indirect costs if an
IHE fails to comply with the cost poli-
cies in this part or fails to consistently
follow its established or disclosed cost
accounting practices when estimating,
accumulating or reporting the costs of
Federal awards, and the aggregate cost
impact on Federal awards is material.
The cost adjustment must normally be
made on an aggregate basis for all af-
fected Federal awards through an ad-
justment of the IHE's future F &A costs
rates or other means considered appro-
priate by the cognizant agency for indi-
rect costs. Under the terms of CAS cov-
ered contracts, adjustments in the
amount of funding provided may also
be required when the estimated pro-
posal costs were not determined in ac-
cordance with established cost ac-
counting practices.
(4) Overpayments. Excess amounts
paid in the aggregate by the Federal
Government under Federal awards due
to a noncompliant cost accounting
practice used to estimate, accumulate,
2 CFR Ch. II (1 -1 -15 Edition)
or report costs must be credited or re-
funded, as deemed appropriate by the
cognizant agency for indirect costs. In-
terest applicable to the excess amounts
paid in the aggregate during the period
of noncompliance must also be deter-
mined and collected in accordance with
applicable Federal agency regulations.
(5) Compliant cost accounting practice
changes. Changes from one compliant
cost accounting practice to another
compliant practice that are approved
by the cognizant agency for indirect
costs may require cost adjustments if
the change has a material effect on
Federal awards and the changes are
deemed appropriate by the cognizant
agency for indirect costs.
(6) Responsibilities. The cognizant
agency for indirect cost must:
(i) Determine cost adjustments for
all Federal awards in the aggregate on
behalf of the Federal Government. Ac-
tions of the cognizant agency for indi-
rect cost in making cost adjustment
determinations must be coordinated
with all affected Federal awarding
agencies to the extent necessary.
(ii) Prescribe guidelines and establish
internal procedures to promptly deter-
mine on behalf of the Federal Govern-
ment that a DS -2 adequately discloses
the IHE's cost accounting practices
and that the disclosed practices are
compliant with applicable CAS and the
requirements of this part.
(iii) Distribute to all affected Federal
awarding agencies any DS-2 determina-
tion of adequacy or noncompliance.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76886, Dec. 19, 2014]
GENERAL PROVISIONS FOR SELECTED
ITEMS OF COST
§ 200.420 Considerations for selected
items of cost.
This section provides principles to be
applied in establishing the allowability
of certain items involved in deter-
mining cost, in addition to the require-
ments of Subtitle II. Basic Consider-
ations of this subpart. These principles
apply whether or not a particular item
of cost is properly treated as direct
cost or indirect (F &A) cost. Failure to
mention a particular item of cost is
not intended to imply that it is either
142
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allowable or unallowable; rather, deter-
mination as to allowability in each
case should be based on the treatment
provided for similar or related items of
cost, and based on the principles de-
scribed in § §200.402 Composition of
costs through 200.411 Adjustment of
previously negotiated indirect (F &A)
cost rates containing unallowable
costs. In case of a discrepancy between
the provisions of a specific Federal
award and the provisions below, the
Federal award governs. Criteria out-
lined in §200.403 Factors affecting al-
lowability of costs must be applied in
determining allowability. See also
§200,102 Exceptions.
§ 200.421 Advertising and public rela-
tions.
(a) The term advertising costs means
the costs of advertising media and cor-
ollary administrative costs. Adver-
tising media include magazines, news-
papers, radio and television, direct
mail, exhibits, electronic or computer
transmittals, and the like.
(b) The only allowable advertising
costs are those which are solely for:
(1) The recruitment of personnel re-
quired by the non - Federal entity for
performance of a Federal award (See
also §200.463 Recruiting costs);
(2) The procurement of goods and
services for the performance of a Fed-
eral award;
(3) The disposal of scrap or surplus
materials acquired in the performance
of a Federal award except when non -
Federal entities are reimbursed for dis-
posal costs at a predetermined amount;
or
(4) Program outreach and other spe-
cific purposes necessary to meet the re-
quirements of the Federal award.
(c) The term "public relations" in-
cludes community relations and means
those activities dedicated to maintain-
ing the image of the non - Federal entity
or maintaining or promoting under-
standing and favorable relations with
the community or public at large or
any segment of the public.
(d) The only allowable public rela-
tions costs are:
(1) Costs specifically required by the
Federal award;
(2) Costs of communicating with the
public and press pertaining to specific
§ 200.424
activities or accomplishments which
result from performance of the Federal
award (these costs are considered nec-
essary as part of the outreach effort for
the Federal award); or
(3) Costs of conducting general liai-
son with news media and government
public relations officers, to the extent
that such activities are limited to com-
munication and liaison necessary to
keep the public informed on matters of
public concern, such as notices of fund-
ing opportunities, financial matters,
etc.
(e) Unallowable advertising and pub-
lic relations costs include the fol-
lowing:
(1) All advertising and public rela-
tions costs other than as specified in
paragraphs (b) and (d) of this section;
(2) Costs of meetings, conventions,
convocations, or other events related
to other activities of the entity (see
also §200.432 Conferences), including:
(i) Costs of displays, demonstrations,
and exhibits;
(ii) Costs of meeting rooms, hospi-
tality suites, and other special facili-
ties used in conjunction with shows
and other special events; and
(iii) Salaries and wages of employees
engaged in setting up and displaying
exhibits, making demonstrations, and
providing briefings;
(3) Costs of promotional items and
memorabilia, including models, gifts,
and souvenirs;
(4) Costs of advertising and public re-
lations designed solely to promote the
non - Federal entity.
§ 200.422 Advisory councils.
Costs incurred by advisory councils
or committees are unallowable unless
authorized by statute, the Federal
awarding agency or as an indirect cost
where allocable to Federal awards. See
§200.444 General costs of government,
applicable to states, local governments
and Indian tribes.
§ 200.423 Alcoholic beverages.
Costs of alcoholic beverages are unal-
lowable.
§ 200.424 Alumni/ae activities.
Costs incurred by IHEs for, or in sup-
port of, alumni/ae activities are unal-
lowable.
143
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§ 200.425
§ 200.425 Audit services.
(a) A reasonably proportionate share
of the costs of audits required by, and
performed in accordance with, the Sin-
gle Audit Act Amendments of 1996 (31
U.S.C. 7501 - 7507), as implemented by re-
quirements of this part, are allowable.
However, the following audit costs are
unallowable:
(1) Any costs when audits required by
the Single Audit Act and Subpart F—
Audit Requirements of this part have
not been conducted or have been con-
ducted but not in accordance there-
with; and
(2) Any costs of auditing a non -Fed-
eral entity that is exempted from hav-
ing an audit conducted under the Sin-
gle Audit Act and Subpart F —Audit
Requirements of this part because its
expenditures under Federal awards are
less than $750,000 during the non -Fed-
eral entity's fiscal year.
(b) The costs of a financial statement
audit of a non - Federal entity that does
not currently have a Federal award
may be included in the indirect cost
pool for a cost allocation plan or indi-
rect cost proposal.
(c) Pass - through entities may charge
Federal awards for the cost of agreed -
upon- procedures engagements to mon-
itor subrecipients (in accordance with
Subpart D —Post Federal Award Re-
quirements of this part, §§200.330 Sub -
recipient and contractor determina-
tions through 200.332 Fixed Amount
Subawards) who are exempted from the
requirements of the Single Audit Act
and Subpart F —Audit Requirements of
this part: This cost is allowable only if
the agreed- upon - procedures engage-
ments are:
(1) - Conducted in accordance with
GAGAS attestation standards;
(2) Paid for and arranged by the pass -
through entity; and
(3) Limited in scope to one or more of
the following types of compliance re-
quirements: activities allowed or
unaliowed; allowable costs /cost prin-
ciples; eligibility; and reporting.
§ 200.420 Bad debts.
Bad debts (debts which have been de-
termined to be uncollectable), includ-
ing losses (whether actual or esti-
mated) arising from uncollectable ac-
counts and other claims, are unallow-
2 CFR Ch. II (1 -1 -15 Edition)
able. Related collection costs, and re-
lated legal costs, arising from such
debts after they have been determined
to be uncollectable are also unallow-
able. See also §200.428 Collections of
improper payments.
§ 200.427 Bonding costs.
(a) Bonding costs arise when the Fed-
eral awarding agency requires assur-
ance against financial loss to itself or
others by reason of the act or default
of the non - Federal entity. They arise
also in instances where the non-Fed-
eral entity requires similar assurance,
including: bonds as bid, performance,
payment, advance payment, infringe-
ment, and fidelity bonds for employees
and officials.
(b) Costs of bonding required pursu-
ant to the terms and conditions of the
Federal award are allowable.
(c) Costs of bonding required by the
non - Federal entity in the general con-
duct of its operations are allowable as
an indirect cost to the extent that such
bonding is in accordance with sound
business practice and the rates and pre-
miums are reasonable under the cir-
cumstances.
§200.428 Collections of improper pay-
ments.
The costs incurred by a non - Federal
entity to recover improper payments
are allowable as either direct or indi-
rect costs, as appropriate. Amounts
collected may be used by the non -Fed-
eral entity in accordance with cash
management standards set forth in
§ 200.305 Payment.
§200.429 Commencement and convoca-
tion costs.
For IHEs, costs incurred for com-
mencements and convocations are un-
allowable; except as provided for in Ap-
pendix III to Part 200 — Indirect (F &A)
Costs Identification and Assignment,
and Rate Determination for Institu-
tions of Higher Education (IHEs), para-
graph (B)(9) Student Administration
and Services, as student activity costs.
§ 200.430 Compensation — personal
services.
(a) General. Compensation for per-
sonal services includes all remunera-
tion, paid currently or accrued, for
144
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OMB Guidance
services of employees rendered during
the period of performance under the
Federal award, including but not nec-
essarily limited to wages and salaries.
Compensation for personal services
may also include fringe benefits which
are addressed in §200.431 Compensa-
tion— fringe benefits. Costs of com-
pensation are allowable to the extent
that they satisfy the specific require-
ments of this part, and that the total
compensation for individual employ-
ees:
(1) Is, reasonable for the services ren-
dered and conforms to the established
written policy of the non - Federal enti-
ty consistently applied to both Federal
and non - Federal activities;
(2) Follows an appointment made in
accordance with a non - Federal entity's
laws and/or rules or written policies
and meets the requirements of Federal
statute, where applicable; and
(3) Is determined and supported as
provided in paragraph (i) of this sec-
tion, Standards for Documentation of
Personnel Expenses, when applicable.
(b) Reasonableness. Compensation for
employees engaged in work on Federal
awards will be considered reasonable to
the extent that it is consistent with
that paid for similar work in other ac-
tivities of the non - Federal entity. In
cases where the kinds of employees re-
quired for Federal awards are not found
in the other activities of the non -Fed-
eral entity, compensation will be con-
sidered reasonable to the extent that it
is comparable to that paid for similar
work in the labor market in which the
non - Federal entity competes for the
kind of employees involved.
(c) Professional activities outside the
non - Federal entity. Unless an arrange-
ment is specifically authorized by a
Federal awarding agency, a non -Fed-
eral entity must follow its written non -
Federal entity -wide policies and prac-
tices concerning the permissible extent
of professional services that can be pro-
vided outside the non - Federal entity
for non - organizational compensation.
Where such non - Federal entity -wide
written policies do not exist or do not
adequately define the permissible ex-
tent of consulting or other non- organi-
zational activities undertaken for
extra outside pay, the Federal Govern-
ment may require that the effort of
§ 200.430
professional staff working on Federal
awards be allocated between:
(1) Non - Federal entity activities, and
(2) Non - organizational professional
activities. If the Federal awarding
agency considers the extent of non -or-
ganizational professional effort exces-
sive or inconsistent with the conflicts -
of- interest terms and conditions of the
Federal award, appropriate arrange-
ments governing compensation will be
negotiated on a case -by -case basis.
(d) Unallowable costs. (1) Costs which
are unallowable under other sections of
these principles must not be allowable
under this section solely on the basis
that they constitute personnel com-
pensation.
(2) The allowable compensation for
certain employees is subject to a ceil-
ing in accordance with statute. For the
amount of the ceiling for cost -reim-
bursement contracts, the covered com-
pensation subject to the ceiling, the
covered employees, and other relevant
provisions, see 10 U.S.C. 2324(e)(1)(P),
and 41 U.S.C. 1127 and 4304(a)(16). For
other types of Federal awards, other
statutory ceilings may apply.
(e) Special considerations. Special con-
siderations in determining allowability
of compensation will be given to any
change in a non - Federal entity's com-
pensation policy resulting in a substan-
tial increase in its employees' level of
compensation (particularly when the
change was concurrent with an in-
crease in the ratio of Federal awards to
other activities) or any change in the
treatment of allowability of specific
types of compensation due to changes
in Federal policy.
(f) Incentive compensation. Incentive
compensation to employees based on
cost reduction, or efficient perform-
ance, suggestion awards, safety awards,
etc., is allowable to the extent that the
overall compensation is determined to
be reasonable and such costs are paid
or accrued pursuant to an agreement
entered into in good faith between the
non - Federal entity and the employees
before the services were rendered, or
pursuant to an established plan fol-
lowed by the non - Federal entity so
consistently as to imply, in effect, an
agreement to make such payment.
145
ATTACH:E: ......�........
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§ 200.430
(g) Nonprofit organizations. For com-
pensation to members of nonprofit or-
ganizations, trustees, directors, associ-
ates, officers, or the immediate fami-
lies thereof, determination must be
made that such compensation is rea-
sonable for the actual personal services
rendered rather than a distribution of
earnings in excess of costs. This may
include director's and executive com-
mittee member's fees, incentive
awards, allowances for off -site pay, in-
centive pay, location allowances, hard-
ship pay, and cost -of- living differen-
tials.
(h) Institutions of higher education
(IHEs). (1) Certain conditions require
special consideration and possible limi-
tations in determining allowable per-
sonnel compensation costs under Fed-
eral awards. Among such conditions
are the following:
(i) Allowable activities. Charges to
Federal awards may include reasonable
amounts for activities contributing
and directly related to work under an
agreement, such as delivering special
lectures about specific aspects of the
ongoing activity, writing reports and
articles, developing and maintaining
protocols (human, animals, etc.), man-
aging substances /chemicals, managing
and securing project- specific data, co-
ordinating research subjects, partici-
pating in appropriate seminars, con-
sulting with colleagues and graduate
students, and attending meetings and
conferences.
(ii) Incidental activities. Incidental
activities for which supplemental com-
pensation is allowable under written
institutional policy (at a rate not to
exceed institutional base salary) need
not be included in the records described
in paragraph (i) of this section to di-
rectly charge payments of incidental
activities, such activities must either
be specifically provided for in the Fed-
eral award budget or receive prior writ-
ten approval by the Federal awarding
agency.
(2) Salary basis. Charge's for work per-
formed on Federal awards by faculty
members during the academic year are
allowable at the IBS rate. Except as
noted in paragraph (h)(1)(h) of this sec-
tion, in no event will charges to Fed-
eral awards, irrespective of the basis of
computation, exceed the proportionate
2 CFR Ch. II (1 -1 -15 Edition)
share of the IBS for that period. This
principle applies to all members of fac-
ulty at an institution. IBS is defined as
the annual compensation paid by an
IHE for an individual's appointment,
whether that individual's time is spent
on research, instruction, administra-
tion, or other activities. IBS excludes
any income that an individual earns
outside of duties performed for the
IHE. Unless there is prior approval by
the Federal awarding agency, charges
of a faculty member's salary to a Fed-
eral award must not exceed the propor-
tionate share of the IBS for the period
during which the faculty member
worked on the award.
(3) Intra- Institution of Higher Edu-
cation (IHE) consulting. Intra -IHE con-
sulting by faculty is assumed to be un-
dertaken as an IHE obligation requir-
ing no compensation in addition to
IBS. However, in unusual cases where
consultation is across departmental
lines or involves a separate or remote
operation, and the work performed by
the faculty member is in addition to
his or her regular responsibilities, any
charges for such work representing ad-
ditional compensation above IBS are
allowable provided that such con-
sulting arrangements are specifically
provided for in the Federal award or
approved in writing by the Federal
awarding agency.
(4) Extra Service Pay normally rep-
resents overload compensation, subject
to institutional compensation policies
for services above and beyond IBS.
Where extra service pay is a result of
Intra -IHE consulting, it is subject to
the same requirements of paragraph (b)
above. It is allowable if all of the fol-
lowing conditions are met:
(i) The non - Federal entity estab-
lishes consistent written policies which
apply uniformly to all faculty mem-
bers, not just those working on Federal
awards.
(ii) The non - Federal entity estab-
lishes a consistent written definition of
work covered by IBS which is specific
enough to determine conclusively when
work beyond that level has occurred.
This may be described in appointment
letters or other documentations.
(iii) The supplementation amount
paid is commensurate with the IBS
146
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OMB Guidance
rate of pay and the amount of addi-
tional work performed. See paragraph
(h)(2) of this section.
(iv) The salaries, as supplemented,
fall within the salary structure and
pay ranges established by and docu-
mented in writing or otherwise applica-
ble to the non - Federal entity.
(v) The total salaries charged to Fed-
eral awards including extra service pay
are subject to the Standards of Docu-
mentation as described in paragraph (i)
of this section.
(5) Periods outside the academic year.
(i) Except as specified for teaching ac-
tivity in paragraph (h)(5)(ii) of this sec-
tion, charges for work performed by
faculty members on Federal awards
during periods not included in the base
salary period will be at a rate not in
excess of the IBS.
(ii) Charges for teaching activities
performed by faculty members on Fed-
eral awards during periods not included
in IBS period will be based on the nor-
mal written policy of the IHE gov-
erning compensation to faculty mem-
bers for teaching assignments during
such periods.
(6) Part -time faculty. Charges for work
performed on Federal awards by fac-
ulty members having only part -time
appointments will be determined at a
rate not in excess of that regularly
paid for part -time assignments.
(7) Sabbatical leave costs. Rules for
sabbatical leave are as follow:
(i) Costs of leaves of absence by em-
ployees for performance of graduate
work or sabbatical study, travel, or re-
search are allowable provided the IHE
has a uniform written policy on sab-
batical leave for persons engaged in in-
struction and persons engaged in re-
search. Such costs will be allocated on
an equitable basis among all related
activities of the IHE.
(ii) Where sabbatical leave is in-
cluded in fringe benefits for which a
cost is determined for assessment as a
direct charge, the aggregate amount of
such assessments applicable to all
work of the institution during the base
period must be reasonable in relation
to the IHE's actual experience under
its sabbatical leave policy.
(8) Salary rates for non - faculty mem-
bers. Non - faculty full -time professional
personnel may also earn "extra service
§ 200.430
pay" in accordance with the non -Fed-
eral entity's written policy and con-
sistent with paragraph (h)(1)(i) of this
section.
(i) Standards for Documentation of Per-
sonnel Expenses (1) Charges to Federal
awards for salaries and wages must be
based on records that accurately re-
flect the work performed. These
records must:
(i) Be supported by a system of inter-
nal control which provides reasonable
assurance that the charges are accu-
rate, allowable, and properly allocated;
(ii) Be incorporated into the official
records of the non - Federal entity;
(iii) Reasonably reflect the total ac-
tivity for which the employee is com-
pensated by the non - Federal entity,
not exceeding 100% of compensated ac-
tivities (for IHE, this per the IHE's def-
inition of IBS);
(iv) Encompass both federally as-
sisted and all other activities com-
pensated by the non - Federal entity on
an integrated basis, but may include
the use of subsidiary records as defined
in the non - Federal entity's written pol-
icy;
(v) Comply with the established ac-
counting policies and practices of the
non - Federal entity (See paragraph
(h)(1)(h) above for treatment of inci-
dental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the
employee's salary or wages among spe-
cific activities or cost objectives if the
employee works on more than one Fed-
eral award; a Federal award and non -
Federal award; an indirect cost activ-
ity and a direct cost activity; two or
more indirect activities which are allo-
cated using different allocation bases;
or an unallowable activity and a direct
or indirect cost activity.
(viii) Budget estimates (i.e., esti-
mates determined before the services
are performed) alone do not qualify as
support for charges to Federal awards,
but may be used for interim accounting
purposes, provided that:
(A) The system for establishing the
estimates produces reasonable approxi-
mations of the activity actually per-
formed;
(B) Significant changes in the cor-
responding work activity (as defined by
147
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§ 200.430
the non - Federal entity's written poli-
cies) are identified and entered into the
records in a timely manner. Short term
(such as one or two months) fluctua-
tion between workload categories need
not be considered as long as the dis-
tribution of salaries and wages is rea-
sonable over the longer term; and
(C) The non- Federal entity's system
of internal controls includes processes
to review after - the -fact interim
charges made -to a Federal awards
based on budget estimates. All nec-
essary adjustment must be made such
that the final amount charged to the
Federal award is accurate, allowable,
and properly allocated.
(ix) Because practices vary as to the
activity constituting a full workload
(for IHEs, IBS), records may reflect
categories of activities expressed as a
percentage distribution of total activi-
ties.
(x) It is recognized that teaching, re-
search, service, and administration are
often inextricably intermingled in an
academic setting. When recording sala-
ries and wages charged to Federal
awards for IHEs, a precise assessment
of factors that contribute to costs is
therefore not always feasible, nor is it
expected.
(2) For records which meet the stand-
ards required in paragraph (i)(1) of this
section, the non - Federal entity will not
be required to provide additional sup-
port or documentation for the work
performed, other than that referenced
in paragraph (1)(3) of this section.
(3) In accordance with Department of
Labor regulations implementing the
Fair Labor Standards Act (FLSA) (29
CFR part 516), charges for the salaries
and wages of nonexempt employees, in
addition to the supporting documenta-
tion described in this section, must
also be supported by records indicating
the total number of hours worked each
day.
(4) Salaries and wages of employees
used in meeting cost sharing or match-
ing requirements on Federal awards
must be supported in the same manner
as salaries and wages claimed for reim-
bursement from Federal awards.
(5) For states, local governments and
Indian tribes, substitute processes or
systems for allocating salaries and
wages to Federal awards may be used
2 CFR Ch. II (1 -1 -15 Edition)
in place of or in addition to the records
described in paragraph (1) if approved
by the cognizant agency for indirect
cost. Such systems may include, but
are not limited to, random moment
sampling, "rolling" time studies, case
counts, or other quantifiable measures
of work performed.
(i) Substitute systems which use
sampling methods (primarily for Tem-
porary Assistance for Needy Families
(TANF), the Supplemental Nutrition
Assistance Program (SNAP), Medicaid,
and other public assistance programs)
must meet acceptable statistical sam-
pling standards including:
(A) The sampling universe must in-
clude all of the employees whose sala-
ries and wages are to be allocated
based on sample results except as pro-
vided in paragraph (i)(5)(iii) of this sec-
tion;
(B) The entire time period involved
must be covered by the sample; and
(C) The results must be statistically
valid and applied to the period being
sampled.
(ii) Allocating charges for the sam-
pled employees' supervisors, clerical
and support staffs, based on the results
of the sampled employees, will be ac-
ceptable.
(iii) Less than full compliance with
the statistical sampling standards
noted in subsection (5)(i) may be ac-
cepted by the cognizant agency for in-
direct costs if it concludes that the
amounts to be allocated to Federal
awards will be minimal, or if it con-
cludes that the system proposed by the
non - Federal entity will result in lower
costs to Federal awards than a system
which complies with the standards.
(6) Cognizant agencies for indirect
costs are encouraged to approve alter-
native proposals based on outcomes
and milestones for program perform-
ance where these are clearly docu-
mented. Where approved by the Federal
cognizant agency for indirect costs,
these plans are acceptable as an alter-
native to the requirements of para-
graph (i)(1). of this section.
(7) For Federal awards of similar pur-
pose activity or instances of approved
blended funding, a non - Federal entity
may submit performance plans that in-
corporate funds from multiple Federal
awards and account for their combined
148
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OMB Guidance
use based on performance- oriented
metrics, provided that such plans are
approved in advance by all involved
Federal awarding agencies. In these in-
stances, the non - Federal entity must
submit a request for waiver of the re-
quirements based on documentation
that describes the method of charging
costs, relates the charging of costs to
the specific activity that is applicable
to all fund sources, and is based on
quantifiable measures of the activity
in relation to time charged.
(8) For a non - Federal entity where
the records do not meet the standards
described in this section, the Federal
Government may require personnel ac-
tivity reports, including prescribed cer-
tifications, or equivalent documenta-
tion that support the records as re-
quired in this section.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§ 200.431 Compensation —fringe bene-
fits.
(a) Fringe benefits are allowances
and services provided by employers to
their employees as compensation in ad-
dition to regular salaries and wages.
Fringe benefits include, but are not
limited to, the costs of leave (vacation,
family - related, sick or military), em-
ployee insurance, pensions, and unem-
ployment benefit plans. Except as pro-
vided elsewhere in these principles, the
costs of fringe benefits are allowable
provided that the benefits are reason-
able and are required by law, non -Fed-
eral entity - employee agreement, or an
established policy of the non - Federal
entity.
(b) Leave. The cost of fringe benefits
in the form of regular compensation
paid to employees during periods of au-
thorized absences from the job, such as
for annual leave, family- related leave,
sick leave, holidays, court leave, mili-
tary leave, administrative leave, and
other similar benefits, are allowable if
all of the following criteria are met:
(1) They are provided under estab-
lished written leave policies;
(2) The costs are equitably allocated
to all related activities, including Fed-
eral awards; and,
(3) The accounting basis (cash or ac-
crual) selected for costing each type of
leave is consistently followed by the
§ 200.431
non - Federal entity or specified group-
ing of employees.
(i) When a non - Federal entity uses
the cash basis of accounting, the cost
of leave is recognized in the period that
the leave is taken and paid for. Pay-
ments for unused leave when an em-
ployee retires or terminates employ-
ment are allowable in the year of pay-
ment.
(ii) The accrual basis may be only
used for those types of leave for which
a liability as defined by GAAP exists
when the leave is earned. When a non -
Federal entity uses the accrual basis of
accounting, allowable leave costs are
the lesser of the amount accrued or
funded.
(c) The cost of fringe benefits in the
form of employer contributions or ex-
penses for social security; employee
life, health, unemployment, and work-
er's compensation insurance (except as
indicated in §200.447 Insurance and in-
demnification); pension plan costs (see
paragraph (i) of this section); and other
similar benefits are allowable, provided
such benefits are granted under estab-
lished written policies. Such benefits,
must be allocated to Federal awards
and all other activities in a manner
consistent with the pattern of benefits
attributable to the individuals or
group(s) of employees whose salaries
and wages are chargeable to such Fed-
eral awards and other activities, and
charged as direct or indirect costs in
accordance with the non - Federal enti-
ty's accounting practices.
(d) Fringe benefits may be assigned
to cost objectives by identifying spe-
cific benefits to specific individual em-
ployees or by allocating on the basis of
entity -wide salaries and wages of the
employees receiving the benefits. When
the allocation method is used, separate
allocations must be made to selective
groupings of employees, unless the
non - Federal entity demonstrates that
costs in relationship to salaries and
wages do not differ significantly for
different groups of employees.
(e) Insurance. See also §200.447 Insur-
ance and indemnification, paragraphs
(d)(1) and (2).
(1) Provisions for a reserve under a
self - insurance program for unemploy-
ment compensation or workers' com-
pensation are allowable to the extent
149
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§ 200.431
that the provisions represent reason-
able estimates of the liabilities for
such compensation, and the types of
coverage, extent of coverage, and rates
and premiums would have been allow-
able had insurance been purchased to
cover the risks. However, provisions for
self- insured liabilities which do not be-
come payable for more than one year
after the provision is made must not
exceed the present value of the liabil-
ity.
(2) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar responsi-
bility are allowable only to the extent
that the insurance represents addi-
tional compensation. The costs of such
insurance when the non - Federal entity
is named as beneficiary are unallow-
able.
(3) Actual claims paid to or on behalf
of employees or former employees for
workers' compensation, unemployment
compensation, severance pay, and simi-
lar employee benefits (e.g., post- retire-
ment health benefits), are allowable in
the year of payment provided that the
non- Federal entity follows a consistent
costing policy.
(f) Automobiles. That portion of auto-
mobile costs furnished by the entity
that relates to personal use by employ-
ees (including transportation to and
from work) is unallowable as fringe
benefit or indirect (F &A) costs regard-
less of whether the cost is reported as
taxable income to the employees.
(g) Pension Plan Costs. Pension plan
costs which are incurred in accordance
with the established policies of the
non - Federal entity are allowable, pro-
vided that:
(1) Such policies meet the test of rea-
sonableness.
(2) The methods of cost allocation are
not discriminatory.
(3) For entities using accrual based
accounting, the cost assigned to each
fiscal year is determined in accordance
with GAAP.
(4) The costs assigned to a given fis-
cal year are funded for all plan partici-
pants within six months after the end
of that year. However, increases to nor-
mal and past service pension costs
caused by a delay in funding the actu-
arial liability beyond 30 calendar days
after each quarter of the year to which
2 CFR Ch. II (1 -1 -15 Edition)
such costs are assignable are unallow-
able. Non - Federal entity may elect to
follow the "Cost Accounting Standard
for Composition and Measurement of
Pension Costs" (48 CFR 9904.412).
(5) Pension plan termination insur-
ance premiums paid pursuant to the
Employee Retirement Income Security
Act ( ERISA) of 1974 (29 U.S.C. 1301 -1461)
are allowable. Late payment charges
on such premiums are unallowable. Ex-
cise taxes on accumulated funding defi-
ciencies and other penalties imposed
under ERISA are unallowable.
(6) Pension plan costs may be com-
puted using a pay -as- you -go method or
an acceptable actuarial cost method in
accordance with established written
policies of the non - Federal entity.
(i) For pension plans financed on a
pay -as- you -go method, allowable costs
will be limited to those representing
actual payments to retirees or their
beneficiaries.
(ii) Pension costs calculated using an
actuarial cost -based method recognized
by GAAP are allowable for a given fis-
cal year if they are funded for that
year within six months after the end of
that year. Costs funded after the six
month period (or a later period agreed
to by the cognizant agency for indirect
costs) are allowable in the year funded.
The cognizant agency for indirect costs
may agree to an extension of the six
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursement and the non - Federal enti-
ty's contribution to the pension fund.
Adjustments may be made by cash re-
fund or other equitable procedures to
compensate the Federal Government
for the time value of Federal reim-
bursements in excess of contributions
to the pension fund.
(iii) Amounts funded by the non -Fed-
eral entity in excess of the actuarially
determined amount for a fiscal year
may be used as the non - Federal enti-
ty's contribution in future periods.
(iv) When a non - Federal entity con-
verts to an acceptable actuarial cost
method, as defined by GAAP, and funds
pension costs in accordance with this
method, the unfunded liability at the
150
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time of conversion is allowable if am-
ortized over a period of years in accord-
ance with GAAP.
(v) The Federal Government must re-
ceive an equitable share of any pre-
viously allowed pension costs (includ-
ing earnings thereon) which revert or
inure to the non - Federal entity in the
form of a refund, withdrawal, or other
credit.
(h) Post - Retirement Health. Post -re-
tirement health plans (PRHP) refers to
costs of health insurance or health
services not included in a pension plan
covered by paragraph (g) of this section
for retirees and their spouses, depend-
ents, and survivors. PRHP costs may
be computed using a pay -as- you -go
method or an acceptable actuarial cost
method in accordance with established
written policies of the non - Federal en-
tity.
(1) For PRHP financed on a pay -as-
you-go method, allowable costs will be
limited to those representing actual
payments to retirees or their bene-
ficiaries.
(2) PRHP costs calculated using an
actuarial cost method recognized by
GAAP are allowable if they are funded
for that year within six months after
the end of that year. Costs funded after
the six month period (or a later period
agreed to by the cognizant agency) are
allowable in the year funded. The Fed-
eral cognizant agency for indirect costs
may agree to an extension of the six
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursements and the non - Federal enti-
ty's contributions to the PRHP fund.
Adjilstments may be made by cash re-
fund, reduction in current year's PRHP
costs, or other equitable procedures to
compensate the Federal Government
for the time value of Federal reim-
bursements in excess of contributions
to the PRHP fund.
(3) Amounts funded in excess of the
actuarially determined amount for a
fiscal year may be used as the Federal
Government's contribution in a future
period.
(4) When a non - Federal entity con-
verts to an acceptable actuarial cost
method and funds PRHP costs in ac-
cordance with this method, the initial
§ 200.431
unfunded liability attributable to prior
years is allowable if amortized over a
period of years in accordance with
GAAP, or, if no such GAAP period ex-
ists, over a period negotiated with the
cognizant agency for indirect costs.
(5) To be allowable in the current
year, the PRHP costs must be paid ei-
ther to:
(i) An insurer or other benefit pro-
vider as current year costs or pre-
miums, or
(ii) An insurer or trustee to maintain
a trust fund or reserve for the sole pur-
pose of providing post- retirement bene-
fits to retirees and other beneficiaries.
(6) The Federal Government must re-
ceive an equitable share of any
amounts of previously allowed post -re-
tirement benefit costs (including earn-
ings thereon) which revert or inure to
the non - Federal entity in the form of a
refund, withdrawal, or other credit.
(i) Severance Pay. (1) Severance pay,
also commonly referred to as dismissal
wages, is a payment in addition to reg-
ular salaries and wages, by non - Federal
entities to workers whose employment
is being terminated. Costs of severance
pay are allowable only to the extent
that in each case, it is required by (a)
law, (b) employer - employee agreement,
(c) established policy that constitutes,
in effect, an implied agreement on the
non - Federal entity's part, or (d) cir-
cumstances of the particular employ-
ment.
(2) Costs of severance payments are
divided into two categories as follows:
(i) Actual normal turnover severance
payments must be allocated to all ac-
tivities; or, where the non - Federal en-
tity provides for a reserve for normal
severances, such method will be ac-
ceptable if the charge to current oper-
ations is reasonable in light of pay-
ments actually made for normal
severances over a representative past
period, and if amounts charged are al-
located to all activities of the non -Fed-
eral entity.
(ii) Measurement of costs of abnor-
mal or mass severance pay by means of
an accrual will not achieve equity to
both parties. Thus, accruals for this
purpose are not allowable. However,
the Federal Government recognizes its
obligation to participate, to the extent
151
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§ 200.432
of its fair share, in any specific pay-
ment. Prior approval by the Federal
awarding agency or cognizant agency
for indirect cost, as appropriate, is re-
quired.
(3) Costs incurred in certain sever-
ance pay packages which are in an
amount in excess of the normal sever-
ance pay paid by the non - Federal enti-
ty to an employee upon termination of
employment and are paid to the em-
ployee contingent upon a change in
management control over, or owner-
ship of, the non - Federal entity's assets,
are unallowable.
(4) Severance payments to foreign na-
tionals employed by the non- Federal
entity outside the United States, to
the extent that the amount exceeds the
customary or prevailing practices for
the non - Federal entity in the United
States, are unallowable, unless they
are necessary for the performance of
Federal programs and approved by the
Federal awarding agency.
(5) Severance payments to foreign na-
tionals employed by the non- Federal
entity outside the United States due to
the termination of the foreign national
as a result of the closing of, or curtail-
ment of activities by, the non - Federal
entity in that country, are unallow-
able, unless they are necessary for the
performance of Federal programs and
approved by the Federal awarding
agency.
(j)(1) For IHEs only. Fringe benefits in
the form of tuition or remission of tui-
tion for individual employees are al-
lowable, provided such benefits are
granted in accordance with established
non - Federal entity policies, and are
distributed to all non - Federal entity
activities on an equitable basis. Tui-
tion benefits for family members other
than the employee are unallowable.
(2) Fringe benefits in the form of tui-
tion or remission of tuition for indi-
vidual employees not employed by
IHEs are limited to the tax -free
amount allowed per section 127 of the
Internal Revenue Code as amended.
(3) IHEs may offer employees tuition
waivers or tuition reductions for un-
dergraduate education under IRC Sec-
tion 117(d) as amended, provided that
the benefit does not discriminate in
favor of highly compensated employ-
ees. Federal reimbursement of tuition
2 CFR Ch. 11 (1 -1 -15 Edition)
or remission of tuition is also limited
to the institution for which the em-
ployee works. See §200.466 Scholarships
and student aid costs, for treatment of
tuition remission provided to students.
(k) For IHEs whose costs are paid by
state or local governments, fringe ben-
efit programs (such as pension costs
and FICA) and any other benefits costs
specifically incurred on behalf of, and
in direct benefit to, the non - Federal
entity, are allowable costs of such non -
Federal entities whether or not these
costs are recorded in the accounting
records of the non - Federal entities,
subject to the following:
(1) The costs meet the requirements
of Basic Considerations in § §200.402
Composition of costs through 200.411
Adjustment of previously negotiated
indirect (F &A) cost rates containing
unallowable costs of this subpart;
(2) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles; and
(3) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 20141
§200.432 Conferences.
A conference is defined as a meeting,
retreat, seminar, symposium, work-
shop or event whose primary purpose is
the dissemination of technical infor-
mation beyond the non - Federal entity
and is necessary and reasonable for
successful performance under the Fed-
eral award. Allowable conference costs
paid by the non - Federal entity as a
sponsor or host of the conference may
include rental of facilities, speakers'
fees, costs of meals and refreshments,
local transportation, and other items
incidental to such conferences unless
further restricted by the terms and
conditions of the Federal award. As
needed, the costs of identifying, but
not providing, locally available depend-
ent -care resources are allowable. Con-
ference hosts /sponsors must exercise
discretion and judgment in ensuring
that conference costs are appropriate,
necessary and managed in a manner
that minimizes costs to the Federal
award. The Federal awarding agency
152
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may authorize exceptions where appro-
priate for programs including Indian
tribes, children, and the elderly. See
also § §200.438 Entertainment costs,
200.456 Participant support costs,
200.474 Travel costs, and 200.475 Trust-
ees.
§ 200.433 Contingency provisions.
(a) Contingency is that part of a
budget estimate of future costs (typi-
cally of large construction projects, IT
systems, or other items as approved by
the Federal awarding agency) which is
associated with possible events or con-
ditions arising from causes the precise
outcome of which is indeterminable at
the time of estimate, and that experi-
ence shows will likely result, in aggre-
gate, in additional costs for the ap-
proved activity or project. Amounts for
major project scope changes, unfore-
seen risks, or extraordinary events
may not be included.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be ex-
plicitly included in budget estimates,
to the extent they are necessary to im-
prove the precision of those estimates.
Amounts must be estimated using
broadly- accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the Federal awarding
agency. As such, contingency amounts
are to be included in the Federal
award. In order for actual costs in-
curred to be allowable, they must com-
ply with the cost principles and other
requirements in this part (see also
§§200.300 Statutory and national policy
requirements through 200.309 Period of
performance of Subpart D of this part
and 200.403 Factors affecting allow -
ability of costs); be necessary and rea-
sonable for proper and efficient accom-
plishment of project or program objec-
tives, and be verifiable from the non -
Federal entity's records.
(c) Payments made by the Federal
awarding agency to the non - Federal
entity's "contingency reserve" or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or inten-
sity, or with an assurance of their hap-
pening, are unallowable, except as
noted in §§200,431 Compensation-
§ 200.434
fringe benefits regarding self- insur-
ance, pensions, severance and post -re-
tirement health costs and 200.447 Insur-
ance and indemnification.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§ 200.434 Contributions and donations.
(a) Costs of contributions and dona-
tions, including cash, property, and
services, from the non - Federal entity
to other entities, are unallowable.
(b) The value of services and property
donated to the non - Federal entity may
not be charged to the Federal award ei-
ther as a direct or indirect (F &A) cost.
The value of donated services and prop-
erty may be used to meet cost sharing
or matching requirements (see §200.306
Cost sharing or matching). Deprecia-
tion on donated assets is permitted in
accordance with §200.436 Depreciation,
as long as the donated property is not
counted towards cost sharing or
matching requirements.
(c) Services donated or volunteered
to the non - Federal entity may be fur-
nished to a non - Federal entity by pro-
fessional and technical personnel, con-
sultants, and other skilled and un-
skilled labor. The value of these serv-
ices may not be charged to the Federal
award either as a direct or indirect
cost. However, the value of donated
services may be used to meet cost shar-
ing or matching requirements in ac-
cordance with the provisions of §200.306
Cost sharing or matching.
(d) To the extent feasible, services
donated to the non - Federal entity will
be supported by the same methods used
to support the allocability of regular
personnel services.
(e) The following provisions apply to
nonprofit organizations. The value of
services donated to the nonprofit orga-
nization utilized in the performance of
a direct cost activity must be consid-
ered in the determination of the non -
Federal entity's indirect cost rate(s)
and, accordingly, must be allocated a
proportionate share of applicable indi-
rect costs when the following cir-
cumstances exist:
(1) The aggregate value of the serv-
ices is material;
(2) The services are supported by a
significant amount of the indirect
153
ATTACHMENT .....2.........
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§ 200.435
costs incurred by the non- Federal enti-
ty;
(i) In those instances where there is
no basis for determining the fair mar-
ket value of the services rendered, the
non - Federal entity and the cognizant
agency for indirect costs must nego-
tiate an appropriate allocation of indi-
rect cost to the services.
(ii) Where donated services directly
benefit a project supported by the Fed-
eral award, the indirect costs allocated
to the services will be considered as a
part of the total costs of the project.
Such indirect costs may be reimbursed
under the Federal award or used to
meet cost sharing or matching require-
ments.
(f) Fair market value of donated
services must be computed as described
in § 200.306 Cost `sharing or matching.
(g) Personal Property and Use of
Space.
(1) Donated personal property and
use of space may be furnished to a non -
Federal entity. The value of the per-
sonal property and space may not be
charged to the Federal award either as
a direct or indirect cost.
(2) The value of the donations may be
used to meet cost sharing or matching
share requirements under the condi-
tions described in § §200.300 Statutory
and national policy requirements
through 200.309 Period of performance
of subpart D of this part. The value of
the donations must be determined in
accordance with § §200.300 Statutory
and national policy requirements
through 200.309 Period of performance.
Where donations are treated as indirect
costs, indirect cost rates will separate
the value of the donations so that re-
imbursement will not be made.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§200.435 Defense and prosecution of
criminal and civil proceedings,
claims, appeals and patent infringe-
ments.
(a) Definitions for the purposes of
this section.
(1) Conviction means a judgment or
conviction of a criminal offense by any
court of competent jurisdiction, wheth-
er entered upon verdict or a plea, in-
cluding a conviction due to a plea of
nolo contendere.
2 CFR Ch. II (1 -1 -15 Edition)
(2) Costs include the services of in-
house or private counsel, accountants,
consultants, or others engaged to as-
sist the non - Federal entity before, dur-
ing, and after commencement of a judi-
cial or administrative proceeding, that
bear a direct relationship to the pro-
ceeding.
(3) Fraud means:
(i) Acts of fraud or corruption or at-
tempts to defraud the Federal Govern-
ment or to corrupt its agents,
(ii) Acts that constitute a cause for
debarment or suspension (as specified
in agency regulations), and
(iii) Acts which violate the False
Claims Act (31 U.S.C. 3729 -3732) or the
Anti - kickback Act (41 U.S.C. 1320a-
7b(b)).
(4) Penalty does not include restitu-
tion, reimbursement, or compensatory
damages.
(5) Proceeding includes an investiga-
tion.
(b) Costs. (1) Except as otherwise de-
scribed herein, costs incurred in con-
nection with any criminal, civil or ad-
ministrative proceeding (including fil-
ing of a false certification) commenced
by the Federal Government, a state,
local government, or foreign govern-
ment, or joined by the Federal Govern-
ment (including a proceeding under the
False Claims Act), against the non -
Federal entity, (or commenced by third
parties or a current or former em-
ployee of the non - Federal entity who
submits a whistleblower complaint of
reprisal in accordance with 10 U.S.C.
2409 or 41 U.S.C. 4712), are not allowable
if the proceeding:
(i) Relates to a violation of, or failure
to comply with, a Federal, state, local
or foreign statute, regulation or the
terms and conditions of the Federal
award, by the non - Federal entity (in-
cluding its agents and employees); and
(ii) Results in any of the following
dispositions:
(A) In a criminal proceeding, a con-
viction.
(B) In a civil or administrative pro-
ceeding involving an allegation of
fraud or similar misconduct, a deter-
mination of non - Federal entity liabil-
ity.
(C) In the case of any civil or admin-
istrative proceeding, the disallowance
154
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of costs or the imposition of a mone-
tary penalty, or an order issued by the
Federal awarding agency head or dele-
gate to the non - Federal entity to take
corrective action under 10 U.S.C. 2409
or 41 U.S.C. 4712.
(D) A final decision by an appropriate
Federal official to debar or suspend the
non - Federal entity, to rescind or void a
Federal award, or to terminate a Fed-
eral award by reason of a violation or
failure to comply with a statute, regu-
lation, or the terms and conditions of
the Federal award.
(E) A disposition by consent or com-
promise, if the action could have re-
sulted in any of the dispositions de-
scribed in paragraphs (b)(1)(ii)(A)
through (D) of this section.
(2) If more than one proceeding in-
volves the same alleged misconduct,
the costs of all such proceedings are
unallowable if any results in one of the
dispositions shown in paragraph (b) of
this section.
(c) If a proceeding referred to in para-
graph (b) of this section is commenced
by the Federal Government and is re-
solved by consent or compromise pur-
suant to an agreement by the non -Fed-
eral entity and the Federal Govern-
ment, then the costs incurred may be
allowed to the extent specifically pro-
vided in such agreement.
(d) If a proceeding referred to in para-
graph (b) of this section is commenced
by a state, local or foreign government,
the authorized Federal official may
allow the costs incurred if such author-
ized official determines that the costs
were incurred as a result of:
(1) A specific term or condition of the
Federal award, or
(2) Specific written direction of an
authorized official of the Federal
awarding agency.
(e) Costs incurred in connection with
proceedings described in paragraph (b)
of this section, which are not made un-
allowable by that subsection, may be
allowed but only to the extent that:
(1) The costs are reasonable and nec-
essary in relation to the administra-
tion of the Federal award and activi-
ties required to deal with the pro-
ceeding and the underlying cause of ac-
tion;
(2) Payment of the reasonable, nec-
essary, allocable and otherwise allow-
§ 200.435
able costs incurred is not prohibited by
any other provision(s) of the Federal
award;
(3) The costs are not recovered from
the Federal Government or a third
party, either directly as a result of the
proceeding or otherwise; and,
(4) An authorized Federal official
must determine the percentage of costs
allowed considering the complexity of
litigation, generally accepted prin-
ciples governing the award of legal fees
in civil actions involving the United
States, and such other factors as may
be appropriate. Such percentage must
not exceed 80 percent. However, if an
agreement reached under paragraph (c)
of this section has explicitly consid-
ered this 80 percent limitation and per-
mitted a higher percentage, then the
full amount of costs resulting from
that agreement are allowable.
(f) Costs incurred by the non - Federal
entity in connection with the defense
of suits brought by its employees or ex-
employees under section 2 of the Major
Fraud Act of 1988 (18 U.S.C. 1031), in-
cluding the cost of all relief necessary
to make such employee whole, where
the non - Federal entity was found liable
or settled, are unallowable.
(g) Costs of prosecution of claims
against the Federal Government, in-
cluding appeals of final Federal agency
decisions, are unallowable.
(h) Costs of legal, accounting, and
consultant services, and related costs,
incurred in connection with patent in-
fringement litigation, are unallowable
unless otherwise provided for in the
Federal award.
(i) Costs which may be unallowable
under this section, including directly
associated costs, must be segregated
and accounted for separately. During
the pendency of any proceeding covered
by paragraphs (b) and (f) of this sec-
tion, the Federal Government must
generally withhold payment of such
costs. However, if in its best interests,
the Federal Government may provide
for conditional payment upon provision
of adequate security, or other adequate
assurance, and agreement to repay all
unallowable costs, plus interest, if the
costs are subsequently determined to
be unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
155
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§ 200.436
§ 200.436 Depreciation.
(a) Depreciation is the method for al-
locating the cost of fixed assets to peri-
ods benefitting from asset use. The
non - Federal entity may be com-
pensated for the use of its buildings,
capital improvements, equipment, and
software projects• capitalized in accord-
ance with GAAP, provided that they
are used, needed in the non - Federal en-
tity's activities, and properly allocated
to Federal awards. Such compensation
must be made by computing deprecia-
tion.
(b) The allocation for depreciation
must be made in accordance with Ap-
pendices III through IX.
(c) Depreciation is computed apply-
ing the following rules. The computa-
tion of depreciation must be based on
the acquisition cost of the assets in-
volved. For an asset donated to the
non - Federal entity by a third party, its
fair market value at the time of the do-
nation must be considered as the acqui-
sition cost. Such assets may be depre-
ciated or claimed as matching but not
both. For the purpose of computing de-
preciation, the acquisition cost will ex-
clude:
(1) The cost of land;
(2) Any portion of the cost of build-
ings and equipment borne by or do-
nated by the Federal Government, irre-
spective of where title was originally
vested or where it is presently located;
(3) Any portion of the cost of build-
ings and equipment contributed by or
for the non - Federal entity where law or
agreement prohibits recovery; and
(4) Any asset acquired solely for the
performance of a non - Federal award.
(d) When computing depreciation
charges, the following must be ob-
served:
(1) The period of useful service or
useful life established in each case for
usable capital assets must take into
consideration such factors as type of
construction, nature of the equipment,
technological developments in the par-
ticular area, historical data, and the
renewal and replacement policies fol-
lowed for the individual items or class-
es of assets involved.
(2) The depreciation method used to
charge the cost of an asset (or group of
assets) to accounting periods must re-
flect the pattern of consumption of the
2 CFR Ch. II (1 -1 -15 Edition)
asset during its useful life. In the ab-
sence of clear evidence indicating that
the expected consumption of the asset
will be significantly greater in the
early portions than in the later por-
tions of its useful life, the straight -line
method must be presumed to be the ap-
propriate method. Depreciation meth-
ods once used may not be changed un-
less approved in advance by the cog-
nizant agency. The depreciation meth-
ods used to calculate the depreciation
amounts for indirect (F &A) rate pur-
poses must be the same methods used
by the non - Federal entity for its finan-
cial statements.
(3) The entire building, including the
shell and all components, may be treat-
ed as a single asset and depreciated
over a single useful life. A building
may also be divided into multiple com-
ponents. Each component item may
then be depreciated over its estimated
useful life. The building components
must be grouped into three general
components of a building: building
shell (including construction and de-
sign costs), building services systems
(e.g., elevators, HVAC, plumbing sys-
tem and heating and air - conditioning
system) and fixed equipment (e.g.,
sterilizers, casework, fume hoods, cold
rooms and glassware /washers). In ex-
ceptional cases, a cognizant agency
may authorize a non - Federal entity to
use more than these three groupings.
When a non - Federal entity elects to de-
preciate its buildings by its compo-
nents, the same depreciation methods
must be used for indirect (F &A) pur-
poses and financial statements pur-
poses, as described in paragraphs (d)(1)
and (2) of this section.
(4) No depreciation may be allowed
on any assets that have outlived their
depreciable lives.
(5) Where the depreciation method is
introduced to replace the use allow-
ance method, depreciation must be
computed as if the asset had been de-
preciated over its entire life (i.e., from
the date the asset was acquired and
ready for use to the date of disposal or
withdrawal from service). The total
amount of use allowance and deprecia-
tion for an asset (including imputed de-
preciation applicable to periods prior
to the conversion from the use allow-
ance method as well as depreciation
156
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after the conversion) may not exceed
the total acquisition cost of the asset.
(e) Charges for depreciation must be
supported by adequate property
records, and physical inventories must
be taken at least once every two years
to ensure that the assets exist and are
usable, used, and needed. Statistical
sampling techniques may be used in
taking these inventories. In addition,
adequate depreciation records showing
the amount of depreciation taken each
period must also be maintained.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§200.437 Employee health and welfare
costs.
(a) Costs incurred in accordance with
the non - Federal entity's documented
policies for the improvement of work-
ing conditions, employer - employee re-
lations, employee health, and employee
performance are allowable.
(b) Such costs will be equitably ap-
portioned to all activities of the non-
Federal entity. Income generated from
any of these activities will be credited
to the cost thereof unless such income
has been irrevocably sent to employee
welfare organizations.
(c) Losses resulting from operating
food services are allowable only if the
non - Federal entity's objective is to op-
erate such services on a break -even
basis. Losses sustained because of oper-
ating objectives other than the above
are allowable only:
(1) Where the non - Federal entity can
demonstrate unusual circumstances;
and
(2) With the approval of the cog-
nizant agency for indirect costs.
§200.438 Entertainment costs.
Costs of entertainment, including
amusement, diversion, and social ac-
tivities and any associated costs are
unallowable, except where specific
costs that might otherwise be consid-
ered entertainment have a pro-
grammatic purpose and are authorized
either in the approved budget for the
Federal award or with prior written ap-
proval of the Federal awarding agency.
§ 200.439
§200.439 Equipment and other capital
expenditures.
(a) See § §200.13 Capital expenditures,
200.33 Equipment, 200.89 Special pur-
pose equipment, 200.48 General purpose
equipment, 200.2 Acquisition cost, and
200.12 Capital assets.
(b) The following rules of allow -
ability must apply to equipment and
other capital expenditures:
(1) Capital expenditures for general
purpose equipment, buildings, and land
are unallowable as direct charges, ex-
cept with the prior written approval of
the Federal awarding agency or pass -
through entity.
(2).-Capital expenditures for special
purpose equipment are allowable as di-
rect costs, provided that items with a
unit cost of $5,000 or more have the
prior written approval of the Federal
awarding agency or pass- through enti-
ty.
(3) Capital expenditures for improve-
ments to land, buildings, or equipment
which materially increase their value
or useful life are unallowable as a di-
rect cost except with the prior written
approval of the Federal awarding agen-
cy, or pass - through entity. See §200.436
Depreciation, for rules on the allow-
ability of depreciation on buildings,
capital improvements, and equipment.
See also §200.465 Rental costs of real
property and equipment.
(4) When approved as a direct charge
pursuant to paragraphs (b)(1) through
(3) of this section, capital expenditures
will be charged in the period in which
the expenditure is incurred, or as oth-
erwise determined appropriate and ne-
gotiated with the Federal awarding
agency.
(5) The unamortized portion of any
equipment written off as a result of a
change in capitalization levels may be
recovered by continuing to claim the
otherwise allowable depreciation on
the equipment, or by amortizing the
amount to be written off over a period
of years negotiated with the Federal
cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the
non - Federal entity is instructed by the
Federal awarding agency to otherwise
dispose of or transfer the equipment
the costs of such disposal or transfer
are allowable.
157
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§ 200."0
(7) Equipment and other capital ex-
penditures are unallowable as indirect
costs. See § 200.436 Depreciation.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76886, Dec. 19, 20141
§200.440 Exchange rates.
(a) Cost increases for fluctuations in
exchange rates are allowable costs sub-
ject to the availability of funding.
Prior approval of exchange rate fluc-
tuations is required only when the
change results in the need for addi-
tional Federal funding, or the in-
creased costs result in the need to sig-
nificantly reduce the scope of the
project. The Federal awarding agency
must however ensure that adequate
funds are available to cover currency
fluctuations in order to avoid a viola-
tion of the Anti - Deficiency Act.
(b) The non - Federal entity is re-
quired to make reviews of local cur-
rency gains to determine the need for
additional federal funding before the
expiration date of the Federal award.
Subsequent adjustments for currency
increases may be allowable only when
the non - Federal entity provides the
Federal awarding agency with ade-
quate source documentation from a
commonly used source in effect at the
time the expense was made, and to the
extent that sufficient Federal funds are
available.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76886, Dec. 19, 2014]
§200.441 Fines, penalties, damages
and other settlements.
Costs resulting from non - Federal en-
tity violations of, alleged violations of,
or failure to comply with, Federal,
state, tribal, local or foreign laws and
regulations are unallowable, except
when incurred as a result of compli-
ance with specific provisions of the
Federal award, or with prior written
approval of the Federal awarding agen-
cy. See also §200.435 Defense and pros-
ecution of criminal and civil pro-
ceedings, claims, appeals and patent
infringements.
§200.442 Fund raising and investment
management costs.
(a) Costs of organized fund raising,
including financial campaigns, endow-
2 CFR Ch. II (1 -1 -15 Edition)
ment drives, solicitation of gifts and
bequests, and similar expenses incurred
to raise capital or obtain contributions
are unallowable. Fund raising costs for
the purposes of meeting the Federal
program objectives are allowable with
prior written approval from the Fed-
eral awarding agency. Proposal costs
are covered in § 200.460 Proposal costs.
(b) Costs of investment counsel and
staff and similar expenses incurred to
enhance income from investments are
unallowable except when associated
with investments covering pension,
self- insurance, or other funds which in-
clude Federal participation allowed by
this part.
(c) Costs related to the physical cus-
tody and control of monies and securi-
ties are allowable.
(d) Both allowable and unallowable
fund raising and investment activities
must be allocated as an appropriate
share of indirect costs under the condi-
tions described in §200,413 Direct costs.
§ 200.443 Gains and losses on disposi-
tion of depreciable assets.
(a) Gains and losses on the sale, re-
tirement, or other disposition of depre-
ciable property must be included in the
year in which they occur as credits or
charges to the asset cost grouping(s) in
which the property was included. The
amount of the gain or loss to be in-
cluded as a credit or charge to the ap-
propriate asset cost grouping(s) is the
difference between the amount realized
on the property and the undepreciated
basis of the property.
(b) Gains and losses from the disposi-
tion of depreciable property must not
be recognized as a separate credit or
charge under the following conditions:
(1) The gain or loss is processed
through a depreciation account and is
reflected in the depreciation allowable
under §§ 200.436 Depreciation and 200.439
Equipment and other capital expendi-
tures.
(2) The property is given in exchange
as part of the purchase price of a simi-
lar item and the gain or loss is taken
into account in determining the depre-
ciation cost basis of the new item.
(3) A loss results from the failure to
maintain permissible insurance, except
as otherwise provided in §200.447 Insur-
ance and indemnification,
158
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(4) Compensation for the use of the
property was provided through use al-
lowances in lieu of depreciation.
(5) Gains and losses arising from
mass or extraordinary sales, retire-
ments, or other dispositions must be
considered on a case -by -case basis.
(c) Gains or losses of any nature aris-
ing from the sale or exchange of prop-
erty other than the property covered in
paragraph (a) of this section, e.g., land,
must be excluded in computing Federal
award costs.
(d) When assets acquired with Fed-
eral funds, in part or wholly, are dis-
posed of, the distribution of the pro-
ceeds must be made in accordance with
§ §200.310 Insurance Coverage through
200.316 Property trust relationship.
[78 FR 78608, Dec, 26, 2013, as amended at 79
FR 75886, Dec. 19, 20141
§ 200.444 General costs of government.
(a) For states, local governments,
and Indian Tribes, the general costs of
government are unallowable (except as
provided in § 200.474 Travel costs). Unal-
lowable costs include:
(1) Salaries and expenses of the Office
of the Governor of a state or the chief
executive of a local government or the
chief executive of an Indian tribe;
(2) Salaries and other expenses of a
state legislature, tribal council, or
similar local governmental body, such
as a county supervisor, city council,
school board, etc., whether incurred for
purposes of legislation or executive di-
rection;
(3) Costs of the judicial branch of a
government;
(4) Costs of prosecutorial activities
unless treated as a direct cost to a spe-
cific program if authorized by statute'
or regulation (however, this does not
preclude the allowability of other legal
activities of the Attorney General as
described in §200.435 Defense and pros-
ecution of criminal and civil pro-
ceedings, claims, appeals and patent
infringements); and
(5) Costs of other general types of
government services normally provided
to the general public, such as fire and
police, unless provided for as a direct
cost under a program statute or regula-
tion.
(b) For Indian tribes and Councils of
Governments (COGs) (see §200.64 Local
§ 200.446
government), up to 50% of salaries and
expenses directly attributable to man-
aging and operating Federal programs
by the chief executive and his or her
staff can be included in the indirect
cost calculation without documenta-
tion.
[78 FR 78608, Dec, 26, 2013, as amended at 79
FR 76886, Dec. 19, 2014]
§200.445 Goods or services for per-
sonal use.
(a) Costs of goods or services for per-
sonal use of the non - Federal entity's
employees are unallowable regardless
of whether the cost is reported as tax-
able income to the employees.
(b) Costs of housing (e.g., deprecia-
tion, maintenance, utilities, fur-
nishings, rent), housing allowances and
personal living expenses are only al-
lowable as direct costs regardless of
whether reported as taxable income to
the employees. In addition, to be allow-
able direct costs must be approved in
advance by a Federal awarding agency.
§200.446 Idle facilities and idle capac-
ity.
(a) As used in this section the fol-
lowing terms have the meanings set
forth in this section:
(1) Facilities means land and build-
ings or any portion thereof, equipment
individually or collectively, or any
other tangible capital asset, wherever
located, and whether owned or leased
by the non - Federal entity.
(2) Idle facilities means completely
unused facilities that are excess to the
non - Federal entity's current needs.
(3) Idle capacity means the unused
capacity of partially used facilities. It
is the difference between:
(i) That which a facility could
achieve under 100 percent operating
time on a one -shift basis less operating
interruptions resulting from time lost
for repairs, setups, unsatisfactory ma-
terials, and other normal delays and;
(ii) The extent to which the facility
was actually used to meet demands
during the accounting period. A multi -
shift basis should be used if it can be
shown that this amount of usage would
normally be expected for the type of fa-
cility involved.
159
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§ 200.447
(4) Cost of idle -facilities or idle ca-
pacity means costs such as mainte-
nance, repair, housing, rent, and other
related costs, e.g., insurance, interest,
and depreciation. These costs could in-
clude the costs of idle public safety
emergency facilities, telecommuni-
cations, or information technology sys-
tem capacity that is built to withstand
major fluctuations in load, e.g., con-
solidated data centers.
(b) The costs of idle facilities are un-
allowable except to the extent that:
(1) They are necessary to meet work-
load requirements which may fluctuate
and are allocated appropriately to all
benefiting programs; or
(2) Although not necessary to meet
fluctuations in workload, they were
necessary when acquired and are now
idle because of changes in program re-
quirements, efforts to achieve more ec-
onomical operations, reorganization,
termination, or other causes which
could not have been reasonably fore-
seen. Under the exception stated in
this subsection, costs of idle facilities
are allowable for a reasonable period of
time, ordinarily not to exceed one
year, depending on the initiative taken
to use, lease, or dispose of such facili-
ties.
(c) The costs of idle capacity are nor-
mal costs of doing business and are a
factor in the normal fluctuations of
usage or indirect cost rates from period
to period. Such costs are allowable,
provided that the capacity is reason-
ably anticipated to be necessary to
carry out the purpose of the Federal
award or was originally reasonable and
is not subject to reduction or elimi-
nation by use on other Federal awards,
subletting, renting, or sale, in accord-
ance with sound business, economic, or
security practices. Widespread idle ca-
pacity throughout an entire facility or
among a group of assets having sub-
stantially the same function may be
considered idle facilities.
§200.447 Insurance and indemnifica•
tion.
(a) Costs of insurance required or ap-
proved and maintained, pursuant to
the Federal award, are allowable.
(b) Costs of other insurance in con-
nection with the general conduct of ac-
2 CFR Ch. ii (1 -1 -15 Edition)
tivities are allowable subject to the
following limitations:
(1) Types and extent and cost of cov-
erage are in accordance with the non -
Federal entity's policy and sound busi-
ness practice,
(2) Costs of insurance or of contribu-
tions to any reserve covering the risk
of loss of, or damage to, Federal Gov-
ernment property are unallowable ex-
cept to the extent that the Federal
awarding agency has specifically re-
quired or approved such costs.
(3) Costs allowed for business inter-
ruption or other similar insurance
must exclude coverage of management
fees.
(4) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar respon-
sibilities are allowable only to the ex-
tent that the insurance represents ad-
ditional compensation (see §200.431
Compensation— fringe benefits). The
cost of such insurance when the non -
Federal entity is identified as the bene-
ficiary is unallowable.
(5) Insurance against defects. Costs of
insurance with respect to any costs in-
curred to correct defects in the non -
Federal entity's materials or work-
manship are unallowable.
(6) Medical liability (malpractice) in-
surance. Medical liability insurance is
an allowable cost of Federal research
programs only to the extent that the
Federal research programs involve
human subjects or training of partici-
pants in research techniques. Medical
liability insurance costs must be treat-
ed as a direct cost and must be as-
signed to individual projects based on
the manner in which the insurer allo-
cates the risk to the population cov-
ered by the insurance.
(c) Actual losses which could have
been covered by permissible insurance
(through a self- insurance program or
otherwise) are unallowable, unless ex-
pressly provided for in the Federal.
award. However, costs incurred because
of losses not covered under nominal de-
ductible insurance coverage provided
in keeping with sound management
practice, and minor losses not covered
by insurance, such as spoilage, break-
age, and disappearance of small hand
tools, which occur in the ordinary
course of operations, are allowable.
160
OMB Guidance
(d) Contributions to a reserve for cer-
tain self - insurance programs including
workers' compensation, unemployment
compensation, and severance pay are
allowable subject to the following pro-
visions:
(1) The type of coverage and the ex-
tent of coverage and the rates and pre-
miums would have been allowed had in-
surance (including reinsurance) been
purchased to cover the risks., However,
provision for known or reasonably esti-
mated self- insured liabilities, which do
not become payable for more than one
year after the provision is made, must
not exceed the discounted present
value of the liability. The rate used for
discounting the liability must be deter-
mined by giving consideration to such
factors as the non - Federal entity's set-
tlement rate for those liabilities and
its investment rate of return.
(2) Earnings or investment income on
reserves must be credited to those re-
serves.
(3)(i) Contributions to reserves must
be based on sound actuarial principles
using historical experience and reason-
able assumptions. Reserve levels must
be analyzed and updated at least bien-
nially for each major risk being in-
sured and take into account any rein-
surance, coinsurance, etc. Reserve lev-
els related to employee - related cov-
erages will normally be limited to the
value of claims:
(A) Submitted and adjudicated but
not paid;
(B) Submitted but not adjudicated;
and
(C) Incurred but not submitted.
(ii) Reserve levels in excess of the
amounts based on the above must be
identified and justified in the cost allo-
cation plan or indirect cost rate pro-
posal.
(4) Accounting records, actuarial
studies, and cost allocations (or bil-
lings) must recognize any significant
differences due to types of insured risk
and losses generated by the various in-
sured activities or agencies of the non -
Federal entity. If individual depart-
ments or agencies of the non - Federal
entity experience significantly dif-
ferent levels of claims for a particular
risk, those differences are to be recog-
nized by the use of separate allocations
§ 200.448
or other techniques resulting in an eq-
uitable allocation.
(5) Whenever funds are transferred
from a self - insurance reserve to other
accounts (e.g., general fund or unre-
stricted account), refunds must be
made to the Federal Government for
its share of funds transferred, including
earned or imputed interest from the
date of transfer and debt interest, if ap-
plicable, chargeable in accordance with
applicable Federal cognizant agency
for indirect cost, claims collection reg-
ulations.
(e) Insurance refunds must be cred-
ited against insurance costs in the year
the refund is received.
(f) Indemnification includes securing
the non - Federal entity against liabil-
ities to third persons and other losses
not compensated by insurance or oth-
erwise. The Federal Government is ob-
ligated to indemnify the non - Federal
entity only to the extent expressly pro-
vided for in the Federal award, except
as provided in paragraph (c) of this sec-
tion.
§ 200.448 Intellectual property.
(a) Patent costs. (1) The following
costs related to securing patents and
copyrights are allowable:
(i) Costs of preparing disclosures, re-
ports, and other documents required by
the Federal award, and of searching the
art to the extent necessary to make
such disclosures;
(ii) Costs of preparing documents and
any other patent costs in connection
with the filing and prosecution of a
United States patent application where
title or royalty -free license is required
by the Federal Government to be con-
veyed to the Federal Government; and
(iii) General counseling services re-
lating to patent and copyright matters,
such as advice on patent and copyright
laws, regulations, clauses, and em-
ployee intellectual property agree-
ments (See also §200.459 Professional
service costs).
(2) The following costs related to se-
curing patents and copyrights are unal-
lowable:
(1) Costs of preparing disclosures, re-
ports, and other documents, and of
searching the art to make disclosures
not required by the Federal award;
161
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§ 200.449
(ii) Costs in connection with filing
and prosecuting any foreign patent ap-
plication, or any United States patent
application, where the Federal award
does not require conveying title or a
royalty -free license to the Federal
Government.
(b) Royalties and other costs for use of
patents and copyrights. (1) Royalties on
a patent or copyright or amortization
of the cost of acquiring by purchase a
copyright, patent, or rights thereto,
necessary for the proper performance
of the Federal award are allowable un-
less:
(i) The Federal Government already
has a license or the right to free use of
the patent or copyright.
(ii) The patent or copyright has been
adjudicated to be invalid, or has been
administratively determined to be in-
valid.
(iii) The patent or copyright is con-
sidered to be unenforceable.
(iv) The patent or copyright is ex-
pired.
(2) Special care should be exercised in
determining reasonableness where the
royalties may have been arrived at as a
result of less - than - arm's- length bar-
gaining, such as:
(i) Royalties paid to persons, includ-
ing corporations, affiliated with the
non - Federal entity.
(ii) Royalties paid to unaffiliated
parties, including corporations, under
an agreement entered into in con-
templation that a Federal award would
be made.
(iii) Royalties paid under an agree-
ment entered into after a Federal
award is made to a non- Federal entity.
(3) In any case involving a patent or
copyright formerly owned by the non -
Federal entity, the amount of royalty
allowed must not exceed the cost which
would have been allowed had the non -
Federal entity retained title thereto.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 20141
§ 200.449 Interest.
(a) General. Costs incurred for inter-
est on borrowed capital, temporary use
of endowment funds, or the use of the
non - Federal entity's own funds, how-
ever represented, are unallowable. Fi-
nancing costs (including interest) to
acquire, construct, or replace capital
2 CFR Ch. II (1 -1 -15 Edition)
assets are allowable, subject to the
conditions in this section.
(b)(1) Capital assets is defined as
noted in §200.12 Capital assets. An
asset cost includes (as applicable) ac-
quisition costs, construction costs, and
other costs capitalized in accordance
with GAAP.
(2) For non - Federal entity fiscal
years beginning on or after January 1,
2016, intangible assets include patents
and computer software. For software
development projects, only interest at-
tributable to the portion of the project
costs capitalized in accordance with
GAAP is allowable.
(c) Conditions for all non - Federal enti-
ties. (1) The non - Federal entity uses the
capital assets in support of Federal
awards;
(2) The allowable asset costs to ac-
quire facilities and equipment are lim-
ited to a fair market value available to
the non - Federal entity from an unre-
lated (arm's length) third party.
(3) The non - Federal entity obtains
the financing via an arm's - length
transaction (that is, a transaction with
an unrelated third party); or claims re-
imbursement of actual interest cost at
a rate available via such a transaction.
(4) The non - Federal entity limits
claims for Federal reimbursement of
interest costs to the least expensive al-
ternative. For example, a capital lease
may be determined less costly than
purchasing through debt financing, in
which case reimbursement must be
limited to the amount of interest de-
termined if leasing had been used.
(5) The non - Federal entity expenses
or capitalizes allowable interest cost in
accordance with GAAP.
(6) Earnings generated by the invest-
ment of borrowed funds pending their
disbursement for the asset costs are
used to offset the current period's al-
lowable interest cost, whether that
cost is expensed or capitalized. Earn-
ings subject to being reported to the
Federal Internal Revenue Service
under arbitrage requirements are ex-
cludable.
(7) The following conditions must
apply to debt arrangements over $1
million to purchase or construct facili-
ties, unless the non - Federal entity
makes an initial equity contribution to
the purchase of 25 percent or more. For
162
=:Z;;1
P
OMB Guidance
this purpose, "initial equity contribu-
tion" means the amount or value of
contributions made by the non - Federal
entity for the acquisition of facilities
prior to occupancy.
(i) The non - Federal entity must re-
duce claims for reimbursement of in-
terest cost by an amount equal to im-
puted interest earnings on excess cash
flow attributable to the portion of the
facility used for Federal awards.
(ii) The non - Federal entity must im-
pute interest on excess cash flow as fol-
lows:
(A) Annually, the non - Federal entity
must prepare a cumulative (from the
inception of the project) report of
monthly cash inflows and outflows, re-
gardless of the funding source. For this
purpose, inflows consist of Federal re-
imbursement for depreciation, amorti-
zation of capitalized construction in-
terest, and annual interest cost. Out-
flows consist of initial equity contribu-
tions, debt principal payments (less the
pro -rata share attributable to the cost
of land), and interest payments.
(B) To compute monthly cash inflows
and outflows, the non - Federal entity
must divide the annual amounts deter-
mined in step (i) by the number of
months in the year (usually 12) that
the building is in service.
(C) For any month in which cumu-
lative cash inflows exceed cumulative
outflows, interest must be calculated
on the excess inflows for that month
and be treated as a reduction to allow-
able interest cost. The rate of interest
to be used must be the three -month
Treasury bill closing rate as of the last
business day of that month.
(8) Interest attributable to a fully de-
preciated asset is unallowable.
(d) Additional conditions for states,
local governments and Indian tribes.
For costs to be allowable, the non -Fed-
eral entity must have incurred the in-
terest costs for buildings after October
1, 1980, or for land and equipment after
September 1, 1995.
(1) The requirement to offset interest
earned on borrowed funds against cur-
rent allowable interest cost (paragraph
(c)(5), above) also applies to earnings
on debt service reserve funds.
(2) The non - Federal entity will nego-
tiate the amount of allowable interest
cost related to the acquisition of facili-
§ 200.460
ties with asset costs of $1 million or
more, as outlined in paragraph (e)(7) of
this section. For this purpose, a non -
Federal entity must consider only cash
inflows and outflows attributable to
that portion of the real property used
for Federal awards.
(e) Additional conditions for IHEs.
For costs to be allowable, the IHE
must have incurred the interest costs
after September 23, 1982, in connection
with acquisitions of capital assets that
occurred after that date.
(f) Additional condition for nonprofit
organizations. For costs to be allow-
able, the nonprofit organization in-
curred the interest costs after Sep-
tember 29, 1995, in connection with ac-
quisitions of capital assets that oc-
curred after that date.
(g) The interest allowability provi-
sions of this section do not apply to a
nonprofit organization subject to "full
coverage" under the Cost Accounting
Standards (CAS), as defined at 48 CFR
9903.201 -2(a). The non - Federal entity's
Federal awards are instead subject to
CAS 414 (48 CPR 9904.414), "Cost of
Money as an Element of the Cost of Fa-
cilities Capital ", and CAS 417 (48 CFR
9904.417), "Cost of Money as an Element
of the Cost of Capital Assets Under
Construction ".
§ 200.450 Lobbying.
(a) The cost of certain influencing ac-
tivities associated with obtaining
grants, contracts, cooperative agree-
ments, or loans is an unallowable cost.
Lobbying with respect to certain
grants, contracts, cooperative agree-
ments, and loans is governed by rel-
evant statutes, including among oth-
ers, the provisions of 31 U.S.C. 1352, as
well as the common rule, "New Re-
strictions on Lobbying" published at 55
FR 6736 (February 26, 1990), including
definitions, and the Office of Manage-
ment and Budget "Governmentwide
Guidance for New Restrictions on Lob-
bying" and notices published at 54 FR
52306 (December 20, 1989), 55 FR 24540
(June 15, 1990), 57 FR 1772 (January 15,
1992), and 61 FR 1412 (January 19, 1996).
(b) Executive lobbying costs. Costs
incurred in attempting to improperly
influence either directly or indirectly,
an employee or officer of the executive
branch of the Federal Government to
163
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§ 200.450
give consideration or to act regarding a
Federal award or a regulatory matter
are unallowable. Improper influence
means any influence that induces or
tends to induce a Federal employee or
officer to give consideration or to act
regarding a Federal award or regu-
latory matter on any basis other than
the merits of the matter.
(c) In addition to the above, the fol-
lowing restrictions are applicable to
nonprofit organizations and IHEs:
(1) Costs associated with the fol-
lowing activities are unallowable:
(i) Attempts to influence the out-
comes of any Federal, state, or local
election, referendum, initiative, or
similar procedure, through in -kind or
cash contributions, endorsements, pub-
licity, or similar activity;
(ii) Establishing, administering, con-
tributing to, or paying the expenses of
a political party, campaign, political
action committee, or other organiza-
tion established for the purpose of in-
fluencing the outcomes of elections in
the United States;
(iii) Any attempt to influence:
(A)The introduction of Federal or
state legislation;
(B) The enactment or modification of
any pending Federal or state legisla-
tion through communication with any
member or employee of the Congress or
state legislature (including efforts to
influence state or local officials to en-
gage in similar lobbying activity);
(C) The enactment or modification of
any pending Federal or state legisla-
tion by preparing, distributing, or
using publicity or propaganda, or by
urging members of the general public,
or any segment thereof, to contribute
to or participate in any mass dem-
onstration, march, rally, fund raising
drive, lobbying campaign or letter
writing or telephone campaign; or
(D) Any government official or em-
ployee in connection with a decision to
sign or veto enrolled legislation;
(iv) Legislative liaison activities, in-
cluding attendance at legislative ses-
sions or committee hearings, gathering
information regarding legislation, and
analyzing the effect of legislation,
when such activities are carried on in
support of or in knowing preparation
for an effort to engage in unallowable
lobbying.
2 CFR Ch. II (1 -1 -15 Edition)
(2) The following activities are ex-
cepted from the coverage of paragraph
(c)(1) of this section:
(i) Technical and factual presen-
tations on topics directly related to
the performance of a grant, contract,
or other agreement (through hearing
testimony, statements, or letters to
the Congress or a state legislature, or
subdivision, member, or cognizant staff
member thereof), in response to a docu-
mented request (including a Congres-
sional Record notice requesting testi-
mony or statements for the record at a
regularly scheduled hearing) made by
the non - Federal entity's member of
congress, legislative body or a subdivi-
sion, or a cognizant staff member
thereof, provided such information is
readily obtainable and can be readily
put in deliverable form, and further
provided that costs under this section
for travel, lodging or meals are unal-
lowable unless incurred to offer testi-
mony at a regularly scheduled Congres-
sional hearing pursuant to a written
request for such presentation made by
the Chairman or Ranking Minority
Member of the Committee or Sub-
committee conducting such hearings;
(ii) Any lobbying made unallowable
by paragraph (c)(1)(iii) of this section
to influence state legislation in order
to directly reduce the cost, or to avoid
material impairment of the non -Fed-
eral entity's authority to perform the
grant, contract, or other agreement; or
(iii) Any activity specifically author-
ized by statute to be undertaken with
funds from the Federal award.
(iv) Any activity excepted from the
definitions of "lobbying" or "influ-
encing legislation" by the Internal
Revenue Code provisions that require
nonprofit organizations to limit their
participation in direct and "grass
roots" lobbying activities in order to
retain their charitable deduction sta-
tus and avoid punitive excise taxes,
I.R.C. § §501(c)(3), 501(h), 4911(a), includ-
ing:
(A) Nonpartisan analysis, study, or
research reports;
(B) Examinations and discussions of
broad social, economic, and similar
problems; and
(C) Information provided upon re-
quest by a legislator for technical ad-
vice and assistance, as defined by I.R.C.
164
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OMB Guidance
§4911(d)(2) and 26 CFR 56.4911-2(c)(1)-
(c)(3).
(v) When a non - Federal entity seeks
reimbursement for indirect (F &A)
costs, total lobbying costs must be sep-
arately identified in the indirect (F &A)
cost rate proposal, and thereafter
treated as other unallowable activity
costs in accordance with the proce-
dures of § 200.413 Direct costs.
(vi) The non - Federal entity must sub-
mit as part of its annual indirect
(F &A) cost rate proposal a certification
that the requirements and standards of
this section have been complied with.
(See also §200.415 Required certifi-
cations.)
(vii)(A) Time logs, calendars, or simi-
lar records are not required to be cre-
ated for purposes of complying with
the record keeping requirements in
§200.302 Financial management with
respect to lobbying costs during any
particular calendar month when:
(1) The employee engages in lobbying
(as defined in paragraphs (c)(1) and
(c)(2) of this section) 25 percent or less
of the employee's compensated hours of
employment during that calendar
month; and
(2) Within the preceding five -year pe-
riod, the non - Federal entity has not
materially misstated allowable or un-
allowable costs of any nature, includ-
ing legislative lobbying costs.
(B) When conditions in paragraph
(c)(2)(vii)(A)(1) and (2) of this section
are met, non - Federal entities are not
required to establish records to support
the allowability of claimed costs in ad-
dition to records already required or
maintained. Also, when conditions in
paragraphs (c)(2)(vii)(A)(1) and (2) of
this section are met, the absence of
time logs, calendars, or similar records
will not serve as a basis for disallowing
costs by contesting estimates of lob-
bying time spent by employees during
a calendar month.
(viii) The Federal awarding agency
must establish procedures for resolving
in advance, in consultation with OMB,
any significant questions or disagree-
ments concerning the interpretation or
application of this section. Any such
advance resolutions must be binding in
any subsequent settlements, audits, or
investigations with respect to that
grant or contract for purposes of inter-
§ 200.453
pretation of this part, provided, how-
ever, that this must not be construed
to prevent a contractor or non - Federal
entity from contesting the lawfulness
of such a determination.
§200.451 Losses on other awards or
contracts.
Any excess of costs over income
under any other award or contract of
any nature is unallowable. This in-
cludes, but is not limited to, the non -
Federal entity's contributed portion by
reason of cost - sharing agreements or
any under- recoveries through negotia-
tion of flat amounts for indirect (F &A)
costs. Also, any excess of costs over au-
thorized funding levels transferred
from any award or contract to another
award or contract is unallowable. All
losses are not allowable indirect (F &A)
costs and are required to be included in
the appropriate indirect cost rate base
for allocation of indirect costs.
§ 200.452 Maintenance and repair
costs.
Costs incurred for utilities, insur-
ance, security, necessary maintenance,
janitorial services, repair, or upkeep of
buildings and equipment (including
Federal property unless otherwise pro-
vided for) which neither add to the per-
manent value of the property nor ap-
preciably prolong its intended life, but
keep it in an efficient operating condi-
tion, are allowable. Costs incurred for
improvements which add to the perma-
nent value of the buildings and equip-
ment or appreciably prolong their in-
tended life must be treated as capital
expenditures (see §200.439 Equipment
and other capital expenditures). These
costs are only allowable to the extent
not paid through rental or other agree-
ments.
§200.453 Materials and supplies costs,
including costs of computing de-
vices.
(a) Costs incurred for materials, sup-
plies, and fabricated parts necessary to
carry out a Federal award are allow-
able.
(b) Purchased materials and supplies
must be charged at their actual prices,
net of applicable credits. Withdrawals
from general stores or stockrooms
must be charged at their actual net
165
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§ 200.454
cost under any recognized method of
pricing inventory withdrawals, consist-
ently applied. Incoming transportation
charges are a proper part of materials
and supplies costs.
(c) Materials and supplies used for
the performance of a Federal award
may be charged as direct costs. In the
specific case of computing devices,
charging as direct costs is allowable for
devices that are essential and allo-
cable, but not solely dedicated, to the
performance of a Federal award.
(d) Where federally - donated or fur-
nished materials are used in per-
forming the Federal award, such mate-
rials will be used without charge.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 20141
§200.454 Memberships, subscriptions,
and professional activity costs.
(a) Costs of the non - Federal entity's
membership in business, technical, and
professional organizations are allow-
able.
(b) Costs of the non - Federal entity's
subscriptions to business, professional,
and technical periodicals are allowable.
(c) Costs of membership in any civic
or community organization are allow-
able with prior approval by the Federal
awarding agency or pass- through enti-
ty.
(d) Costs of membership in any coun-
try club or social or dining club or or-
ganization are unallowable.
(e) Costs of membership in organiza-
tions whose primary purpose is lob-
bying are unallowable. See also §200,450
Lobbying.
§200.455 Organization costs.
Costs such as incorporation fees, bro-
kers' fees, fees to promoters, organizers
or management consultants, attorneys,
accountants, or investment counselor,
whether or not employees of the non -
Federal entity in connection with es-
tablishment or reorganization of an or-
ganization, are unallowable except
with prior approval of the Federal
awarding agency.
§200.456 Participant support costs.
Participant support costs as defined
in §200.75 Participant support costs are
allowable with the prior approval of
the Federal awarding agency.
2 CFR Ch. II (1 -1 -15 Edition)
§ 200.457 Plant and security costs.
Necessary and reasonable expenses
incurred for protection and security of
facilities, personnel, and work products
are allowable. Such costs include, but
are not limited to, wages and uniforms
of personnel engaged in security activi-
ties; equipment; barriers; protective
(non - military) gear; devices, and equip-
ment; contractual security services;
and consultants. Capital expenditures
for plant security purposes are subject
to § 200.439 Equipment and other capital
expenditures.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§ 200.458 Pre award costs.
Pre -award costs are those incurred
prior to the effective date of the Fed-
eral award directly pursuant to the ne-
gotiation and in anticipation of the
Federal award where such costs are
necessary for efficient and timely per-
formance of the scope of work. Such
costs are allowable only to the extent
that they would have been allowable if
incurred after the date of the Federal
award and only with the written ap-
proval of the Federal awarding agency.
§ 200.459 Professional service costs.
(a) Costs of professional and consult-
ant services rendered by persons who
are members of a particular profession
or possess a special skill, and who are
not officers or employees of the non -
Federal entity, are allowable, subject
to paragraphs (b) and (c) when reason-
able in relation to the services ren-
dered and when not contingent upon
recovery of the costs from the Federal
Government. In addition, legal and re-
lated services are limited under
§200.435 Defense and prosecution of
criminal and civil proceedings, claims,
appeals and patent infringements.
(b) In determining the allowability of
costs in a particular case, no single fac-
tor or any special combination of fac-
tors is necessarily determinative, How-
ever, the following factors are relevant:
(1) The nature and scope of the serv-
ice rendered in relation to the service
required.
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(2) The necessity of contracting for
the service, considering the non -Fed-
eral entity's capability in the par-
ticular area.
(3) The past pattern of such costs,
particularly in the years prior to Fed-
eral awards.
(4) The impact of Federal awards on
the non - Federal entity's business (i.e.,
what new problems have arisen).
(5) Whether the proportion of Federal
work to the non - Federal entity's total
business is such as to influence the
non - Federal entity in favor of incur-
ring the cost, particularly where the
services rendered are not of a con-
tinuing nature and have little relation-
ship to work under Federal awards.
(6) Whether the service can be per-
formed more economically by direct
employment rather than contracting.
(7) The qualifications of the indi-
vidual or concern rendering the service
and the customary fees charged, espe-
cially on non - federally funded activi-
ties.
(8) Adequacy of the contractual
agreement for the service (e.g., descrip-
tion of the service, estimate of time re-
quired, rate of compensation, and ter-
mination provisions).
(c) In addition to the factors in para-
graph, (b) of this section, to be allow-
able, retainer fees must be supported
by evidence of bona fide services avail-
able or rendered.
§ 200.460 Proposal costs.
Proposal costs are the costs of pre-
paring bids, proposals, or applications
on potential Federal and non - Federal
awards or projects, including the devel-
opment of data necessary to support
the non - Federal entity's bids or pro-
posals. Proposal costs of the current
accounting period of both successful
and unsuccessful bids and proposals
normally should be treated as indirect
(F &A) costs and allocated currently to
all activities of the non - Federal entity.
No proposal costs of past accounting
periods will be allocable to the current
period.
§ 200.461 Publication and printing
costs.
(a) Publication costs for electronic
and print media, including distribu-
tion, promotion, and general handling
§ 200.463
are allowable. If these costs are not
identifiable with a particular cost ob-
jective, they should be allocated as in-
direct costs to all benefiting activities
of the non - Federal entity.
(b) Page charges for professional
journal publications are allowable
where:
(1) The publications report work sup-
ported by the Federal Government; and
(2) The charges are levied impartially
on all items published by the journal,
whether or not under a Federal award.
(3) The non - Federal entity may
charge the Federal award before close-
out for the costs of publication or shar-
ing of research results if the costs are
not incurred during the period of per-
formance of the Federal award.
§ 200.462 Rearrangement and recon-
version costs.
(a) Costs incurred for ordinary and
normal rearrangement and alteration
of facilities are allowable as indirect
costs. Special arrangements and alter-
ations costs incurred specifically for a
Federal award are allowable as a direct
cost with the prior approval of the Fed-
eral awarding agency or pass- through
entity.
(b) Costs incurred in the restoration
or rehabilitation of the non - Federal en-
tity's facilities to approximately the
same condition existing immediately
prior to commencement of Federal
awards, less costs related to normal
wear and tear, are allowable.
§200.463 Recruiting costs.
(a) Subject to paragraphs (b) and (c)
of this section, and provided that the
size of the staff recruited and main-
tained is in keeping with workload re-
quirements, costs of "help wanted" ad-
vertising, operating costs of an em-
ployment office necessary to secure
and maintain an adequate staff, costs
of operating an aptitude and edu-
cational testing program, travel costs
of employees while engaged in recruit-
ing personnel, travel costs of appli-
cants for interviews for prospective
employment, and relocation costs in-
curred incident to recruitment of new
employees, are allowable to the extent
that such costs are incurred pursuant
to the non - Federal entity's standard
recruitment program. Where the non-
167
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§ 200.464
Federal entity uses employment agen-
cies, costs not in excess of standard
commercial rates for such services are
allowable.
(b) Special emoluments, fringe bene-
fits, and salary allowances incurred to
attract professional personnel that do
not meet the test of reasonableness or
do not conform with the established
practices of the non - Federal entity, are
unallowable.
(c) Where relocation costs incurred
incident to recruitment of a new em-
ployee have been funded in whole or in
part to a Federal award, and the newly
hired employee resigns for reasons
within the employee's control within 12
months after hire, the non - Federal en-
tity will be required to refund or credit
the Federal share of such relocation
costs to the Federal Government. See
also §200.464 Relocation costs of em-
ployees.
(d) Short -term, travel visa costs (as
opposed to longer -term, immigration
visas) are generally allowable expenses
that may be proposed as a direct cost.
Since short -term visas are issued for a
specific period and purpose, they can be
clearly identified as directly connected
to work performed on a Federal award.
For these costs to be directly charged
to a Federal award, they must:
(1) Be critical and necessary for the
conduct of the project;
(2) Be allowable under the applicable
cost principles;.
(3) Be consistent with the non -Fed-
eral entity's cost accounting practices
and non - Federal entity policy; and
(4) Meet the definition of "direct
cost" as described in the applicable
cost principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§ 200.464 Relocation costs of employ.
ees.
(a) Relocation costs are costs inci-
dent to the permanent change of duty
assignment (for an indefinite period or
for a stated period of not less than 12
months) of an existing employee or
upon recruitment of a new employee.
Relocation costs are allowable, subject
to the limitations described in para-
graphs (b), (c), and (d) of this section,
provided that:
2 CFR Ch. II (1 -1 -15 Edition)
(1) The move is for the benefit of the
employer.
(2) Reimbursement to the employee
is in accordance with an established
written policy consistently followed by
the employer.
(3) The reimbursement does not ex-
ceed the employee's actual (or reason-
ably estimated) expenses.
(b) Allowable relocation costs for
current employees are limited to the
following:
(1) The costs of transportation of the
employee, members of his or her imme-
diate family and his household, and
personal effects to the new location.
(2) The costs of finding a new home,
such as advance trips by employees and
spouses to locate living quarters and
temporary lodging during the transi-
tion period, up to maximum period of
30 calendar days.
(3) Closing costs, such as brokerage,
legal, and appraisal fees, incident to
the disposition of the employee's
former home. These costs, together
with those described in (4), are limited
to 8 per cent of the sales price of the
employee's former home.
(4) The continuing costs of ownership
(for up to six months) of the vacant
former home after the settlement or
lease date of the employee's new per-
manent home, such as maintenance of
buildings and grounds (exclusive of fix -
ing-up expenses), utilities, taxes, and
property insurance.
(5) Other necessary and reasonable
expenses normally incident to reloca-
tion, such as the costs of canceling an
unexpired lease, transportation of per-
sonal property, and purchasing insur-
ance against loss of or damages to per-
sonal property. The cost of canceling
an unexpired lease is limited to three
times the monthly rental.
(c) Allowable relocation costs for new
employees are limited to those de-
scribed in paragraphs (b)(1) and (2) of
this section. When relocation costs in-
curred incident to the recruitment of
new employees have been charged to a
Federal award and the employee re-
signs for reasons within the employee's
control within 12 months after hire,
the non - Federal entity must refund or
credit the Federal Government for its
share of the cost. However, the costs of
travel to an overseas location must be
168
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considered travel costs in accordance
with §200.474 Travel costs, and not this
§200.464 Relocation costs of employees,
for the purpose of this paragraph if de-
pendents are not permitted at the loca-
tion for any reason and the costs do
not include costs of transporting
household goods.
(d) The following costs related to re-
location are unallowable:
(1) Fees and other costs associated
with acquiring a new home.
(2) A loss on the sale of a former
home.
(3) Continuing mortgage principal
and interest payments on a home being
sold.
(4) Income taxes paid by an employee
related to reimbursed relocation costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 20141
§ 200.465 Rental costs of real property
and equipment,
(a) Subject to the limitations de-
scribed in paragraphs (b) through (d) of
this section, rental costs are allowable
to the extent that the rates are reason-
able in light of such factors as: rental
costs of comparable property, if any;
market conditions in the area; alter-
natives available; and the type, life ex-
pectancy, condition, and value of the
property leased. Rental arrangements
should be reviewed periodically to de-
termine if circumstances have changed
and other options are available.
(b) Rental costs under "sale and lease
back" arrangements are allowable only
up to the amount that would be al-
lowed had the non - Federal entity con-
tinued to own the property. This
amount would include expenses such as
depreciation, maintenance, taxes, and
insurance.
(c) Rental costs under "less -than-
arm's - length" leases are allowable only
up to the amount (as explained in para-
graph (b) of this section). For this pur-
pose, a less- than - arm's - length lease is
one under which one party to the lease
agreement is able to control or sub-
stantially influence the actions of the
other. Such leases include, but are not
limited to those between:
(1) Divisions of the non - Federal enti-
ty;
§ 200.465
(2) The non - Federal entity under
common control through common offi-
cers, directors, or members; and
(3) The non - Federal entity and a di-
rector, trustee, officer, or key em-
ployee of the non - Federal entity or an
immediate family member, either di-
rectly or through corporations, trusts,
or similar arrangements in which they
hold a controlling interest. For exam-
ple, the non - Federal entity may estab-
lish a separate corporation for the sole
purpose of owning property and leasing
it back to the non - Federal entity.
(4) Family members include one
party with any of the following rela-
tionships to another party:
(i) Spouse, and parents thereof;
(ii) Children, and spouses thereof;
(iii) Parents, and spouses thereof;
(iv) Siblings, and spouses thereof;
(v) Grandparents and grandchildren,
and spouses thereof;
(vi) Domestic partner and parents
thereof, including domestic partners of
any individual in 2 through 5 of this
definition; and
(vii) Any individual related by blood
or affinity whose close association with
the employee is the equivalent of a
family relationship.
(5) Rental costs under leases which
are required to be treated as capital
leases under GAAP are allowable only
up to the amount (as explained in para-
graph (b) of this section) that would be
allowed had the non - Federal entity
purchased the property on the date the
lease agreement was executed. The pro-
visions of GAAP must be used to deter-
mine whether a lease is a capital lease.
Interest costs related to capital leases
are allowable to the extent they meet
the criteria in §200.449 Interest. Unal-
lowable costs include amounts paid for
profit, management fees, and taxes
that would not have been incurred had
the non - Federal entity purchased the
property.
(6) The rental of any property owned
by any individuals or entities affiliated
with the non - Federal entity, to include
commercial or residential real estate,
for purposes such as the home office
workspace is unallowable.
169
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§ 200.466
§ 200.466 Scholarships and student aid
costs.
(a) Costs of scholarships, fellowships,
and other programs of student aid at
IHEs are allowable only when the pur-
pose of the Federal award is to provide
training to selected participants and
the charge is approved by the Federal
awarding agency. However, tuition re-
mission and other forms of compensa-
tion paid as, or in lieu of, wages to stu-
dents performing necessary work are
allowable provided that:
(1) The individual is conducting ac-
tivities necessary to the Federal
award;
(2) Tuition remission and other sup-
port are provided in accordance with
established policy of the IHE and con-
sistently provided in a like manner to
students in return for similar activities
conducted under Federal awards as
well as other activities; and
(3) During the academic period, the
student is enrolled in an advanced de-
gree program at a non - Federal entity
or affiliated institution and the activi-
ties of the student in relation to the
Federal award are related to the degree
program;
(4) The tuition or other payments are
reasonable compensation for the work
performed and are conditioned explic-
itly upon the performance of necessary
work; and
(5) It is the IHE's practice to simi-
larly compensate students under Fed-
eral awards as well as other activities.
(b) Charges for tuition remission and
other forms of compensation paid to
students as, or in lieu of, salaries and
wages must be subject to the reporting
requirements in §200.430 Compensa-
tion— personal services, and must be
treated as direct or indirect cost in ac-
cordance with the actual work being
performed. Tuition remission may be
charged on an average rate basis. See
also §200.431 Compensation— fringe ben-
efits.
§ 200.467 Selling and marketing costs.
Costs of selling and marketing any
products or services of the non - Federal
entity (unless allowed under §200.421
Advertising and public relations.) are
unallowable, except as direct costs,
with prior approval by the Federal
2 CFR Ch. II (1 -1 -16 Edition)
awarding agency when necessary for
the performance of the Federal award.
§ 200.468 Specialized service facilities.
(a) The costs of services provided by
highly complex or specialized facilities
operated by the non - Federal entity,
such as computing facilities, wind tun-
nels, and reactors are allowable, pro-
vided the charges for the services meet
the conditions of either paragraphs (b)
or (e) of this section, and, in addition,
take into account any items of income
or Federal financing that qualify as ap-
plicable credits under §200.406 Applica-
ble credits.
(b) The costs of such services, when
material, must be charged directly to
applicable awards based on actual
usage of the services on the basis of a
schedule of rates or established meth-
odology that:
(1) Does not discriminate between ac-
tivities under Federal awards and other
activities of the non - Federal entity, in-
cluding usage by the non - Federal enti-
ty for internal purposes, and
(2) Is designed to recover only the ag-
gregate costs of the services. The costs
of each service must consist normally
of both its direct costs and its allocable
share of all indirect (F &A) costs. Rates
must be adjusted at least biennially,
and must take into consideration over/
under applied costs of the previous pe-
riod(s).
(c) Where the costs incurred for a
service are not material, they may be
allocated as indirect (F &A) costs.
(d) Under some extraordinary cir-
cumstances, where it is in the best in-
terest of the Federal Government and
the non - Federal entity to establish al-
ternative costing arrangements, such
arrangements may be worked out with
the Federal cognizant agency for indi-
rect costs.
§ 200.469 Student activity costs.
Costs incurred for intramural activi-
ties, student publications, student
clubs, and other student activities, are
unallowable, unless specifically pro-
vided for in the Federal award.
§ 200.470 Taxes (including Value
Added Tax).
(a) For states, local governments and
Indian tribes:
170
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OMB Guidance
(1) Taxes that a governmental unit is
legally required to pay are allowable,
except for self- assessed taxes that dis-
proportionately affect Federal pro-
grams or changes in tax policies that
disproportionately affect Federal pro-
grams.
(2) Gasoline taxes, motor vehicle
fees, and other taxes that are in effect
user fees for benefits provided to the
Federal Government are allowable.
(3) This provision does not restrict
the authority of the Federal awarding
agency to identify taxes where Federal
participation is inappropriate. Where
the identification of the amount of un-
allowable taxes would require an inor-
dinate amount of effort, the cognizant
agency for indirect costs may accept a
reasonable approximation thereof.
(b) For nonprofit organizations and
IHEs:
(1) In general, taxes which the non -
Federal entity is required to pay and
which are paid or accrued in accord-
ance with GAAP, and payments made
to local governments in lieu of taxes
which are commensurate with the local
government services received are al-
lowable, except for:
(i) Taxes from which exemptions are
available to the non - Federal entity di-
rectly or which are available to the
non - Federal entity based on an exemp-
tion afforded the Federal Government
and, in the latter case, when the Fed-
eral awarding agency makes available
the necessary exemption certificates,
(ii) Special assessments on land
which represent capital improvements,
and
(iii) Federal income taxes.
(2) Any refund of taxes, and any pay-
ment to the non - Federal entity of in-
terest thereon, which were allowed as
Federal award costs, will be credited
either as a cost reduction or cash re-
fund, as appropriate, to the Federal
Government. However, any interest ac-
tually paid or credited to an non -Fed-
eral entity incident to a refund of tax,
interest, and penalty will be paid or
credited to the Federal Government
only to the extent that such interest
accrued over the period during which
the non - Federal entity has been reim-
bursed by the Federal Government for
the taxes, interest, and penalties.
§ 200.471
(c) Value Added Tax (VAT) Foreign
taxes charged for the purchase of goods
or services that a non - Federal entity is
legally required to pay in country is an
allowable expense under Federal
awards. Foreign tax refunds or applica-
ble credits under Federal awards refer
to receipts, or reduction of expendi-
tures, which operate to offset or reduce
expense items that are allocable to
Federal awards as direct or indirect
costs. To the extent that such credits
accrued or received by the non - Federal
entity relate to allowable cost, these
costs must be credited to the Federal
awarding agency either as costs or cash
refunds. If the costs are credited back
to the Federal award, the non - Federal
entity may reduce the Federal share of
costs by the amount of the foreign tax
reimbursement, or where Federal
award has not expired, use the foreign
government tax refund for approved ac-
tivities under the Federal award with
prior approval of the Federal awarding
agency.
§200.471 Termination costs.
Termination of a Federal award gen-
erally gives rise to the incurrence of
costs, or the need for special treatment
of costs, which would not have arisen
had the Federal award not been termi-
nated. Cost principles covering these
items are set forth in this section.
They are to be used in conjunction
with the other provisions of this part
in termination situations.
(a) The cost of items reasonably usa-
ble on the non- Federal entity's other
work must not be allowable unless the
non - Federal entity submits evidence
that it would not retain such items at
cost without sustaining a loss. In de-
ciding whether such items are reason-
ably usable on other work of the non -
Federal entity, the Federal awarding
agency should consider the non - Federal
entity's plans and orders for current
and scheduled activity. Contempora-
neous purchases of common items by
the non - Federal entity must be re-
garded as evidence that such items are
reasonably usable on the non - Federal
entity's other work. Any acceptance of
common items as allocable to the ter-
minated portion of the Federal award
must be limited to the extent that the
quantities of such items on hand, in
171
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§ 200.472
transit, and on order are in excess of
the reasonable quantitative require-
ments of other work.
(b) If in a particular case, despite all
reasonable efforts by the non - Federal
entity, certain costs cannot be discon-
tinued immediately after the effective
date of termination, such costs are
generally allowable within the limita-
tions set forth in this part, except that
any such costs continuing after termi-
nation due to the negligent or willful
failure of the non - Federal entity to dis-
continue such costs must be unallow-
able.
(c) Loss of useful value of special
tooling, machinery, and equipment is
generally allowable if:
(1) Such special tooling, special ma-
chinery, or equipment is not reason-
ably capable of use in the other work of
the non - Federal entity,
(2) The interest of the Federal Gov-
ernment is protected by transfer of
title or by other means deemed appro-
priate by the Federal awarding agency
(see also § 200.313 Equipment, paragraph
(d), and
(3) The loss of useful value for any
one terminated Federal award is lim-
ited to that portion of the acquisition
cost which bears the same ratio to the
total acquisition cost as the termi-
nated portion of the Federal award
bears to the entire terminated Federal
award and other Federal awards for
which the special tooling, machinery,
or equipment was acquired.
(d) Rental costs under unexpired
leases are generally allowable where
clearly shown to have been reasonably
necessary for the performance of the
terminated Federal award less .the re-
sidual value of such leases, if:
(1) The amount of such rental
claimed does not exceed the reasonable
use value of the property leased for the
period of the Federal award and such
further period as may be reasonable,
and
(2) The non - Federal entity makes all
reasonable efforts to terminate, assign,
settle, or otherwise reduce the cost of
such lease. There also may be included
the cost of alterations of such leased
property, provided such alterations
were necessary for the performance of
the Federal award, and of reasonable
2 CFR Ch. II (1 -1 -15 Edition)
restoration required by the provisions
of the lease.
(e) Settlement expenses including the
following are generally allowable:
(1) Accounting, legal, clerical, and
similar costs reasonably necessary for:
(i) The preparation and presentation
to the Federal awarding agency of set-
tlement claims and supporting data
with respect to the terminated portion
of the Federal award, unless the termi-
nation is for cause (see Subpart D—
Post Federal Award Requirements of
this part, §§ 200.338 Remedies for Non-
compliance through 200.342 Effects of
Suspension and termination); and
(ii) The termination and settlement
of subawards.
(2) Reasonable costs for the storage,
transportation, protection, and disposi-
tion of property provided by the Fed-
eral Government or acquired or pro-
duced for the Federal award.
(f) Claims under subawards, including
the allocable portion of claims which
are common to the Federal award and
to other work of the non - Federal enti-
ty, are generally allowable. An appro-
priate share of the non - Federal entity's
indirect costs may be allocated to the
amount of settlements with contrac-
tors and/or subrecipients, provided that
the amount allocated is otherwise con-
sistent with the basic guidelines con-
tained in §200.414 Indirect (F &A) costs.
The indirect costs so allocated must
exclude the same and similar costs
claimed directly or indirectly as settle-
ment expenses.
§ 200.472 Training and education costs.
The cost of training and education
provided for employee development is
allowable.
§ 200.473 Transportation costs.
Costs incurred for freight, express,
cartage, postage, and other transpor-
tation services relating either to goods
purchased, in process, or delivered, are
allowable. When such costs can readily
be identified with the items involved,
they may be charged directly as trans-
portation costs or added to the cost of
such items. Where identification with
the materials received cannot readily
be made, inbound transportation cost
may be charged to the appropriate in-
direct (F &A) cost accounts if the non-
172
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OMB Guidance
Federal entity follows a consistent, eq-
uitable procedure in this respect. Out-
bound freight, if reimbursable under
the terms and conditions of the Federal
award, should be treated as a direct
cost.
§ 200.474 Travel costa.
(a) General. Travel costs are the ex-
penses for transportation, lodging, sub-
sistence, and related items incurred by
employees who are in travel status on
official business of the non - Federal en-
tity. Such costs may be charged on an
actual cost basis, on a per diem or
mileage basis in lieu of actual costs in-
curred, or on a combination of the two,
provided the method used is applied to
an entire trip and not to selected days
of the trip, and results in charges con-
sistent with those normally allowed in
like circumstances in the non - Federal
entity's non - federally- funded activities
and in accordance with non- Federalen-
tity's written travel reimbursement
policies. Notwithstanding the provi-
sions of §200.444 General costs of gov-
ernment, travel costs of officials cov-
ered by that section are allowable with
the prior written approval of the Fed-
eral awarding agency or pass- through
entity when they are specifically re-
lated to the Federal award.
(b) Lodging and subsistence. Costs in-
curred by employees and officers for
travel, including costs of lodging, other
subsistence, and incidental expenses,
must be considered reasonable and oth-
erwise allowable only to the extent
such costs do not exceed charges nor-
mally allowed by the non - Federal enti-
ty in its regular operations as the re-
sult of the non - Federal entity's written
travel policy. In addition, if these costs
are charged directly to the Federal
award documentation must justify
that:
(1) Participation of the individual is
necessary to the Federal award; and
(2) The costs are reasonable and con-
sistent with non - Federal entity's es-
tablished travel policy.
(c)(1) Temporary dependent care
costs (as dependent is defined in 26
U.S.C. 152) above and beyond regular
dependent care that directly results
from travel to conferences is allowable
provided that:
§ 200.474
(i) The costs are a direct result of the
individual's travel for the Federal
award;
(ii) The costs are consistent with the
non - Federal entity's documented trav-
el policy for all entity travel; and
(iii) Are only temporary during the
travel period.
(2) Travel costs for dependents are
unallowable, except for travel of dura-
tion of six months or more with prior
approval of the Federal awarding agen-
cy. See also §200.432 Conferences.
(d) In the absence of an acceptable,
written non - Federal entity policy re-
garding travel costs, the rates and
amounts established under 5 U.S.C.
5701 -11, ( "Travel and Subsistence Ex-
penses; Mileage Allowances "), or by
the Administrator of General Services,
or by the President (or his or her des-
ignee) pursuant to any provisions of
such subchapter must apply to travel
under Federal awards (48 CFR 31.205 -
46(a)).
(e) Commercial air travel. (1) Airfare
costs in excess of the basic least expen-
sive unrestricted accommodations
class offered by commercial airlines
are unallowable except when such ac-
commodations would:
(i) Require circuitous routing;
(ii) Require travel during unreason-
able hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that
Would offset the transportation sav-
ings; or
(v) Offer accommodations not reason-
ably adequate for the traveler's med-
ical needs. The non - Federal entity
must justify and document these condi-
tions on a case -by -case basis in order
for the use of first -class or business -
class airfare to be allowable in such
cases.
(2) Unless a pattern of avoidance is
detected, the Federal Government will
generally not question a non - Federal
entity's determinations that cus-
tomary standard airfare or other dis-
count airfare is unavailable for specific
trips if the non - Federal entity can
demonstrate that such airfare was not
available in the specific case.
(f) Air travel by other than commercial
carrier. Costs of travel by non - Federal
entity- owned, - leased, or - chartered
173
L :AAC HMEN71�i' ........®
...� .... ®. PAGES
§200.475
aircraft include the cost of lease, char-
ter, operation (including personnel
costs), maintenance, depreciation, in-
surance, and other related costs. The
portion of such costs that exceeds the
cost of airfare as provided for in para-
graph (d) of this section, is unallow-
able.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§ 200.475 Trustees.
Travel and subsistence costs of trust-
ees (or directors) at IHEs and nonprofit
organizations are allowable. See also
§200.474 Travel costs.
Subpart F —Audit Requirements
GENERAL
§200.500 Purpose.
This part sets forth standards for ob-
taining consistency and uniformity
among Federal agencies for the audit
of non - Federal entities expending Fed-
eral awards.
AUDITS
§ 200.501 Audit requirements.
(a) Audit required. A non - Federal enti-
ty that expends $750,000 or more during
the non - Federal entity's fiscal year in
Federal awards must have a single or
program- specific audit conducted for
that year in accordance with the provi-
sions of this part.
(b) Single audit. A non - Federal entity
that expends $750,000 or more during
the non - Federal entity's fiscal year in
Federal awards must have a single
audit conducted in accordance with
§200.514 Scope of audit except when it
elects to have a program- specific audit
conducted in accordance with para-
graph (c) of this section.
(c) Program- specific audit election.
When an auditee expends Federal
awards under only one Federal pro-
gram (excluding R &D) and the Federal
program's statutes, regulations, or the
terms and conditions of the Federal
award do not require a financial state-
ment audit of the auditee, the auditee
may elect to have a program- specific
audit conducted in accordance with
§ 200.507 Program- specific audits. A pro-
gram- specific audit may not be elected
2 CFR Ch. II (1 -1 -15 Edition)
for R &D unless all of the Federal
awards expended were received from
the same Federal agency, or the same
Federal agency and the same pass -
through entity, and that Federal agen-
cy, or pass- through entity in the case
of a subrecipient, approves in advance
a program- specific audit.
(d) Exemption when Federal awards ex-
pended are less than $750,000. A non -Fed-
eral entity that expends less than
$750,000 during the non - Federal entity's
fiscal year in Federal awards is exempt
from Federal audit requirements for
that year, except as noted in §200.503
Relation to other audit requirements,
but records must be available for re-
view or audit by appropriate officials
of the Federal agency, pass- through en-
tity, and Government Accountability
Office (GAO).
(e) Federally Funded Research and De-
velopment Centers ( FFRDQ. Manage-
ment of an auditee that owns or oper-
ates a FFRDC may elect to treat the
FFRDC as a separate entity for pur-
poses of this part.
(f) Subrecipients and Contractors. An
auditee may simultaneously be a re-
cipient, a subrecipient, and a con-
tractor. Federal awards expended as a
recipient or a subrecipient are subject
to audit under this part. The payments
received for goods or services provided
as a contractor are not Federal awards.
Section §200.330 Subrecipient and con-
tractor determinations sets forth the
considerations in determining whether
payments constitute a Federal award
or a payment for goods or services pro-
vided as a contractor.
(g) Compliance responsibility for con-
tractors. In most cases, the auditee's
compliance responsibility for contrac-
tors is only to ensure that the procure-
ment, receipt, and payment for goods
and services comply with Federal stat-
utes, regulations, and the terms and
conditions of Federal awards. Federal
award compliance requirements nor-
mally do not pass through to contrac-
tors. However, the auditee is respon-
sible for ensuring compliance for pro-
curement transactions which are struc-
tured such that the contractor is re-
sponsible for program compliance or
the contractor's records must be re-
viewed to determine program compli-
ance. Also, when these procurement
174
n O
OMB Guidance
transactions relate to a major pro-
gram, the scope of the audit must in-
clude determining whether these trans-
actions are in compliance with Federal
statutes, regulations, and the terms
and conditions of Federal awards.
(h) For - profit subrecipient. Since this
part does not apply to for - profit sub-
recipients, the pass- through entity is
responsible` for establishing require-
ments, as necessary, to ensure compli-
ance by for - profit subrecipients. The
agreement with the for- profit sub -
recipient must describe applicable
compliance requirements and the for -
profit subrecipient's compliance re-
sponsibility. Methods to ensure compli-
ance for Federal awards made to for -
profit subrecipients may include pre -
award audits, monitoring during the
agreement, and post -award audits. See
also §200.331 Requirements for pass -
through entities.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 20141
§ 200.502 Basis for determining Fed-
eral awards expended.
(a) Determining Federal awards ex-
pended. The determination of when a
Federal award is expended must be
based on when the activity related to
the Federal award occurs. Generally,
the activity pertains to events that re-
quire the non - Federal entity to comply
with Federal statutes, regulations, and
the terms and conditions of Federal
awards, such as: expenditure /expense
transactions associated with awardsin-
cluding grants, cost - reimbursement
contracts under the FAR, compacts
with Indian Tribes, cooperative agree-
ments, and direct appropriations; the
disbursement of funds to subrecipients;
the use of loan proceeds under loan and
loan guarantee programs; the receipt of
property; the receipt of surplus prop-
erty; the receipt or use of program in-
come; the distribution or use of food
commodities; the disbursement of
amounts entitling the non - Federal en-
tity to an interest subsidy; and the pe-
riod when insurance is in force.
(b) Loan and loan guarantees (loans).
Since the Federal Government is at
risk for loans until the debt is repaid,
the following guidelines must be used
to calculate the value of Federal
awards expended under loan programs,
§ 200.502
except as noted in paragraphs (c) and
(d) of this section:
(1) Value of new loans made or re-
ceived during the audit period; plus
(2) Beginning of the audit period bal-
ance of loans from previous years for
which the Federal Government imposes
continuing compliance requirements;
plus
(3) Any interest subsidy, cash, or ad-
ministrative cost allowance received.
(c) Loan and loan guarantees (loans) at
IHEs. When loans are made to students
of an IHE but the IHE does not make
the loans, then only the value of loans
made during the audit period, must be
considered Federal awards expended in
that audit period. The balance of loans
for previous audit periods is not in-
cluded as Federal awards expended be-
cause the lender accounts for the prior
balances.
(d) Prior loan and loan guarantees
(loans). Loans, the proceeds of which
were received and expended in prior
years, are not considered Federal
awards expended under this part when
the Federal statutes, regulations, and
the terms and conditions of Federal
awards pertaining to such loans impose
no continuing compliance require-
ments other than to repay the loans.
(e) Endowment funds. The cumulative
balance of Federal awards for endow-
ment funds that are federally re-
stricted are considered Federal awards
expended in each audit period in which
the funds are still restricted.
(f) Free rent. Free rent received by
itself is not considered a Federal award
expended under this part. However, free
rent received as part of a Federal
award to carry out a Federal program
must be included in determining Fed-
eral awards expended and subject to
audit under this part.
(g) Valuing non -cash assistance. Fed-
eral non -cash assistance, such as free
rent, food commodities, donated prop-
erty, or donated surplus property, must
be valued at fair market value at the
time of receipt or the assessed value
provided by the Federal agency.
(h) Medicare. Medicare payments to a
non - Federal entity for providing pa-
tient care services to Medicare - eligible
individuals are not considered Federal
awards expended under this part.
175
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§ 200.503
(i) Medicaid. Medicaid payments to a
subrecipient for providing patient care
services to Medicaid - eligible individ-
uals are not considered Federal awards
expended under this part unless a state
requires the funds to be treated as Fed-
eral awards expended because reim-
bursement is on a cost - reimbursement
basis.
(j) Certain loans provided by the Na-
tional Credit Union Administration. For
purposes of this part, loans made from
the National Credit Union Share Insur-
ance Fund and the Central Liquidity
Facility that are funded by contribu-
tions from insured non - Federal entities
are not considered Federal awards ex-
pended.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 20141
§ 200.503 Relation to other audit re-
quirements.
(a) An audit conducted in accordance
with this part must be in lieu of any fi-
nancial audit of Federal awards which
a non - Federal entity is required to un-
dergo under any other Federal statute
or regulation. To the extent that such
audit provides a Federal agency with
the information it requires to carry
out its responsibilities under Federal
statute or regulation, a Federal agency
must rely upon and use that informa-
tion.
(b) Notwithstanding subsection (a), a
Federal agency, Inspectors General, or
GAO may conduct or arrange for addi-
tional audits which are necessary to
carry out its responsibilities under
Federal statute or regulation. The pro-
visions of this part do not authorize
any non - Federal entity to constrain, in
any manner, such Federal agency from
carrying out or arranging for such ad-
ditional audits, except that the Federal
agency must plan such audits to not be
duplicative of other audits of Federal
awards. Prior to commencing such an
audit, the Federal agency or pass -
through entity must review the FAC
for recent audits submitted by the non -
Federal entity, and to the extent such
audits meet a Federal agency or pass -
through entity's needs, the Federal
agency or pass- through entity must
rely upon and use such audits. Any ad-
ditional audits must be planned and
performed in such a way as to build
2 CFR Ch. II (1 -1 -15 Edition)
upon work performed, including the
audit documentation, sampling, and
testing already performed, by other
auditors.
(c) The provisions of this part do not
limit the authority of Federal agencies
to conduct, or arrange for the conduct
of, audits and evaluations of Federal
awards, nor limit the authority of any
Federal agency Inspector General or
other Federal official. For example, re-
quirements that ,may be applicable
under the FAR or CAS and the terms
and conditions of a cost - reimbursement
contract may include additional appli-
cable audits to be conducted or ar-
ranged for by Federal agencies.
(d) Federal agency to pay for addi-
tional audits. A Federal agency that
conducts or arranges for additional au-
dits must, consistent with other appli-
cable Federal statutes and regulations,
arrange for funding the full cost of
such additional audits.
(e) Request for a program to be au-
dited as a major program. A Federal
awarding agency may request that an
auditee have a particular Federal pro-
gram audited as a major program in
lieu of the Federal awarding agency
conducting or arranging for the addi-
tional audits. To allow for planning,
such requests should be made at least
180 calendar days prior to the end of
the fiscal year to be audited. The
auditee, after consultation with its
auditor, should promptly respond to
such a request by informing the Fed-
eral awarding agency whether the pro-
gram would otherwise be audited as a
major program using the risk -based
audit approach described in §200.518
Major program determination and, if
not, the estimated incremental cost.
The Federal awarding agency must
then promptly confirm to the auditee
whether it wants the program audited
as a major program. If the program is
to be audited as a major program based
upon this Federal awarding agency re-
quest, and the Federal awarding agen-
cy agrees to pay the full incremental
costs, then the auditee must have the
program audited as a major program. A
pass- through entity may use the provi-
sions of this paragraph for a sub -
recipient.
176
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§ 200.504 Frequency of audits.
Except for the provisions for biennial
audits provided in paragraphs (a) and
(b) of this section, audits required by
this part must be performed annually.
Any biennial audit must cover both
years within the biennial period.
(a) A state, local government, or In-
dian tribe that is required by constitu-
tion or statute, in effect on January 1,
1987, to undergo its audits less fre-
quently than annually, is permitted to
undergo its audits pursuant to this
part biennially. This requirement must
still be in effect for the biennial period.
(b) Any nonprofit organization that
had biennial audits for all biennial pe-
riods ending between July 1, 1992, and
January 1, 1995, is permitted to under-
go its audits pursuant to this part bi-
ennially.
§ 200.505 Sanctions.
In cases of continued inability or un-
willingness to have an audit conducted
in accordance with this part, Federal
agencies and pass- through entities
must take appropriate action as pro-
vided in §200.338 Remedies for non-
compliance.
§200.506 Audit costs.
See § 200.425 Audit services.
§200.507 Program- specific audits.
(a) Program - specific audit guide avail-
able. In many cases, a program - specific
audit guide will be available to provide
specific guidance to the auditor with
respect to internal controls, compli-
ance requirements, suggested audit
procedures, and audit reporting re-
quirements. A listing of current pro-
gram- specific audit guides can be found
in the compliance supplement begin-
ning with the 2014 supplement includ-
ing Federal awarding agency contact
information and a Web site where a
copy of the guide can be obtained.
When a current program- specific audit
guide is available, the auditor must
follow GAGAS and the guide when per-
forming a program- specific audit.
(b) Program - specific audit guide not
available. (1) When a current program -
specific audit guide is not available,
the auditee and auditor must have ba-
sically the same responsibilities for the
§ 200.507
Federal program as they would have
for an audit of a major program in a
single audit.
(2) The auditee must prepare the fi-
nancial statement(s) for the Federal
program that includes, at a minimum,
a schedule of expenditures of Federal
awards for the program and notes that
describe the significant accounting
policies used in preparing the schedule,
a summary schedule of prior audit find-
ings consistent with the requirements
of §200.511 Audit, findings follow -up,
paragraph (b), and a corrective action
plan consistent with the requirements
of §200.511 Audit findings follow -up,
paragraph (c).
(3) The auditor must:
(i) Perform an audit of the financial
statement(s) for the Federal, program
in accordance with GAGAS;
(ii) Obtain an understanding of inter-
nal controls and perform tests of inter-
nal controls over the Federal program
consistent with the requirements of
§200.514 Scope of audit, paragraph (c)
for a major program;
(iii) Perform procedures to determine
whether the auditee has complied with
Federal statutes, regulations, and the
terms and conditions of Federal awards
that could have a direct and material
effect on the Federal program con-
sistent with the requirements of
§200.514 Scope of audit, paragraph (d)
for a major program;
(iv) Follow up on prior audit findings,
perform procedures to assess the rea-
sonableness of the summary schedule
of prior audit findings prepared by the
auditee in accordance with the require-
ments of § 200.511 Audit findings follow -
up, and report, as a current year audit
finding, when the auditor concludes
that the summary schedule of prior
audit findings materially misrepre-
sents the status of any prior audit find-
ing; and
(v) Report any audit findings con-
sistent with the requirements of
§ 200.516 Audit findings.
(4) The auditor's report(s) may be in
the form of either combined or sepa-
rate reports and may be organized dif-
ferently from the manner presented in
this section. The auditor's report(s)
must state that the audit was con-
ducted in accordance with this part
and include the following:
177
=PAGE HMENT ..... .........
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§ 200.508
(i) An opinion (or disclaimer of opin-
ion) as to whether the financial state-
ments) of the Federal program is pre-
sented fairly in all material respects in
accordance with the stated accounting
policies;
(ii) A report on internal control re-
lated to the Federal program, which
must describe the scope of testing of
internal control and the results of the
tests;
(iii) A report on compliance which in-
cludes an opinion (or disclaimer of
opinion) as to whether the auditee
complied with laws, regulations, and
the terms and conditions of Federal
awards which could have a direct and
material effect on the Federal pro-
gram; and
(iv) A schedule of findings and ques-
tioned costs for the Federal program
that includes a summary of the audi-
tor's results relative to the Federal
program in a format consistent with
§200.515 Audit reporting, paragraph
(d)(1) and findings and questioned costs
consistent with the requirements of
§200.515 Audit reporting, paragraph
(d)(3).
(c) Report submission for program -spe-
cific audits. (1) The audit must be com-
pleted and the reporting required by
paragraph (c)(2) or (c)(3) of this section
submitted within the earlier of 30 cal-
endar days after receipt of the audi-
tor's report(s), or nine months after
the end of the audit period, unless a
different period is specified in a pro-
gram- specific audit guide. Unless re-
stricted by Federal law or regulation,
the auditee must make report copies
available for public inspection.
Auditees and auditors must ensure
that their respective parts of the re-
porting package do not include pro-
tected personally identifiable informa-
tion,
(2) When a program- specific audit
guide is available, the auditee must
electronically submit to the FAC the
data collection form prepared in ac-
cordance with §200.512 Report submis-
sion, paragraph (b), as applicable to a
program- specific audit, and the report-
ing required by the program- specific
audit guide.
(3) When a program - specific audit
guide is not available, the reporting
package for a program- specific audit
2 CFR Ch. II (1 -1 -15 Edition)
must consist of the financial state -
ment(s) of the Federal program, a sum-
mary schedule of prior audit findings,
and a corrective action plan as de-
scribed in paragraph (b)(2) of this sec-
tion, and the auditor's report(s) de-
scribed in paragraph (b)(4) of this sec-
tion. The data collection form prepared
in accordance with §200.512 Report sub-
mission, paragraph (b), as applicable to
a program- specific audit, and one copy
of this reporting package must be elec-
tronically submitted to the FAC.
(d) Other sections of this part may
apply. Program- specific audits are sub-
ject to:
(1) 200.500 Purpose through 200.503 Re-
lation to other audit requirements,
paragraph (d);
(2) 200.504 Frequency of audits
through 200.506 Audit costs;
(3) 200.508 Auditee responsibilities
through 200.509 Auditor selection;
(4) 200.511 Audit findings follow -up;
(5) 200.512 Report submission, para-
graphs (e) through (h);
(6) 200.513 Responsibilities;
(7) 200.516 Audit findings through
200.517 Audit documentation;
(8) 200.521 Management decision, and
(9) Other referenced provisions of this
part unless contrary to the provisions
of this section, a program- specific
audit guide, or program statutes and
regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014)
AUDITEES
§200.508 Auditee responsibilities.
The auditee must:
(a) Procure or otherwise arrange for
the audit required by this part in ac-
cordance with §200.509 Auditor selec-
tion, and ensure it is properly per-
formed and submitted when due in ac-
cordance with §200.512 Report submis-
sion.
(b) Prepare appropriate financial
statements, including the schedule of
expenditures of Federal awards in ac-
cordance with §200.510 Financial state-
ments.
(c) Promptly follow up and take cor-
rective action on audit findings, in-
cluding preparation of a summary
schedule of prior audit findings and a
corrective action plan in accordance
178
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OMB Guidance
with §200.511 Audit findings follow -up,
paragraph (b) and §200.511 Audit find-
ings follow -up, paragraph (c), respec-
tively.
(d) Provide the auditor with access to
personnel, accounts, books, records,
supporting documentation, and other
information as needed for the auditor
to perform the audit required by this
part.
§ 200.509 Auditor selection.
(a) Auditor procurement. In procuring
audit services, the auditee must follow
the procurement standards prescribed
by the Procurement Standards in
§§ 200.317 Procurement by states
through 20.326 Contract provisions of
Subpart D- Post Federal Award Re-
quirements of this part or the FAR (48
CFR part 42), as applicable. When pro-
curing audit services, the objective is
to obtain high - quality audits. In re-
questing proposals for audit services,
the objectives and scope of the audit
must be made clear and the non -Fed-
eral entity must request a copy of the
audit organization's peer review report
which the auditor is required to pro-
vide under GAGAS. Factors to be con-
sidered in evaluating each proposal for
audit services include the responsive-
ness to the request for proposal, rel-
evant experience, availability of staff
with professional qualifications and
technical abilities, the results of peer
and external quality control reviews,
and 'price. Whenever possible, the
auditee must make positive efforts to
utilize small businesses, minority -
owned firms, and women's business en-
terprises, in procuring audit services as
stated in §200.321 Contracting with
small and minority businesses, wom-
en's business enterprises, and labor
surplus area firms, or the FAR (48 CFR
part 42), as applicable.
(b) Restriction on auditor preparing in-
direct cost proposals. An auditor who
prepares the indirect cost proposal or
cost allocation plan may not also be se-
lected to perform the audit required by
this part when the indirect costs recov-
ered by the auditee during the prior
year exceeded $1 million. This restric-
tion applies to the base year used in
the preparation of the indirect cost
proposal or cost allocation plan and
any subsequent years in which the re-
§ 200.510
sulting indirect cost agreement or cost
allocation plan is used to recover costs.
(c) Use of Federal auditors. Federal
auditors may perform all or part of the
work required under this part if they
comply fully with the requirements of
this part.
§ 200.510 Financial statements.
(a) Financial statements. The auditee
must prepare financial statements that
reflect its financial position, results of
operations or changes in net assets,
and, where appropriate, cash flows for
the fiscal year audited. The financial
statements must be for the same orga-
nizational unit and fiscal year that is
chosen to meet the requirements of
this part. However, non - Federal entity -
wide financial statements may also in-
clude departments, agencies, and other
organizational units that have separate
audits in accordance with §200.514
Scope of audit, paragraph (a) and pre-
pare separate financial statements.
(b) Schedule of expenditures of Federal
awards. The auditee must also prepare
a schedule of expenditures of Federal
awards for the period covered by the
auditee's financial statements which
must include the total Federal awards
expended as determined in accordance
with § 200.502 Basis for determining
Federal awards expended. While not re-
quired, the auditee may choose to pro-
vide information requested by Federal
awarding agencies and pass- through
entities to make the schedule easier to
use. For example, when a Federal .pro-
gram has multiple Federal award
years, the auditee may list the amount
of Federal awards expended for each
Federal award year separately. At a
minimum, the schedule must:
(1) List individual Federal programs
by Federal agency. For a cluster of pro-
grams, provide the cluster name, list
individual Federal programs within the
cluster of programs, and provide the
applicable Federal agency name. For
R &D, total Federal awards expended
must be shown either by individual
Federal award or by Federal agency
and major subdivision within the Fed-
eral agency. For example, the National
Institutes of Health is a major subdivi-
sion in the Department of Health and
Human Services.
179
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§ 200.511
(2) For Federal awards received as a
subrecipient, the name of the pass -
through entity and identifying number
assigned by the pass- through entity
must be included.
(3) Provide total Federal awards ex-
pended for each individual Federal pro-
gram and the CFDA number or other
identifying number when the CFDA in-
formation is not available. For a clus-
ter of programs also provide the total
for the cluster,
(4) Include the total amount provided
to subrecipients from each Federal pro-
gram.
(5) For loan or loan guarantee pro-
grams described in §200.502 Basis for
determining Federal awards expended,
paragraph (b), identify in the notes to
the schedule the balances outstanding
at the end of the audit period. This is
in addition to including the total Fed-
eral awards expended for loan or loan
guarantee programs in the schedule.
(6) Include notes that describe that
significant accounting policies used in
preparing the schedule, and note
whether or not the auditee elected to
use the 10% de minimis cost rate as
covered in §200.414 Indirect (F &A)
costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75667, Dec. 19, 2014]
§ 200.511 Audit findings follow -up.
(a) General. The auditee is responsible
for follow -up and corrective action on
all audit findings. As part of this re-
sponsibility, the auditee must prepare
a summary schedule of prior audit find-
ings. The auditee must also prepare a
corrective action plan for current year
audit findings. The summary schedule
of prior audit findings and the correc-
tive action plan must include the ref-
erence numbers the auditor assigns to
audit findings under §200.516 Audit
findings, paragraph (c). Since the sum-
mary schedule may include audit find-
ings from multiple years, it must in-
clude the fiscal year in which the find-
ing initially occurred. The corrective'
action plan and summary schedule of
prior audit findings must include find-
ings relating to the financial state-
ments which are required to be re-
ported in accordance with GAGAS.
(b) Summary schedule of prior audit
findings. The summary schedule of
2 CFR Ch. II (1 -1 -15 Edition)
prior audit findings must report the
status of all audit findings included in
the prior audit's schedule of findings
and questioned costs. The summary
schedule must also include audit find-
ings reported in the prior audit's sum-
mary schedule of prior audit findings
except audit findings listed as cor-
rected in accordance with paragraph
(b)(1) of this section, or no longer valid
or not warranting further action in ac-
cordance with paragraph (b)(3) of this
section.
(1) When audit findings were fully
corrected, the summary schedule need
only list the audit findings and state
that corrective action was taken.
(2) When audit findings were not cor-
rected or were only partially corrected,
the summary schedule must describe
the reasons for the finding's recurrence
and planned corrective action, and any
partial corrective action taken. When
corrective action taken is significantly
different from corrective action pre-
viously reported in a corrective action
plan or in the Federal agency's or pass -
through entity's management decision,
the summary schedule must provide an
explanation.
(3) When the auditee believes the
audit findings are no longer valid or do
not warrant further action, the reasons
for this position must be described in
the summary schedule. A valid reason
for considering an audit finding as not
warranting further action is that all of
the following have occurred:
(i) Two years have passed since the
audit report in which the finding oc-
curred was submitted to the FAQ
(ii) The Federal agency or pass -
through entity is not currently fol-
lowing up with the auditee on the audit
finding; and
(iii) A management decision was not
issued.
(c) Corrective action plan. At the com-
pletion of the audit, the auditee must
prepare, in a document separate from
the auditor's findings described in
§200.516 Audit findings, a corrective ac-
tion plan to address each audit finding
included in the current year auditor's
reports. The corrective action plan
must provide the name(s) of the con-
tact person(s) responsible for correc-
tive action, the corrective action
180
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planned, and the anticipated comple-
tion date. If the auditee does not agree
with the audit findings or believes cor-
rective action is not required, then the
corrective action plan must include an
explanation and specific reasons.
§200.512 Report submission.
(a) General. (1) The audit must be
completed and the data collection form
described in paragraph (b) of this sec-
tion and reporting package described in
paragraph (c) of this section must be
submitted within the earlier of 30 cal-
endar days after receipt of the audi-
tor's report(s), or nine months after
the end of the audit period. If the due
date falls on a Saturday, Sunday, or
Federal holiday, the reporting package
is due the next business day.
(2) Unless restricted by Federal stat-
utes or regulations, the auditee must
make copies available for public in-
spection. Auditees and auditors must
ensure that their respective parts of
the reporting package do not include
protected personally identifiable infor-
mation.
(b) Data Collection. The FAC is the re-
pository of record for Subpart F —Audit
Requirements of this part reporting
packages and the data collection form.
All Federal agencies, pass- through en-
tities and others interested in a report-
ing package and data collection form
must obtain it by accessing the FAC.
(1) The auditee must submit required
data elements described in Appendix X
to Part 200 —Data Collection Form
(Form SF -SAC), which state whether
the audit was completed in accordance
with this part and provides informa-
tion about the auditee, its Federal pro-
grams; and the results of the audit.
The data must include information
available from the audit required by
this part that is necessary for Federal
agencies to use the audit to ensure in-
tegrity for Federal programs. The data
elements and format must be approved
by OMB, available from the FAC, and
include collections of information from
the reporting package described in
paragraph (c) of this section. A senior
level representative of the auditee
(e.g., state controller, director of fi-
nance, chief executive officer, or chief
financial officer) must sign a state-
ment to be included as part of the data
§ 200.512
collection that says that the auditee
complied with the requirements of this
part, the data were prepared in accord-
ance with this part (and the instruc-
tions accompanying the form), the re-
porting package does not include pro-
tected personally identifiable informa-
tion, the information included in its
entirety is accurate and complete, and
that the FAC is authorized to make the
reporting package and the form pub-
licly available on a Web site.
(2) Exception for Indian Tribes and
Tribal Organizations. An auditee that is
an Indian tribe or a tribal organization
(as defined in the Indian Self- Deter-
mination, Education and Assistance
Act (ISDEAA), 25 U.S.C. 450b(l)) may
opt not to authorize the FAC to make
the reporting package publicly avail-
able on a Web site, by excluding the au-
thorization for the FAC publication in
the statement described in paragraph
(b)(1) of this section. If this option is
exercised, the auditee becomes respon-
sible for submitting the reporting
package directly to any pass- through
entities through which it has received
a Federal award and to pass- through
entities for which the summary sched-
ule of prior audit findings reported the
status of any findings related to Fed-
eral awards that the pass- through enti-
ty provided. Unless restricted by Fed-
eral statute or regulation, if the
auditee opts not to authorize publica-
tion, it must make copies of the report-
ing package available for public inspec-
tion.
(3) Using the information included in
the reporting package described in
paragraph (c) of this section, the audi-
tor must complete the applicable data
elements of the data collection form.
The auditor must sign a statement to
be included as part of the data collec-
tion form that indicates, at a min-
imum, the source of the information
included in the form, the auditor's re-
sponsibility for the information, that
the form is not a substitute for the re-
porting package described in paragraph
(c) of this section, and that the content
of the form is limited to the collection
of information prescribed by OMB.
(c) Reporting package. The reporting
package must include the:
(1) Financial statements and sched-
ule of expenditures of Federal awards
181
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§ 200.513
discussed in §200.510 Financial state-
ments, paragraphs (a) and (b), respec-
tively;
(2) Summary schedule of prior audit
findings discussed in §200,511 Audit
findings follow -up, paragraph (b);
(3) Auditor's report(s) discussed in
§ 200.515 Audit reporting; and
(4) Corrective action plan discussed
in §200.511 Audit findings follow -up,
paragraph (c).
(d) Submission to FAC. The auditee
must electronically submit to the FAC
the data collection form described in
paragraph (b) of this section and the
reporting package described in para-
graph (c) of this section.
(e) Requests for management letters
issued by the auditor. In response to re-
quests by a Federal agency or pass -
through entity, auditees must submit a
copy of any management letters issued
by the auditor.
(f) Report retention requirements.
Auditees must keep one copy of the
data collection form described in para-
graph (b) of this section and one copy
of the reporting package described in
paragraph (c) of this section on file for
three years from the date of submis-
sion to the FAC.
(g) FAC responsibilities. The FAC must
make available the reporting packages
received in accordance with paragraph
(c) of this section and § 200.507 Pro-
gram- specific audits, paragraph (c) to
the public, except for Indian tribes ex-
ercising the option in (b)(2) of this sec-
tion, and maintain a data base of com-
pleted audits, provide appropriate in-
formation to Federal agencies, and fol-
low up with known auditees that have
not submitted the required data collec-
tion forms and reporting packages.
(h) Electronic filing. Nothing in this
part must preclude electronic submis-
sions to the FAC in such manner as
may be approved by OMB.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 20141
FEDERAL AGENCIES
§ 200.513 Responsibilities.
(a)(1) Cognizant agency for audit re-
sponsibilities. A non - Federal entity ex-
pending more than $50 million a year in
Federal awards must have a cognizant
agency for audit. The designated cog-
2 CFR Ch. II (1 -1 -15 Edition)
nizant agency for audit must be the
Federal awarding agency that provides
the predominant amount of direct
funding to a non - Federal entity unless
OMB designates a specific cognizant
agency for audit.
(2) To provide for continuity of cog-
nizance, the determination of the pre-
dominant amount of direct funding
must be based upon direct Federal
awards expended in the non - Federal en-
tity's fiscal years ending in 2009, 2014,
2019 and every fifth year thereafter.
For example, audit cognizance for peri-
ods ending in 2011 through 2015 will be
determined based on Federal awards
expended in 2009.
(3) Notwithstanding the manner in
which audit cognizance is determined,
a Federal awarding agency with cog-
nizance for an auditee may reassign
cognizance to another Federal award-
ing agency that provides substantial
funding and agrees to be the cognizant
agency for audit. Within 30 calendar
days after any reassignment, both the
old and the new cognizant agency for
audit must provide notice of the
change to the FAC, the auditee, and, if
known, the auditor. The cognizant
agency for audit must:
(i) Provide technical audit advice and
liaison assistance to auditees and audi-
tors.
(ii) Obtain or conduct quality control
reviews on selected audits made by
non - Federal auditors, and provide the
results to other interested organiza-
tions. Cooperate and provide support to
the Federal agency designated by OMB
to lead a governmentwide project to
determine the quality of single audits
by providing a statistically reliable es-
timate of the extent that single audits
conform to applicable requirements,
standards, and procedures; and to make
recommendations to address noted
audit quality issues, including rec-
ommendations for any changes to ap-
plicable requirements, standards and
procedures indicated by the results of
the project. This governmentwide audit
quality project must be performed once
every 6 years beginning in 2018 or at
such other interval as determined by
OMB, and the results must be public.
(iii) Promptly inform other affected
Federal agencies and appropriate Fed-
eral law enforcement officials of any
182
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OMB Guidance
direct reporting by the auditee or its
auditor required by GAGAS or statutes
and regulations.
(iv) Advise the community of inde-
pendent auditors of any noteworthy or
important factual trends related to the
quality of audits stemming from qual-
ity control reviews. Significant prob-
lems or quality issues consistently
identified through quality control re-
views of audit reports must be referred
to appropriate state licensing agencies
and professional bodies.
(v) Advise the auditor, Federal
awarding agencies, and, where appro-
priate, the auditee of any deficiencies
found in the audits when the defi-
ciencies require corrective action by
the auditor. When advised of defi-
ciencies, the auditee must work with
the auditor to take corrective action.
If corrective action is not taken, the
cognizant agency for audit must notify
the auditor, the auditee, and applicable
Federal awarding agencies and pass -
through entities of the facts and make
recommendations for follow -up action.
Major inadequacies or repetitive sub-
standard performance by auditors must
be referred to appropriate state licens-
ing agencies and professional bodies for
disciplinary action.
(vi) Coordinate, to the extent prac-
tical, audits or reviews made by or for
Federal agencies that are in addition
to the audits made pursuant to this
part, so that the additional audits or
reviews build upon rather than dupli-
cate audits performed in accordance
with this part.
(vii) Coordinate a management deci-
sion for cross - cutting audit findings (as
defined in §200.30 Cross - cutting audit
finding) that affect the Federal pro-
grams of more than one agency when
requested by any Federal awarding
agency whose awards are included in
the audit finding of the auditee.
(viii) Coordinate the audit work and
reporting responsibilities among audi-
tors to achieve the most cost - effective
audit.
(ix) Provide advice to auditees as to
how to handle changes in fiscal years.
(b) Oversight agency for audit re-
sponsibilities. An auditee who does not
have a designated cognizant agency for
audit will be under the general over-
sight of the Federal agency determined
§ 200.513
in accordance with §200.73 Oversight
agency for audit. A Federal agency
with oversight for an auditee may reas-
sign oversight to another Federal agen-
cy that agrees to be the oversight
agency for audit. Within 30 calendar
days after any reassignment, both the
old and the new oversight agency for
audit must provide notice of the
change to the FAC, the auditee, and, if
known, the auditor. The oversight
agency for audit:
(1) Must provide technical advice to
auditees and auditors as requested.
(2) May assume all or some of the re-
sponsibilities normally performed by a
cognizant agency for audit.
(c) Federal awarding agency respon-
sibilities. The Federal awarding agency
must perform the following for the
Federal awards it makes (See also the
requirements of §200.210 Information
contained in a Federal award):
(1) Ensure that audits are completed
and reports are received in a timely
manner and in accordance with the re-
quirements of this part.
(2) Provide technical advice and
counsel to auditees and auditors as re-
quested.
(3) Follow -up on audit findings to en-
sure that the recipient takes appro-
priate and timely corrective action. As
part of audit follow -up, the Federal
awarding agency must:
(i) Issue a management decision as
prescribed in §200.521 Management de-
cision;
(ii) Monitor the recipient taking ap-
propriate and timely corrective action;
(iii) Use cooperative audit resolution
mechanisms (see §200.25 Cooperative
audit resolution) to improve Federal
program outcomes through better
audit resolution, follow -up, and correc-
tive action; and
(iv) Develop a baseline, metrics, and
targets to track, over time, the effec-
tiveness of the Federal agency's proc-
ess to follow -up on audit findings and
on the effectiveness of Single Audits in
improving non - Federal entity account-
ability and their use by Federal award-
ing agencies in making award deci-
sions.
(4) Provide OMB annual updates to
the compliance supplement and work
with OMB to ensure that the compli-
ance supplement focuses the auditor to
183
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§ 200.514
test the compliance requirements most
likely to cause improper payments,
fraud, waste, abuse or generate audit
finding for which the Federal awarding
agency will take sanctions.
(5) Provide OMB with the name of a
single audit accountable official from
among the senior policy officials of the
Federal awarding agency who must be:
(]) Responsible for ensuring that the
agency fulfills all the requirements of
paragraph (c) of this section and effec-
tively uses the single audit process to
reduce improper payments and improve
Federal program outcomes.
(ii) Held accountable to improve the
effectiveness of the single audit process
based upon metrics as described in
paragraph (c)(3)(iv) of this section.
(iii) Responsible for designating the
Federal agency's key management sin-
gle audit liaison.
(6) Provide OMB with the name of a
key management single audit liaison
who must:
(i) Serve as the Federal awarding
agency's management point of contact
for the single audit process both within
and outside the Federal Government.
(ii) Promote interagency coordina-
tion, consistency, and sharing in areas
such as coordinating audit follow -up;
identifying higher -risk non - Federal en-
tities; providing input on single audit
and follow -up policy; enhancing the
utility of the FAC; and studying ways
to use single audit results to improve
Federal award accountability and best
practices.
(iii) Oversee training for the Federal
awarding agency's program manage-
ment personnel related to the single
audit - process.
(iv) Promote the Federal awarding
agency's use of cooperative audit reso-
lution mechanisms.
(v) Coordinate the Federal awarding
agency's activities to ensure appro-
priate and timely follow -up and correc-
tive action on audit findings.
(vi) Organize the Federal cognizant
agency for audit's follow -up on cross-
cutting audit findings that affect the
Federal programs of more than one
Federal awarding agency.
(vii) Ensure the Federal awarding
agency provides annual updates of the
compliance supplement to OMB.
2 CFR Ch. If (1 -1 -15 Edition)
(viii) Support the Federal awarding
agency's single audit accountable offi-
cial's mission.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec, 19, 2014]
AUDITORS
§200.514 Scope of audit.
(a) General. The audit must be con-
ducted in accordance with GAGAS. The
audit must cover the entire operations
of the auditee, or, at the option of the
auditee, such audit must include a se-
ries of audits that cover departments,
agencies, and other organizational
units that expended or otherwise ad-
ministered Federal awards during such
audit period, provided that each such
audit must encompass the financial
statements and schedule of expendi-
tures of Federal awards for each such
department, agency, and other organi-
zational unit, which must be consid-
ered to be a non - Federal entity. The fi-
nancial statements and schedule of ex-
penditures of Federal awards must be
for the same audit period.
(b) Financial statements. The auditor
must determine whether the financial
statements of the auditee are presented
fairly in all material respects in ac-
cordance with generally accepted ac-
counting principles. The auditor must
also determine whether the schedule of
expenditures of Federal awards is stat-
ed fairly in all material respects in re-
lation to the auditee's financial state-
ments as a whole.
(c) Internal control. (1) The compli-
ance supplement provides guidance on
internal controls over Federal pro-
grams based upon the guidance in
Standards for Internal Control in the
Federal Government issued by the
Comptroller General of the United
States and the Internal Control —Inte-
grated Framework, issued by the Com-
mittee of Sponsoring Organizations of
the Treadway Commission (COSO).
(2) In addition to the requirements of
GAGAS, the auditor must perform pro-
cedures to obtain an understanding of
internal control over Federal programs
sufficient to plan the audit to support
a low assessed level of control risk of
noncompliance for major programs.
(3) Except as provided in paragraph
(c)(4) of this section, the auditor must:
184
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OMB Guidance
(i) Plan the testing of internal con-
trol over compliance for major pro-
grams to support a low assessed level
of control risk for the assertions rel-
evant to the compliance requirements
for each major program; and
(ii) Perform testing of internal con-
trol as planned in paragraph (c)(3)(i) of
this section.
(4) When internal control over some
or all of the compliance requirements
for a major program are likely to be in-
effective in preventing or detecting
noncompliance, the planning and per-
forming of testing described in para-
graph (c)(3) of this section are not re-
quired for those compliance require-
ments. However, the auditor must re-
port a significant deficiency or mate-
rial weakness in accordance with
§200.516 Audit findings, assess the re-
lated control risk at the maximum,
and consider whether additional com-
pliance tests are required because of
ineffective internal control.
(d) Compliance. (1) In addition to the
requirements of GAGAS, the auditor
must determine whether the auditee
has complied with Federal statutes,
regulations, and the terms and condi-
tions of Federal awards that may have
a direct and material effect on each of
its major programs.
(2) The principal compliance require-
ments applicable to most Federal pro-
grams and the compliance require-
ments of the largest Federal programs
are included in the compliance supple-
ment.
(3) For the compliance requirements
related to Federal programs contained
in the compliance supplement, an audit
of these compliance requirements will
meet the requirements of this part.
Where there have been changes to the
compliance requirements and the
changes are not. reflected in the com-
pliance supplement, the auditor must
determine the current compliance re-
quirements and modify the audit proce-
dures accordingly. For those Federal
programs not covered in the compli-
ance supplement, the auditor must fol-
low the compliance supplement's guid-
ance for programs not included in the
supplement.
(4) The compliance testing must in-
clude tests of transactions and such
other auditing procedures necessary to
§ 200.515
provide the auditor sufficient appro-
priate audit evidence to support an
opinion on compliance.
(e) Audit follow -up. The auditor must
follow -up on prior audit findings, per-
form procedures to assess the reason-
ableness of the summary schedule of
prior audit findings prepared by the
auditee in accordance with §200.511
Audit findings follow -up paragraph (b),
and report, as a current year audit
finding, when the auditor concludes
that the summary schedule of prior
audit findings materially misrepre-
sents the status of any prior audit find-
ing. The auditor must perform audit
follow -up procedures' regardless of
whether a prior audit finding relates to
a major program in the current year.
(f) Data Collection Form. As required
in §200.512 Report submission para-
graph (b)(3), the auditor must complete
and sign specified sections of the data
collection form.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§ 200.515 Audit reporting.
The auditor's report(s) may be in the
form of either combined or separate re-
ports and may be organized differently
from the manner presented in this sec-
tion. The auditor's report(s) must state
that the audit was conducted in ac-
cordance with this part and include the
following:
(a) An opinion (or disclaimer of opin-
ion) as to whether the financial state-
ments are presented fairly in all mate-
rial respects in accordance with gen-
erally accepted accounting principles
and an opinion (or disclaimer of opin-
ion) as to whether the schedule of ex-
penditures of Federal awards is fairly
stated in all material respects in rela-
tion to the financial statements as a
whole.
(b) A report on internal control over
financial reporting and compliance
with provisions of laws, regulations,
contracts, and award agreements, non-
compliance with which could have a
material effect on the financial state-
ments. This report must describe the
scope of testing of internal control and
compliance and the results of the tests,
and, where applicable, it will refer to
the separate, schedule of findings and
185
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§ 200.516
questioned costs described in para-
graph (d) of this section.
(c) A report on compliance for each
major program and a report on internal
control over compliance. This report
must describe the scope of testing of
internal control over compliance, in-
clude an opinion or disclaimer of opin-
ion as to whether the auditee complied
with Federal statutes, regulations, and
the terms and conditions of Federal
awards which could have a direct and
material effect on each major program
and refer to the separate schedule of
findings and questioned costs described
in paragraph (d) of this section.
(d) A schedule of findings and ques-
tioned costs which must include the
following three components:
(1) A summary of the auditor's re-
sults, which must include:
(i) The type of report the auditor
issued on whether the financial state-
ments audited were prepared in accord-
ance with GAAP (i.e., unmodified opin-
ion, qualified opinion, adverse opinion,
or disclaimer of opinion);
(ii) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal con-
trol were disclosed by the audit of the
financial statements;
(iii) A statement as to whether the
audit disclosed any noncompliance
that is material to the financial state-
ments of the auditee;
(iv) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal con-
trol over major programs were dis-
closed by the audit;
(v) The type of report the auditor
issued on compliance for major pro-
grams (i.e., unmodified opinion, quali-
fied opinion, adverse opinion, or dis-
claimer of opinion);
(vi) A statement as to whether the
audit disclosed any audit findings that
the auditor is required to report under
§ 200.516 Audit findings paragraph (a);
(vii) An identification of major pro-
grams by listing each individual major
program; however in the case of a clus-
ter of programs only the cluster name
as shown on the Schedule of Expendi-
tures of Federal Awards is required;
(viii) The dollar threshold used to
distinguish between Type A and Type B
programs, as described in § 200.518
2 CFR Ch. II (1 -1 -15 Edition)
Major program determination para-
graph (b)(1), or (b)(3) when a recalcula-
tion of the Type A threshold is re-
quired for large loan or loan guaran-
tees; and
(ix) A statement as to whether the
auditee qualified as a low -risk auditee
under §200.520 Criteria for a low -risk
auditee.
(2) Findings relating to the financial
statements which are required to be re-
ported in accordance with GAGAS.
(3) Findings and questioned costs for
Federal awards which must include
audit findings as defined in §200.516
Audit findings, paragraph (a).
(i) Audit findings (e.g., internal con-
trol findings, compliance findings,
questioned costs, or fraud) that relate
to the same issue must be presented as
a single audit finding. Where practical,
audit findings should be organized by
Federal agency or pass- through entity.
(ii) Audit findings that relate to both
the financial statements and Federal
awards, as reported under paragraphs
(d)(2) and (d)(3) of this section, respec-
tively, must be reported in both sec-
tions of the schedule. However, the re-
porting in one section of the schedule
may be in summary form with a ref-
erence to a detailed reporting in the
other section of the schedule.
(e) Nothing in this part precludes
combining of the audit reporting re-
quired by this section with the report-
ing required by §200.512 Report submis-
sion, paragraph (b) Data Collection
when allowed by GAGAS and Appendix
X to Part 200 —Data Collection Form
(Form SF- SAC)..
[78 FR 78608, Dec, 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§200.516 Audit findings.
(a) Audit findings reported. The audi-
tor must report the following as audit
findings in a schedule of findings and
questioned costs:
(1) Significant deficiencies and mate-
rial weaknesses in internal control
over major programs and significant
instances of abuse relating to major
programs. The auditor's determination
of whether a deficiency in internal con-
trol is a significant deficiency or mate-
rial weakness for the purpose of report-
ing an audit finding is in relation to a
type of compliance requirement for a
186
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OMB Guidance
major program identified in the Com-
pliance Supplement.
(2) Material noncompliance with the
provisions of Federal statutes, regula-
tions, or the terms and conditions of
Federal awards related to a major pro-
gram. The auditor's determination of
whether a noncompliance with the pro-
visions of Federal statutes, regula-
tions, or the terms and conditions of
Federal awards is material for the pur-
pose of reporting an audit finding is in
relation to a type of compliance re-
quirement for a major program identi-
fied in the compliance supplement.
(3) Known questioned costs that are
greater than $25,000 for a type of com-
pliance requirement for a major pro-
gram. Known questioned costs are
those specifically identified by the
auditor. In evaluating the effect of
questioned costs on the opinion on
compliance, the auditor considers the
best estimate of total costs questioned
(likely questioned costs), not just the
questioned costs specifically identified
(known questioned costs). The auditor
must also report known questioned
costs when likely questioned costs are
greater than $25,000 for a type of com-
pliance requirement for a major pro-
gram. In reporting questioned costs,
the auditor must include information
to provide proper perspective for judg-
ing the prevalence and consequences of
the questioned costs.
(4) Known questioned costs that are
greater than $25,000 for a Federal pro-
gram which is not audited as a major
program. Except for audit follow -up,
the auditor is not required under this
part to perform audit procedures for
such a Federal program; therefore, the
auditor will normally not find ques-
tioned costs for a program that is not
audited as a major program. However,
if the auditor does become aware of
questioned costs for a Federal program
that is not audited as a major program
(e.g., as part of audit follow -up or other
audit procedures) and the known ques-
tioned costs are greater than $25,000,
then the auditor must report this as an
audit finding.
(5) The circumstances concerning
why the auditor's report on compliance
for each major program is other than
an unmodified opinion, unless such cir-
cumstances are otherwise reported as
§ 200.516
audit findings in the schedule of find-
ings and questioned costs for Federal
awards.
(6) Known or likely fraud affecting a
Federal award, unless such fraud is
otherwise reported as an audit finding
in the schedule of findings and ques-
tioned costs for Federal awards. This
paragraph does not require the auditor
to report publicly information which
could compromise investigative or
legal proceedings or to make an addi-
tional reporting when the auditor con-
firms that the fraud was reported out-
side the auditor's reports under the di-
rect reporting requirements of GAGAS.
(7) Instances where the results of
audit follow -up procedures disclosed
that the summary schedule of prior
audit findings prepared by the auditee
in accordance with §200.511 Audit find-
ings follow -up, paragraph (b) materi-
ally misrepresents the status of any
prior audit finding.
(b) Audit finding detail and clarity.
Audit findings must be presented in
sufficient detail and clarity for the
auditee to prepare a corrective action
plan and take corrective action, and
for Federal agencies and pass- through
entities to arrive at a management de-
cision. The following specific informa-
tion must be included, as applicable, in
audit findings:
(1) Federal program and specific Fed-
eral award identification including the
CFDA title and number, Federal award
identification number and year, name
of Federal agency, and name of the ap-
plicable pass - through entity. When in-
formation, such as the CFDA title and
number or Federal award identification
number, is not available, the auditor
must provide the best information
available to describe the Federal
award.
(2) The criteria or specific require-
ment upon which the audit finding is
based, including the Federal statutes,
regulations, or the terms and condi-
tions of the Federal awards. Criteria
generally identify the required or de-
sired state or expectation with respect
to the program or operation. Criteria
provide a context for evaluating evi-
dence and understanding findings.
(3) The condition found, including
facts that support the deficiency iden-
tified in the audit finding.
187
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§ 200.517
(4) A statement of cause that identi-
fies the reason or explanation for the
condition or the factors responsible for
the difference between the situation
that exists (condition) and the required
or desired state (criteria), which may
also serve as a basis for recommenda-
tions for corrective action.
(5) The possible asserted effect to
provide sufficient information to the
auditee and Federal agency, or pass -
through entity in the case of a sub -
recipient, to permit them to determine
the cause and effect to facilitate
prompt and proper corrective action. A
statement of the effect or potential ef-
fect should provide a clear, logical link
to establish the impact or potential
impact of the difference between the
condition and the criteria.
(6) Identification of questioned costs
and how they were computed. Known
questioned costs must be identified by
applicable CFDA number(s) and appli-
cable Federal award identification
number(s).
(7) Information to provide proper per-
spective for judging the prevalence and
consequences of the audit findings,
such as whether the audit findings rep-
resent an isolated instance or a sys-
temic problem. Where appropriate, in-
stances identified must be related to
the universe and the number of cases
examined and be quantified in terms of
dollar value. The auditor should report
whether the sampling was a statis-
tically valid sample.
(8) Identification of whether the
audit finding was a repeat of a finding
in the immediately prior audit and if
so any applicable prior year audit find-
ing numbers.
(9) Recommendations to prevent fu-
ture occurrences of the deficiency iden-
tified in the audit finding.
(10) Views of responsible officials of
the auditee.
(c) Reference numbers. Each audit
finding in the schedule of findings and
questioned costs must include a ref-
erence number in the format meeting
the requirements of the data collection
form submission required by §200.512
Report submission, paragraph (b) to
allow for easy referencing of the audit
findings during follow -up.
2 CFR Ch. II (1 -1 -15 Edition)
§ 200.517 Audit documentation.
(a) Retention of audit documentation.
The auditor must retain audit docu-
mentation and reports for a minimum
of three years after the date of
issuance of the auditor's report(s) to
the auditee, unless the auditor is noti-
fied in writing by the cognizant agency
for audit, oversight agency for audit,
cognizant agency for indirect costs, or
pass- through entity to extend the re-
tention period. When the auditor is
aware that the Federal agency, pass -
through entity, or auditee is con-
testing an audit finding, the auditor
must contact the parties contesting
the audit finding for guidance prior to
destruction of the audit documentation
and reports.
(b) Access to audit documentation.
Audit documentation must be made
available upon request to the cognizant
or oversight agency for audit or its des-
ignee, cognizant agency for indirect
cost, a Federal agency, or GAO at the
completion of the audit, as part of a
quality review, to resolve audit find-
ings, or to carry out oversight respon-
sibilities consistent with the purposes
of this part. Access to audit docu-
mentation includes the right of Federal
agencies to obtain copies of audit docu-
mentation, as is reasonable and nec-
essary.
§200.518 Major program determina-
tion.
(a) General. The auditor must use a
risk -based approach to determine
which Federal programs are major pro-
grams. This risk -based approach must
include gonsideration of: current and
prior audit experience, oversight by
Federal agencies and pass- through en-
tities, and the inherent risk of the Fed-
eral program. The process in para-
graphs (b) through (h) of this section
must be followed.
(b) Step one. (1) The auditor must
identify the larger Federal programs,
which must be labeled Type A pro-
grams. Type A programs are defined as
Federal programs with Federal awards
expended during the audit period ex-
ceeding the levels outlined in the table
in this paragraph (b)(1):
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101IIil3�_f7T
Total Federal awards ex-
pended
Type A/B threshold
Equal to or exceed $750,000
$750,000.
but less than or equal to
$25 million.
Exceed $25 million but less
Total Federal awards ex-
than or equal to $100 mil-
pended times .03.
lion.
Exceed $100 million but less
$3 million.
than or equal to $1 billion.
Exceed $1 billion but less
Total Federal awards ex-
than or equal to $10 billion.
pended times .003.
Exceed $10 billion but less
$30 million.
than or equal to $20 billion.
Exceed $20 billion .................
Total Federal awards ex-
pended times .0015.
(2) Federal programs not labeled
Type,A under paragraph (b)(1) of this
section must be labeled Type B pro-
grams.
(3) The inclusion of large loan and
loan guarantees (loans) must not result
in the exclusion of other programs as
Type A programs. When a Federal pro-
gram providing loans exceeds four
times the largest non -loan program it
is considered a large loan program, and
the auditor must consider this Federal
program as a Type A program and ex-
clude its values in determining other
Type A programs. This recalculation of
the Type A program is performed after
removing the total of all large loan
programs. For the purposes of this
paragraph a program is only considered
to be a Federal program providing
loans if the value of Federal awards ex-
pended for loans within the program
comprises fifty percent or more of the
total Federal awards expended for the
program. A cluster of programs is
treated as one program and the value
of Federal awards expended under a
loan program is determined as de-
scribed in §200,502 Basis for deter-
mining Federal awards expended.
(4) For biennial audits permitted
under §200.504 Frequency of audits, the
determination of Type A and Type B
programs must be based upon the Fed-
eral awards expended during the two -
year period.
(c) Step two. (1) The auditor must
identify Type A programs which are
low -risk. In making this determina-
tion, the auditor must consider wheth-
er the requirements in §200.519 Criteria
for Federal program risk paragraph (c),
the results of audit follow -up, or any
changes in personnel or systems affect-
ing the program indicate significantly
§ 200.518
increased risk and preclude the pro-
gram from being low risk. For a Type
A program to be considered low -risk, it
must have been audited as a major pro-
gram in at least one of the two most
recent audit periods (in the most re-
cent audit period in the case of a bien-
nial audit), and, in the most recent
audit period, the program must have
not had:
(i) Internal control deficiencies
which were identified as material
weaknesses in the auditor's report on
internal control for major programs as
required under §200.515 Audit report-
ing, paragraph (c); 1,
(ii) A modified opinion on the pro-
gram in the auditor's report on major
programs as required under §200.515
Audit reporting, paragraph (c); or
(iii) Known or likely questioned costs
that exceed five percent of the total
Federal awards expended for the pro-
gram.
(2) Notwithstanding paragraph (c)(1)
of this section, OMB may approve a
Federal awarding agency's request that
a Type A program may not be consid-
ered low risk for a certain recipient.
For example, it may be necessary for a
large Type A program to be audited as
a major program each year at a par-
ticular recipient to allow the Federal
awarding agency to comply with 31
U.S.C. 3515, The Federal awarding
agency must notify the recipient and,
if known, the auditor of OMB's ap-
proval at least 180 calendar days prior
to the end of the fiscal year to be au-
dited.
(d) Step three. (1) The auditor must
identify Type B programs which are
high -risk using professional judgment
and the criteria in §200.519 Criteria for
Federal program risk. However, the
auditor is not required to identify more
high -risk Type B programs than at
least one fourth the number of low -risk
Type A programs identified as low -risk
under Step 2 (paragraph (c) of this sec-
tion). Except for known material weak-
ness in internal control or compliance
problems as discussed in §200.519 Cri-
teria for Federal program risk para-
graphs (b)(1), (b)(2), and (c)(1), a single
criteria in risk would seldom cause a
Type B program to be considered high -
risk. When identifying which Type B
programs to risk assess, the auditor is
189
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§ 200.519
encouraged to use an approach which
provides an opportunity for different
high -risk Type B programs to be au-
dited as major over a period of time.
(2) The auditor is not expected to per-
form risk assessments on relatively
small Federal programs. Therefore, the
auditor is only required to perform risk
assessments on Type B programs that
exceed twenty -five percent (0.25) of the
Type A threshold determined in Step 1
(paragraph (b) of this section).
(e) Step four. At a minimum, the
auditor must audit all of the following
as major programs:
(1) All Type A programs not identi-
fied as low risk under step two (para-
graph (c)(1) of this section).
(2) All Type B programs identified as
high -risk under step three (paragraph
(d) of this section).
(3) Such additional programs as may
be necessary to comply with the per-
centage of coverage rule discussed in
paragraph (f) of this section. This may
require the auditor to audit more pro-
grams as major programs than the
number of Type A programs.
(f) Percentage of coverage rule. If the
auditee meets the criteria in §200.520
Criteria for a low -risk auditee, the
auditor need only audit the major pro-
grams identified in Step 4 (paragraph
(e)(1) and (2) of this section) and such
additional Federal programs with Fed-
eral awards expended that, in aggre-
gate, all major programs encompass at
least 20 percent (0.20) of total Federal
awards expended. Otherwise, the audi-
tor must audit the major programs
identified in Step 4 (paragraphs (e)(1)
and (2) of this section) and such addi-
tional Federal programs with Federal
awards expended that, in aggregate, all
major programs encompass at least 40
percent (0.40) of total Federal awards
expended.
(g) Documentation of risk. The auditor
must include in the audit documenta-
tion the risk analysis process used in
determining major programs.
(h) Auditor's judgment. When the
major program determination was per-
formed and documented in accordance
with this Subpart, the auditor's judg-
ment in applying the risk -based ap-
proach to determine major programs
must be presumed correct. Challenges
by Federal agencies and pass - through
2 CFR Ch. II (1 -1 -15 Edition)
entities must only be for clearly im-
proper use of the requirements in this
part. However, Federal agencies and
pass- through entities may provide
auditors guidance about the risk of a
particular Federal program and the
auditor must consider this guidance in
determining major programs in audits
not yet completed.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75887, Dec. 19, 2014]
§200.519 Criteria for Federal program
risk.
(a) General. The auditor's determina-
tion should be based on an overall eval-
uation of the risk of noncompliance oc-
curring that could be material to the
Federal program. The auditor must
consider criteria, such as described in
paragraphs (b), (c), and (d) of this sec-
tion, to identify risk in Federal pro-
grams. Also, as part of the risk anal-
ysis, the auditor may wish to discuss a
particular Federal program with
auditee management and the Federal
agency or pass- through entity.
(b) Current and prior audit experience.
(1) Weaknesses in internal control over
Federal programs would indicate high-
er risk. Consideration should be given
to the control environment over Fed-
eral programs and such factors as the
expectation of management's adher-
ence to Federal statutes, regulations,
and the terms and conditions of Fed-
eral awards and the competence and
experience of personnel who administer
the Federal programs.
(i) A Federal program administered
under multiple internal control struc-
tures may have higher risk. When as-
sessing risk in a large single audit, the
auditor must consider whether weak-
nesses are isolated in a single oper-
ating unit (e.g., one college campus) or
pervasive throughout the entity.
(ii) When significant parts of a Fed-
eral program are passed through to
subrecipients, a weak system for moni-
toring subrecipients would indicate
higher risk.
(2) Prior audit findings would indi-
cate higher risk, particularly when the
situations identified in the audit find-
ings could have a significant impact on
a Federal program or have not been
corrected.
190
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Eel Jil3ei Sr. =i-
(3)
Federal programs not recently au-
dited as major programs may be of
higher risk than Federal programs re-
cently audited as major programs with-
out audit findings.
(c) Oversight exercised by Federal agen-
cies and pass- through entities. (1) Over-
sight exercised by Federal agencies or
pass- through, entities could be used to
assess.risk. For example, recent moni-
toring or other reviews performed by
an oversight entity that disclosed no
significant problems would indicate
lower risk, whereas monitoring that
disclosed significant problems would
indicate higher risk.
(2) Federal agencies, with the concur-
rence of OMB, may identify Federal
programs that are higher risk. OMB
will provide this identification in the
compliance supplement.
(d) Inherent risk of the Federal pro-
gram. (1) The nature of a Federal pro-
gram may indicate risk. Consideration
should be given to the complexity of
the program and the extent to which
the Federal program contracts for
goods and services. For example, Fed-
eral programs that disburse funds
through third party contracts or have
eligibility criteria may be of higher
risk, Federal programs primarily in-
volving staff payroll costs may have
high risk for noncompliance with re-
quirements of §200.430 Compensation —
personal services, but otherwise be at
low risk.
(2) The phase of a Federal program in
its life cycle at the Federal agency
may indicate risk. For example, a new
Federal program with new or interim
regulations may have higher risk than
an established program with time -test-
ed regulations. Also, significant
changes in Federal programs, statutes,
regulations, or the terms and condi-
tions of Federal awards may increase
risk.
(3) The phase of a Federal program in
its life cycle at the auditee may indi-
cate risk. For example, during the first
and last years that an auditee partici-
pates in a Federal program, the risk
may be higher due to start -up or close-
out of program activities and staff.
(4) Type B programs with larger Fed-
eral awards expended would be of high-
er risk than programs with substan-
§ 200.520
tially smaller Federal awards ex-
pended.
§ 200.520 Criteria for a low -risk
auditee.
An auditee that meets all of the fol-
lowing conditions for each of the pre-
ceding two audit periods must qualify
as a low -risk auditee and be eligible for
reduced audit coverage in accordance
with §200.518 Major program deter-
mination.
(a) Single audits were performed on
an annual basis in accordance with the
provisions of this Subpart, including
submitting the data collection form
and the reporting package to the FAC
within the timeframe specified in
§200.512 Report submission. A non -Fed-
eral entity that has biennial audits
does not qualify as a low -risk auditee.
(b) The auditor's opinion on whether
the financial statements were prepared
in accordance with GAAP, or a basis of
accounting required by state law, and
the auditor's in relation to opinion on
the schedule of expenditures of Federal
awards were unmodified.
(c) There were no deficiencies in in-
ternal control which were identified as
material weaknesses under the require-
ments of GAGAS.
(d) The auditor did not report a sub-
stantial doubt about the auditee's abil-
ity to continue as a going concern.
(e) None of the Federal programs had
audit findings from any of the fol-
lowing in either of the preceding two
audit periods in which they were classi-
fied as Type A programs:
(1) Internal control deficiencies that
were identified as material weaknesses
in the auditor's report on internal con-
trol for major programs as required
under §200.515 Audit reporting, para-
graph (c);
(2) A modified opinion on a major
program in the auditor's report on
major programs as required under
§200.515 Audit reporting, paragraph (c);
or
(3) Known or likely questioned costs
that exceeded five percent of the total
Federal awards expended for a Type A
program during the audit period.
191
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§ 200.521
MANAGEMENT DECISIONS
§200,521 Management decision.
(a) General. The management deci-
sion must clearly state whether or not
the audit finding is sustained, the rea-
sons for the decision, and the expected
auditee action to repay disallowed
costs, make financial adjustments, or
take other action. If the auditee has
not completed corrective action, a
timetable, for follow -up should be
given. Prior to issuing the manage-
ment decision, the Federal agency or
pass- through entity may request addi-
tional information or documentation
from the auditee, including a request
for auditor assurance related to the
documentation, as a way of mitigating
disallowed costs. The management de-
cision should describe any appeal proc-
ess available to the auditee. While not
required, the Federal agency or pass -
through entity may also issue a man-
agement decision on findings relating
to the financial statements which are
required to be reported in accordance
with GAGAS.
(b) Federal agency: As provided in
§200.513 Responsibilities, paragraph
(a)(7), the cognizant agency for audit
must be responsible for coordinating a
management decision for audit find-
ings that affect the programs of more
than one Federal agency. As provided
in §200.513 Responsibilities, paragraph
(c)(3), a Federal awarding agency is re-
sponsible for issuing a management de-
cision for findings that relate to Fed-
eral awards it makes to non - Federal
entities.
(c) Pass - through entity. As provided in
§200.361 Requirements for pass- through
entities, paragraph (d), the pass -
through entity must be responsible for
issuing a management decision for
audit findings that relate to Federal
awards it makes to subrecipients.
(d) Time requirements. The Federal
awarding agency or pass- through enti-
ty responsible for issuing a manage-
ment decision must do so within six
months of acceptance of the audit re-
port by the FAC. The auditee must ini-
tiate and proceed with corrective ac-
tion as rapidly as possible and correc-
tive action should begin no later than
upon receipt of the audit report.
2 CFR Ch. II (1 -1 -15 Edition)
(e) Reference numbers. Management
decisions must include the reference
numbers the auditor assigned to each
audit finding in accordance with
§200.516 Audit findings paragraph (c).
APPENDIX I TO PART 200 —FULL TEXT OF
NOTICE OF FUNDING OPPORTUNITY
The full text of the notice of funding op-
portunity is organized in sections. The re-
quired format outlined in this appendix indi-
cates immediately following the title of each
section whether that section is required in
every announcement or is a Federal award-
ing agency option. The format is designed so
that similar types of information will appear
in the same sections in announcements of
different Federal funding opportunities. To-
ward that end, there is text in each of the
following sections to describe the types of in-
formation that a Federal awarding agency
would include in that section of an actual
announcement.
A Federal awarding agency that wishes to
include information that the format does not
specifically discuss may address that subject
in whatever section(s) is most appropriate.
For example, if a Federal awarding agency
chooses to address performance goals in the
announcement, it might do so in the funding
opportunity description, the application con-
tent, or the reporting requirements.
Similarly, when this format calls for a
type of information to be in a particular sec-
tion, a Federal awarding agency wishing to
address that subject in other sections may
elect to repeat the information in those sec-
tions or use cross references between the sec-
tions (there should be hyperlinks for cross -
references in any electronic versions of the
announcement). For example, a Federal
awarding agency may want to include Sec-
tion A information about the types of non -
Federal entities who are eligible to apply.
The format specifies a standard location for
that information in Section C.1 but does not
preclude repeating the information in Sec-
tion A or creating a cross reference between
Section A and CA, as long as a potential ap-
plicant can find the information quickly and
easily from the standard location.
The sections of the full text of the an-
nouncement are described in the following
paragraphs.
A. PROGRAM DESCRIPTION— REQUIRED
This section contains the full program de-
scription of the funding opportunity. It may
be as long as needed to adequately commu-
nicate to potential applicants the areas in
which funding may be provided. It describes
the Federal awarding agency's funding prior-
ities or the technical or focus areas in which
192
ATTACHMENT ......2.........
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OMB Guidance
the Federal awarding agency intends to pro-
vide assistance. As appropriate, it may in-
clude any program history (e.g., whether this
is a new program or a new or changed area of
program emphasis). This section may com-
municate indicators of successful projects
(e.g., if the program encourages collabo-
rative efforts) and may include examples of
projects that have been funded previously.
This section also may include other informa-
tion the Federal awarding agency deems nec-
essary, and must at a minimum include cita-
tions for authorizing statutes and regula-
tions for the funding opportunity.
B, FEDERAL AWARD INFORMATION - REQUIRED
This section provides sufficient informa-
tion to help an applicant make an informed
decision about whether to submit a proposal.
Relevant information could include the total
amount of funding that the Federal awarding
agency expects to award through the an-
nouncement; the anticipated number of Fed-
eral awards; the expected amounts of indi-
vidual Federal awards (which may be a
range); the amount of funding per Federal
award, on average, experienced in previous
years; and the anticipated start dates and
periods of performance for new Federal
awards, This section also should address
whether applications for renewal or sup-
plementation of existing projects are eligible
to compete with applications for new Fed-
eral awards,
This section also must indicate the type(s)
of assistance instrument (e.g., grant, cooper-
ative agreement) that may be awarded if ap-
plications are successful. If cooperative
agreements may be awarded, this section ei-
ther should describe the "substantial in-
volvement" that the Federal awarding agen-
cy expects to have or should reference where
the potential applicant can find that infor-
mation (e.g., in the funding opportunity de-
scription in A. Program Description —Re-
quired or Federal award administration in-
formation in Section D. Application and
Submission Information). If procurement
contrabts also may be awarded, this must be
stated.
C. ELIGIBILITY INFORMATION
This section addresses the considerations
or factors that determine applicant or appli-
cation eligibility. This includes the eligi-
bility of particular types of applicant organi-
zations, any factors affecting the eligibility
of the principal investigator or project direc-
tor, and any criteria that make particular
projects ineligible. Federal agencies should
make clear whether an applicant's failure to
meet an eligibility criterion by the time of
an application deadline will result in the
Federal awarding agency returning the ap-
plication without review or, even though an
application may be reviewed, will preclude
Pt. 200, App. I
the Federal awarding agency from making a
Federal award, Key elements to be addressed
are:
1, Eligible Applicants— Required. Announce-
ments must clearly identify the types of en-
tities that are eligible to apply. If there are
no restrictions on eligibility, this section
may simply indicate that all potential appli-
cants are eligible. If there are restrictions on
eligibility, it is important to be clear about
the specific types of entities that are eligi-
ble, not just the types that are ineligible.
For example, if the program is limited to
nonprofit organizations subject to 26 U.S.C.
601(c)(3) of the tax code (26 U.S.C. 601(c)(3)),
the announcement should say so. Similarly,
it is better to state explicitly that Native
American tribal organizations are eligible
than to assume that they can unambiguously
infer that from a statement that nonprofit
organizations may apply. Eligibility also can
be expressed by exception, (e.g., open to all
types of domestic applicants other than indi-
viduals). This section should refer to any
portion of Section D specifying documenta-
tion that must be submitted to support an
eligibility determination (e.g., proof of
501(c)(3) status as determined by the Internal
Revenue Service or an authorizing tribal res-
olution). To the extent that any funding re-
striction in Section D.6 could affect the eli-
gibility of an applicant or project, the an-
nouncement must either restate that restric-
tion in this section or provide a cross -ref-
erence to its description in Section D.6.
2. Cost Sharing or Matching — Required. An-
nouncements must state whether there is re-
quired cost sharing, matching, or cost par-
ticipation without which an application
would be ineligible (if cost sharing is not re-
quired, the announcement must explicitly
say so). Required cost sharing may be a cer-
tain percentage or amount, or may be in the
form of contributions of specified items or
activities (e.g., provision of equipment). It is
important that the announcement be clear
about any restrictions on the types of cost
(e.g., in -kind contributions) that are accept-
able as cost sharing. Cost sharing as an eligi-
bility criterion includes requirements based
in statute or regulation, as described in
§200.306 Cost sharing or matching of this
Part. This section should refer to the appro-
priate portion(s) of section D. Application
and Submission Information stating any pre -
award requirements for submission of letters
or other documentation to verify commit-
ments to meet cost - sharing requirements if a
Federal award is made.
3. Other— Required, if applicable. If there are
other eligibility criteria (i.e., criteria that
have the effect of making an application or
project ineligible for Federal awards, wheth-
er referred to as "responsiveness" criteria,
"go -no go" criteria, "threshold" criteria, or
in other ways), must be clearly stated and
must include a reference to the regulation of
193
ATTACHMENT .
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Pt. 200, App. I
requirement that describes the restriction,
as applicable. For example, if entities that
have been found to be in violation of a par-
ticular Federal statute are ineligible, it is
important to say so. This section must also
state any limit on the number of applica-
tions an applicant may submit under the an-
nouncement and make clear whether the
limitation is on the submitting organization,
individual investigator /program director, or
both. This section should also address any
eligibility criteria for beneficiaries or for
program participants other than Federal
award recipients.
D. APPLICATION AND SUBMISSION INFORMATION
1. Address to Request Application Package —
Required. Potential applicants must be told
how to get application forms, kits, or other
materials needed to apply (if this announce-
ment contains everything needed, this sec-
tion need only say so). An Internet address
where the materials can be accessed is ac-
ceptable. However, since high -speed Internet
access is not yet universally available for
downloading documents, and applicants may
have additional accessibility requirements,
there also should be a way for potential ap-
plicants to request paper copies of materials,
such as a U.S. Postal Service mailing ad-
dress, telephone or FAX number, Telephone
Device for the Deaf (TDD), Text Telephone
(TTY) number, and/or Federal Information
Relay Service (FIRS) number.
2. Content and Form of Application Submis-
sion— Required. This section must identify
the required content of an application and
the forms or formats that an applicant must
use to submit it. If any requirements are
stated elsewhere because they are general re-
quirements that apply to multiple programs
or funding opportunities, this section should
refer to where those requirements may be
found. This section also should include re-
quired forms or formats as part of the an-
nouncement or state where the applicant
may obtain them.
This section should specifically address
content and form or format requirements
for:
i, Pre - applications, letters of intent, or
white papers required or encouraged (see
Section DA), including any limitations on
the number of pages or other formatting re-
quirements similar to those for full applica-
tions.
ii. The application as a whole. For all sub-
missions, this would include any limitations
on the number of pages, font size and type-
face, margins, paper size, number of copies,
and sequence or assembly requirements. If
electronic submission is permitted or re-
quired, this could include special require-
ments for formatting or signatures.
iii. Component pieces of the application
(e.g., if all copies of the application must
bear original signatures on the face page or
2 CFR Ch. II (1 -1 -15 Edition)
the program narrative may not exceed 10
pages). This includes any pieces that may be
submitted separately by third parties (e.g.,
references or letters confirming commit-
ments from third parties that will be con-
tributing a portion of any required cost shar-
ing).
iv. Information that successful applicants
must submit after notification of intent to
make a Federal award, but prior to a Federal
award. This could include evidence of com-
pliance with requirements relating to human
subjects or information needed to comply
with the National Environmental Policy Act
(NEPA) (42 U.S.C. 4321- 4370h).
3. Unique entity identifier and System for
Award Management (SAM)— Required.
This paragraph must state clearly that
each applicant (unless the applicant is an in-
dividual or Federal awarding agency that is
excepted from those requirements under 2
CFR §25.110(b) or (c), or has an exception ap-
proved by the Federal awarding agency
under 2 CFR §25.110(d)) is required to: (i) Be
registered in SAM before submitting its ap-
plication; (ii) provide a a valid unique entity
identifier in its application; and (iii) con-
tinue to maintain an active SAM registra-
tion with current information at all times
during which it has an active Federal award
or an application or plan under consideration
by a Federal awarding agency. It also must
state that the Federal awarding agency may
not make a Federal award to an applicant
until the applicant has complied with all ap-
plicable unique entity identifier and SAM re-
quirements and, if an applicant has not fully
complied with the requirements by the time
the Federal awarding agency is ready to
make a Federal award, the Federal awarding
agency may determine that the applicant is
not qualified to receive a Federal award and
use that determination as a basis for making
a Federal award to another applicant.
4. Submission Dates and Times — Required.
Announcements must identify due dates and
times for all submissions. This includes not
only the full applications but also any pre-
liminary submissions (e.g., letters of intent,
white papers, or pre - applications). It also in-
cludes any other submissions of information
before Federal award that are separate from
the full application. If the funding oppor-
tunity is a general announcement that is
open for a period of time with no specific due
dates for applications, this section should
say so. Note that the information on dates
that is included in this section also must ap-
pear with other overview information in a lo-
cation preceding the full text of the an-
nouncement (see §200.203 Notices of funding
opportunities of this Part).
Each type of submission should be des-
ignated as encouraged or required and, if re-
quired, any deadline date (or dates, if the
Federal awarding agency plans more than
one cycle of application submission, review,
194
ATTACHMENT ..................
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OMB Guidance
and Federal award under the announcement)
should be specified. The announcement must
state (or provide a reference to another docu-
ment that states):
i, Any deadline in terms of a date and local
time. If the due date falls on a Saturday,
Sunday, or Federal holiday, the reporting
package is due the next business day.
ii. What the deadline means (e.g., whether
It is the date and time by which the Federal
awarding agency must receive the applica-
tion, the date by which the application must
be postmarked, or something else) and how
that depends, if at all, on the submission
method (e.g., mail, electronic, or personal/
courier delivery).
iii. The effect of missing a deadline (e.g.,
whether late applications are neither re-
viewed nor considered or are reviewed and
considered under some circumstances).
iv. How the receiving Federal office deter-
mines whether an application or pre- applica-
tion has been submitted before the deadline.
This includes the form of acceptable proof of
mailing or system - generated documentation
of receipt date and time.
This section also may indicate whether,
when, and in what form the applicant will re-
ceive an acknowledgement of receipt. This
information should be displayed in ways that
will be easy to understand and use. It can be
difficult to extract all needed information
from narrative paragraphs, even when they
are well written. A tabular form for pro-
viding a summary of the information may
help applicants for some programs and give
them what effectively could be a checklist to
verify the completeness of their application
package before submission.
5. Intergovernmental Review — Required, if ap-
plicable. If the funding opportunity is subject
to Executive Order 12372, "Intergovern-
mental Review of Federal Programs," the
notice must say so. In alerting applicants
that they must contact their state's Single
Point of Contact (SPOC) to find out about
and comply with the state's process under
Executive Order 12372, it may be useful to in-
form potential applicants that the names
and addresses of the SPOCs are listed in the
Office of Management and Budget's Web site,
www.whitehouse.govlomblgrantslspoc.html.
6. Funding Restrictions — Required. Notices
must include information on funding restric-
tions in order to allow an applicant to de-
velop an application and budget consistent
with program requirements. Examples are
whether construction is an allowable activ-
ity, if there are any limitations on direct
costs such as foreign travel or equipment
purchases, and if there are any limits on in-
direct costs (or facilities and administrative
costs). Applicants must be advised if Federal
awards will not allow reimbursement of pre -
Federal award costs.
7. Other Submission Requirements— Required.
This section must address any other submis-
Pt. 200, App.
sion requirements not included in the other
paragraphs of this section. This might in-
clude the format of submission, i.e., paper or
electronic, for each type of required submis-
sion, Applicants should not be required to
submit in more than one format and this sec-
tion should indicate whether they may
choose whether to submit applications in
hard copy or electronically, may submit only
in hard copy, or may submit only electroni-
cally.
This section also must indicate where ap-
plications (and any pre - applications) must be
submitted if sent by postal mail, electronic
means, or hand - delivery. For postal mail
submission, this must include the name of an
office, official, individual or function (e.g.,
application receipt center) and a complete
mailing address. For electronic submission,
this must include the URL or email address;
whether a password(s) is required; whether
particular software or other electronic capa-
bilities are required; what to do in the event
of system problems and a point of contact
who will be available in the event the appli-
cant experiences technical difficulties.'
E. APPLICATION REVIEW INFORMATION
1. Criteria — Required. This section must ad-
dress the criteria that the Federal awarding
agency will use to evaluate applications.
This includes the merit and other review cri-
teria that evaluators will use to judge appli-
cations, including any statutory, regulatory,
or other preferences (e.g., minority status or
Native American tribal preferences) that
will be applied in the review process. These
criteria are distinct from eligibility criteria
that are addressed before an application is
accepted for review and any program policy
or other factors that are applied during the
selection process, after the review process is
completed. The intent is to make the appli-
cation process transparent so applicants can
make informed decisions when preparing
their applications to maximize fairness of
the process. The announcement should clear-
ly describe all criteria, including any sub -
criteria. If criteria vary in importance, the
announcement should specify the relative
percentages, weights, or other means used to
distinguish among them. For statutory, reg-
ulatory, or other preferences, the announce-
ment should provide a detailed explanation
of those preferences with an explicit indica-
tion of their effect (e.g., whether they result
in additional points being assigned).
'With respect to electronic methods for
providing information about funding.oppor-
tunities or accepting applicants' submissions
of information, each Federal awarding agen-
cy is responsible for compliance with Section
503 of the Rehabilitation Act of 1973 (29
U.S.C. 794d).
195
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If an applicant's proposed cost sharing will
be considered in the review process (as op-
posed to being an eligibility criterion de-
scribed in Section 0.2), the announcement
must specifically address how it will be con-
sidered (e.g„ to assign a certain number of
additional points to applicants who offer
cost sharing, or to break ties among applica-
tions with equivalent scores after evaluation
against all other factors). If cost sharing will
not be considered in the evaluation, the an-
nouncement should say so, so that there is
no ambiguity for potential applicants. Vague
statements that cost sharing is encouraged,
without clarification as to what that means,
are unhelpful to applicants. It also is impor-
tant that the announcement be clear about
any restrictions on the types of cost (e.g., in-
kind contributions) that are acceptable as
cost sharing.
2. Review and Selection Process — Required.
This section may vary in the level of detail
provided, The announcement must list any
program policy or other factors or elements,
other than merit criteria, that the selecting
official may use in selecting applications for
Federal award (e.g., geographical dispersion,
program balance, or diversity). The Federal
awarding agency may also include other ap-
propriate details. For example, this section
may indicate who is responsible for evalua-
tion against the merit criteria (e.g., peers ex-
ternal to the Federal awarding agency or
Federal awarding agency personnel) and/or
who makes the final selections for Federal
awards. If there is a multi -phase review proc-
ess (e.g., an external panel advising internal
Federal awarding agency personnel who
make final recommendations to the deciding
official), the announcement may describe the
.phases. It also may include: the number of
people on an evaluation panel and how it op-
erates, the way reviewers are selected, re-
viewer qualifications, and the way that con-
flicts of interest are avoided. With respect to
electronic methods for providing informa-
tion about funding opportunities or accept-
ing applicants' submissions of information,
each Federal awarding agency is responsible
for compliance with Section 608 of the Reha-
bilitation Act of 1973 (29 U.S.C. 794d).
In addition, if the Federal awarding agency
permits applicants to nominate suggested re-
viewers of their applications or suggest those
they feel may be inappropriate due to a con-
flict of interest, that information should be
included in this section.
3. Anticipated Announcement and Federal
Award Dates — Optional. This section is in-
tended to provide applicants with informa-
tion they can use for planning purposes. If
there is a single application deadline fol-
lowed by the simultaneous review of all ap-
plications, the Federal awarding agency can
include in this section information about the
anticipated dates for announcing or noti-
fying successful and unsuccessful applicants
2 CFR Ch. II (1 -1 -15 Edition)
and for having Federal awards in place. If ap-
plications are received and evaluated on a
"rolling" basis at different times during an
extended period, it may be appropriate to
give applicants an estimate of the time need-
ed to process an application and notify the
applicant of the Federal awarding agency's
decision.
F. FEDERAL AWARD ADMINISTRATION
INFORMATION
1. Federal Award Notices — Required. This
section must address what a successful appli-
cant can expect to receive following. selec-
tion. If the Federal awarding agency's prac-
tice is to provide a separate notice stating
that an application has been selected before
it actually makes the Federal award, this
section would be the place to indicate that
the letter is not an authorization to begin
performance (to the extent that it allows
charging to Federal awards of pre -award
costs at the non - Federal entity's own risk),
This section should indicate that the notice
of Federal award signed by the grants officer
(or equivalent) is the authorizing document,
and whether it is provided through postal
mail or by electronic means and to whom. It
also may address the timing, form, and con-
tent of notifications to unsuccessful appli-
cants. See also §200.210 Information con-
tained in a Federal award.
2. Administrative and National Policy Re-
quirements— Required. This section must iden-
tify the usual administrative and national
policy requirements the Federal awarding
agency's Federal awards may include. Pro-
viding this information lets a potential ap-
plicant identify any requirements with
which it would have difficulty complying if
its application is successful. In those cases,
early notification about the requirements al-
lows the potential applicant to decide not to
apply or to take needed actions before re-
ceiving the Federal award. The announce-
ment need not include all of the terms and
conditions of the Federal award, but may
refer to a document (with information about
how to obtain it) or Internet site where ap-
plicants can see the terms and conditions. If
this funding opportunity will lead to Federal
awards with some special terms and condi-
tions that differ from the Federal awarding
agency's usual (sometimes called "general ")
terms and conditions, this section should
highlight those special terms and conditions.
Doing so will alert applicants that have re-
ceived Federal awards from the Federal
awarding agency previously and might not
otherwise expect different terms and condi-
tions. For the same reason, the announce-
ment should inform potential applicants
about special requirements that could apply
to particular Federal awards after the review
of applications and other information, based
on the particular circumstances of the effort
196
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to be supported (e.g., if human subjects were
to be involved or if some situations may jus-
tify special terms on intellectual property,
data sharing or security requirements).
3. Reporting — Required, This section must
include general information about the type
(e.g., financial or performance), frequency,
and means of submission (paper or elec-
tronic) of post - Federal award reporting re-
quirements. Highlight any special reporting
requirements for Federal awards under this
funding opportunity that differ (e.g., by re-
port type, frequency, form/format, or cir-
cumstances for use) from what the Federal
awarding agency's Federal awards usually
require.
G. FEDERAL AWARDING AGENCY CONTACT(S)-
REQUIRED
The announcement must give potential ap-
plicants a point(s) of contact for answering
questions or helping with problems while the
funding opportunity is open. The intent of
this requirement is to be as helpful as pos-
sible to potential applicants, so the Federal
awarding agency should consider approaches
such as giving:
°i. Points of contact who may be reached in
multiple ways (e.g., by telephone, FAX, and/
or email, as well as regular mail).
ii. A fax or email address that multiple
people access, so that someone will respond
even if others are unexpectedly absent dur-
ing critical periods.
iii. Different contacts for distinct kinds of
help (e.g., one for questions of programmatic
content and a second for administrative
questions).
H. OTHER INFORMATION— OPTIONAL
This section may include any additional
information that will assist a potential ap-
plicant. For example, the section might:
i, Indicate whether this is a new program
or a one -time initiative.
ii. Mention related programs or other up-
coming or ongoing Federal awarding agency
funding opportunities for similar activities.
iii. Include current Internet addresses for
Federal awarding agency Web sites that may
be useful to an applicant in understanding
the program.
iv. Alert applicants to the need to identify
proprietary information and inform them
about the way the Federal awarding agency
will handle it.
v. Include certain routine notices to appli-
cants (e.g,, that the Federal Government is
not obligated to make any Federal award as
a result of the announcement or that only
grants officers can bind the Federal Govern-
ment to the expenditure of funds).
Pt. 200, App. II
APPENDIX II TO PART 200 — CONTRACT
PROVISIONS FOR NON- FEDERAL ENTI-
TY CONTRACTS UNDER FEDERAL
AWARDS
In addition to other provisions required by
the Federal agency or non - Federal entity, all
contracts made by the non - Federal entity
under the Federal award must contain provi-
sions covering the following, as applicable.
(A) Contracts for more than the simplified
acquisition threshold currently set at
$150,000, which is the inflation adjusted
amount determined by the Civilian Agency
Acquisition Council and the Defense Acquisi-
tion Regulations Council (Councils) as au-
thorized by 41 U.S.C. 1908, must address ad-
ministrative, contractual, or legal remedies
in instances where contractors violate or
breach contract terms, and provide for such
sanctions and penalties as appropriate.
(B) All contracts in excess of $10,000 must
address termination for cause and for con-
venience by the non - Federal entity including
the manner by which it will be effected and
the basis for settlement,
(C) Equal Employment Opportunity. Ex-
cept as otherwise provided under 41 CFR
Part 60, all contracts that meet the defini-
tion of "federally assisted construction con-
tract" in 41 CFR Part 60-1.3 must include the
equal opportunity clause provided under 41
CFR 60- 1.4(b), in accordance with Executive
Order 11246, "Equal Employment Oppor-
tunity" (30 FR 12319, 12935, 3 CFR Part, 1964-
1965 Comp., p. 339), as amended by Executive
Order 11375, "Amending Executive Order
11246 Relating to Equal Employment Oppor-
tunity," and implementing regulations at 41
CFR part 60, "Office of Federal Contract
Compliance Programs, Equal Employment
Opportunity, Department of Labor."
(D) Davis -Bacon Act, as amended (40 U.S.C.
3141 - 3148). When required by Federal program
legislation, all prime construction contracts
in excess of $2,000 awarded by non - Federal
entities must include a provision for compli-
ance with the Davis -Bacon Act (40 U.S.C.
3141 -3144, and 3146 -3148) as supplemented by
Department of Labor regulations (29 CFR
Part 5, "Labor Standards Provisions Appli-
cable to Contracts Covering Federally Fi-
nanced and Assisted Construction "), In ac-
cordance with the statute, contractors must
be required to pay wages to laborers and me-
chanics at a rate not less than the prevailing
wages specified in a wage determination
made by the Secretary of Labor. In addition,
contractors must be required to pay wages
not less than once a week. The non - Federal
entity must place a copy of the current pre-
vailing wage determination issued by the De-
partment of Labor in each solicitation. The
decision to award a contract or subcontract
must be conditioned upon the acceptance of
the wage determination. The non - Federal en-
tity must report all suspected or reported
197
ATTACHMENT .....P..........
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Pt. 200, App. III
violations to the Federal awarding agency.
The contracts must also include a provision
for compliance with the Copeland "Anti -
Kickback" Act (40 U.S.C. 3145), as supple-
mented by Department of Labor regulations
(29 CFR Part 3, "Contractors and Sub-
contractors 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 sub -
recipient must 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 compensa-
tion to which he or she is otherwise entitled.
The non - Federal entity must report all sus-
pected or reported violations to the Federal
awarding agency.
(E) Contract Work Hours and Safety
Standards Act (40 U.S.C. 3701- 3708). Where
applicable, all contracts awarded by the non-
Federal entity in excess of $100,000 that in-
volve the employment of mechanics or labor-
ers must include a provision for compliance
with 40 U.S.C. 3702 and 3704, as supplemented
by Department of Labor regulations (29 CFR
Part 5). Under 40 U.S.C. 3702 of the Act, each
contractor must 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 com-
pensated at a rate of not less than one and a
half times the basic rate of pay for all hours
worked in excess of 40 hours in the work
week. The requirements of 40 U.S.C. 3704 are
applicable to construction work and provide
that no laborer or mechanic must be re-
quired 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 transpor-
tation or transmission of intelligence.
(F) Rights to Inventions Made Under a
Contract or Agreement. If the Federal award
meets the definition of "funding agreement"
under 37 CFR §401.2 (a) and the recipient or
subreelpient wishes to enter into a contract
with a small business firm or nonprofit orga-
nization regarding the substitution of par-
ties, assignment or performance of experi-
mental, developmental, or research work
under that "funding agreement," the recipi-
ent or subrecipient must comply with the re-
quirements of 37 CFR Part 401, "Rights to In-
ventions Made by Nonprofit Organizations
and Small Business Firms Under Govern-
ment Grants, Contracts and Cooperative
Agreements," and any implementing regula-
tions issued by the awarding agency.
(G) Clean Air Act (42 U.S.C. 7401- 7671q.) and
the Federal Water Pollution Control Act (33
U.S.C. 1251- 1387), as amended — Contracts and
subgrants of amounts in excess of $150,000
must contain a provision that requires the
2 CFR Ch. II (1 -1 -15 Edition)
non - Federal award to agree to comply with
all applicable standards, orders or regula-
tions issued pursuant to the Clean Air Act
(42 U.S.C. 7401- 7671q) and the Federal Water
Pollution Control Act as amended (33 U.S.C.
1251 - 1387). Violations must be reported to the
Federal awarding agency and the Regional
Office of the Environmental Protection
Agency (EPA).
(H) Debarment and Suspension (Executive
Orders 12649 and 12689) —A contract award
(see 2 CFR 180.220) must not be made to par-
ties listed on the governmentwide exclusions
in the System for Award Management
(SAM), in accordance with the OMB guide-
lines at 2 CFR 180 that implement Executive
Orders 12549 (3 CFR part 1986 Comp., p. 189)
and 12689 (3 CFR part 1989 Comp., p. 235),
"Debarment and Suspension." SAM Exclu-
sions contains the names of parties debarred,
suspended, or otherwise excluded by agen-
cies, as well as parties declared ineligible
under statutory or regulatory authority
other than Executive Order 12549.
(I) Byrd Anti - Lobbying Amendment (31
U.S.C. 1352) — Contractors that apply or bid
for an award exceeding $100,000 must 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 at-
tempting 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 ob-
taining any Federal contract, grant or any
other award covered by 31 U.S.C. 1362. Each
tier must also disclose any lobbying with
non - Federal funds that takes place in con-
nection with obtaining any Federal award.
Such disclosures are forwarded from tier to
tier up to the non - Federal award,
(J) See §200.322 Procurement of recovered
materials,
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75888, Dec. 19, 2014]
APPENDIX III TO PART 200 — INDIRECT
(F &A) COSTS IDENTIFICATION AND
ASSIGNMENT, AND RATE DETERMINA-
TION FOR INSTITUTIONS OF HIGHER
EDUCATION (IHES)
A. GENERAL
This appendix provides criteria for identi-
fying and computing indirect (or indirect
(F &A)) rates at IHES (institutions). Indirect
(F &A) costs are those that are incurred for
common or joint objectives and therefore
cannot be identified readily and specifically
with a particular sponsored project, an in-
structional activity, or any other institu-
tional activity. See subsection B.1, Defini-
tion of Facilities and Administration, for a
discussion of the components of indirect
(F &A) costs.
198
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OMB Guidance
1. Major Functions of an Institution
Refers to instruction, organized research,
other sponsored activities and other institu-
tional activities as defined in this section:
a. Instruction means the teaching and
training activities of an institution, Except
for research training as provided in sub-
section b, this term includes all teaching and
training activities, whether they are offered
for credits toward a degree or certificate or
on a non - credit basis, and whether they are
offered through regular academic depart-
ments or separate divisions, such as a sum-
mer school division or an extension division.
Also considered part of this major function
are departmental research, and, where
agreed to, university research.
(1) Sponsored instruction and training means
specific instructional or training activity es-
tablished by grant, contract, or cooperative
agreement. For purposes of the cost prin-
ciples, this activity may be considered a
major function even though an institution's
accounting treatment may include it in the
instruction function.
(2) Departmental research means research,
development and scholarly activities that
are not organized research and, con-
sequently, are not separately budgeted and
accounted for. Departmental research, for
purposes of this document, is not considered
as a major function, but as a part of the in-
struction function of the institution.
(3) Only mandatory cost sharing or cost
sharing specifically committed in the project
budget must be included in the organized re-
search base for computing the indirect (F &A)
cost rate or reflected in any allocation of in-
direct costs. Salary costs above statutory
limits are not considered cost sharing.
b. Organized research means all research
and development activities of an institution
that are separately budgeted and accounted
for. It includes:
(1) Sponsored research means all research
and development activities that are spon-
sored by Federal and non - Federal agencies
and organizations. This term includes activi-
ties involving the training of individuals in
research techniques (commonly called re-
search training) where such activities utilize
the same facilities as other research and de-
velopment activities and where such activi-
ties are not included in the instruction func-
tion.
(2) University research means all research
and development activities that are sepa-
rately budgeted and accounted for by the in-
stitution under an internal application of in-
stitutional funds. University research, for
purposes of this document, must be com-
bined with sponsored research under the
function of organized research.
c. Other sponsored activities means programs
and projects financed by Federal and non -
Federal agencies and organizations which in-
Pt. 200, App. III
volve the performance of work other than in-
struction and organized research. Examples
of such programs and projects are health
service projects and community service pro-
grams. However, when any of these activities
are undertaken by the institution without
outside support, they may be classified as
other institutional activities.
d. Other institutional activities means all ac-
tivities of an institution except for instruc-
tion, departmental research, organized re-
search, and other sponsored activities, as de-
fined in this section; indirect (F &A) cost ac-
tivities identified .in this Appendix para-
graph B, Identification and assignment of in-
direct (F &A) costs; and specialized services
facilities described in §200.468 Specialized
service facilities of this Part.
Examples of other institutional activities
include operation of residence halls, dining
halls, hospitals and clinics, student unions,
intercollegiate athletics, bookstores, faculty
housing, student apartments, guest houses,
chapels, theaters, public museums, and other
similar auxiliary enterprises. This definition
also includes any other categories of activi-
ties, costs of which are "unallowable" to
Federal awards, unless otherwise indicated
in an award.
2. Criteria for Distribution
a. Base period. A base period for distribu-
tion of indirect (F &A) costs is the period
during which the costs are incurred. The
base period normally should coincide with
the fiscal year established by the institution,
but in any event the base period should be so
selected as to avoid inequities in the dis-
tribution of costs.
b. Need for cost groupings. The overall ob-
jective of the indirect (F &A) cost allocation
process is to distribute the indirect (F &A)
costs described in Section B, Identification
and assignment of indirect (F &A) costs, to
the major functions of the institution in pro-
portions reasonably consistent with the na-
ture and extent of their use of the institu-
tion's resources. In order to achieve this ob-
jective, it may be necessary to provide for
selective distribution by establishing sepa-
rate groupings of cost within one or more of
the indirect (F &A) cost categories referred
to in subsection B.1, Definition of Facilities
and Administration. In general, the cost
groupings established within a category
should constitute, in each case, a pool of
those items of expense that are considered to
be of like nature in terms of their relative
contribution to (or degree of remoteness
from) the particular cost objectives to which
distribution is appropriate, Cost groupings
should be established considering the general
guides provided in subsection c of this sec-
tion. Each such pool or cost grouping should
then be distributed individually to the re-
lated cost objectives, using the distribution
base or method most appropriate in light of
199
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PAGE _ I2��•.•- OF .. :. PAGES
Pt. 200, App. III
the guidelines set forth in subsection d of
this section.
c. General considerations on cost groupings.
The extent to which separate cost groupings
and selective distribution would be appro-
priate at an institution is a matter of judg-
ment to be determined on a case -by -case
basis. Typical situations which may warrant
the establishment of two or more separate
cost groupings (based on account classifica-
tion or analysis) within an indirect (F &A)
cost category include but are not limited to
the following:
(1) If certain items or categories of expense
relate solely to one of the major functions of
the institution or to less than all functions,
such expenses should be set aside as a sepa-
rate cost grouping for direct assignment or
selective allocation in accordance with the
guides provided in subsections b and d.
(2) If any types of expense ordinarily treat-
ed as general administration or depart-
mental administration are charged to Fed-
eral awards as direct costs, expenses applica-
ble to other activities of the institution
when incurred for the same purposes in like
circumstances must, through separate cost
groupings, be excluded from the indirect
(F &A) costs allocable to those Federal
awards and included in the direct cost of
other activities for cost allocation purposes.
(3) If it is determined that certain expenses
are for the support of a service unit or facil-
ity whose output is susceptible of measure-
ment on a workload or other quantitative
basis, such expenses should be set aside as a
separate cost grouping for distribution on
such basis to organized research, instruc-
tional, and other activities at the institution
or within the department.
(4) If activities provide their own pur-
chasing, personnel administration, building
maintenance or similar service, the distribu-
tion of general administration and general
expenses, or operation and maintenance ex-
penses to such activities should be accom-
plished through cost groupings which include
only that portion of central indirect (F &A)
costs (such as for overall management)
which`are properly allocable to such activi-
ties.
(5) If the institution elects to treat fringe
benefits as indirect (F &A) charges, such
costs should be set aside as a separate cost
grouping for selective distribution to related
cost objectives.
(6) The number of separate cost groupings
within a category should be held within
practical limits, after taking into consider-
ation the materiality of the amounts in-
volved and the degree of precision attainable
through less selective methods of distribu-
tion.
d. Selection of distribution method.
(1) Actual conditions must be taken into
account in selecting the method or base to
be used in distributing individual cost
2 CFR Ch. II (1 -1 -15 Edition)
groupings. The essential consideration in se-
lecting a base is that it be the one best suit-
ed for assigning the pool of costs to cost ob-
jectives in accordance with benefits derived;
with a traceable cause - and - effect relation-
ship; or with logic and reason, where neither
benefit nor a cause- and - effect relationship is
determinable.
(2) If a cost grouping can be identified di-
rectly with the cost objective benefitted, it
should be assigned to that cost objective.
(3) If the expenses in a cost grouping are
more general in nature, the distribution may
be based on a cost analysis study which re-
sults in an equitable distribution of the
costs, Such cost analysis studies may take
into consideration weighting factors, popu-
lation, or space occupied if appropriate. Cost
analysis studies, however, must (a) be appro-
priately documented in sufficient detail for
subsequent review by the cognizant agency
for indirect costs, (b) distribute the costs to
the related cost objectives in accordance
with the relative benefits derived, (c) be sta-
tistically sound, (d) be performed specifically
at the institution at which the results are t6
be used, and (e) be reviewed periodically, but
not less frequently than rate negotiations,
updated if necessary, and used consistently.
Any assumptions made in the study must be
stated and explained. The use of cost anal-
ysis studies and periodic changes in the
method of cost distribution must be fully
justified.
(4) If a cost analysis study is not per-
formed, or if the study does not result in an
equitable distribution of the costs, the dis-
tribution must be made in accordance with
the appropriate base cited in Section B, Iden-
tification and assignment of indirect (F &A)
costs, unless one of the following conditions
is met:
(a) It can be demonstrated that the use of
a different base would result in a more equi-
table allocation of the costs, or that a more
readily available base would not increase the
costs charged to Federal awards, or
(b) The institution qualifies for, and elects
to use, the simplified method for computing
indirect (F &A) cost rates described in Sec-
tion D, Simplified method for small institu-
tions.
(5) Notwithstanding subsection (3), effec-
tive July 1, 1998, a cost analysis or base other
than that in Section B must not be used to
distribute utility or student services costs.
Instead, subsections B.4.c Operation and
maintenance expenses, may be used in the
recovery of utility costs.
e. Order of distribution.
(1) Indirect (F &A) costs are the broad cat-
egories of costs 'discussed in Section B.1,
Definitions of Facilities and Administration
(2) Depreciation, interest expenses, oper-
ation and maintenance expenses, and general
administrative and general expenses should
be allocated in that order to the remaining
200
[ATTACHMENT ....m.��...........
PAGE..� .. GP .. . �. PAGES
OMB Guidance
indirect (F &A) cost categories as well as to
the major functions and specialized service
facilities of the institution, Other cost cat-
egories may be allocated in the order deter-
mined to be most appropriate by the institu-
tions. When cross allocation of costs is made
as provided in subsection (3), this order of al-
location does not apply.
(3) Normally an indirect (F &A) cost cat-
egory will be considered closed once it has
been allocated to other cost objectives, and
costs may not be subsequently allocated to
it. However, a cross allocation of costs be-
tween two or more indirect (F &A) cost cat-
egories may be used if such allocation will
result in a more equitable allocation of
costs. If a cross allocation is used, an appro-
priate modification to the composition of
the indirect (F &A) cost categories described
in Section B is required.
B. IDENTIFICATION AND ASSIGNMENT OF
INDIRECT (F &A) COSTS
1. Definition of Facilities and Administration
See §200.414 Indirect (F &A) costs which
provides the basis for these indirect cost re-
quirements.
2. Depreciation
a. The expenses under this heading are the
portion of the costs of the institution's
buildings, capital improvements to land and
buildings, and equipment which are com-
puted in accordance with §200.436 Deprecia-
tion,
b. In the absence of the alternatives pro-
vided for in Section A.2.d, Selection of dis-
tribution method, the expenses included in
this category must be allocated in the fol-
lowing manner:
(1) Depreciation on buildings used exclu-
sively in the conduct of a single function,
and on capital improvements and equipment
used in such buildings, must be assigned to
that function.
(2) Depreciation on buildings used for more
than one function, and on capital improve-
ments and equipment used in such buildings,
must be allocated to the individual functions
performed in each building on the basis of
usable square feet of space, excluding com-
mon areas such as hallways, stairwells, and
rest rooms.
(3) Depreciation on buildings, capital im-
provements and equipment related to space
(e.g., individual rooms, laboratories) used
jointly by more than one function (as deter-
mined by the users of the space) must be
treated as follows. The cost of each jointly
used unit of space must be allocated to bene-
fitting functions on the basis of:
(a) The employee full -time equivalents
(FTEs) or salaries and wages of those indi-
vidual functions benefitting from the use of
that space; or
Pt. 200, App. III
(b) Institution -wide employee FTEs or sal-
aries and wages applicable to the benefitting
major functions (see Section A.1) of the in-
stitution.
(4) Depreciation on certain capital im-
provements to land, such as paved parking
areas, fences, sidewalks, and the like, not in-
cluded in the cost of buildings, must be allo-
cated to user categories of students and em-
ployees on a full -time equivalent basis. The
amount allocated to the student category
must be assigned to the instruction function
of the institution. The amount allocated to
the employee category must be further allo-
cated to the major functions of the institu-
tion in proportion to the salaries and wages
of all employees applicable to those func-
tions.
3. Interest
Interest on debt associated with certain
buildings, equipment and capital improve-
ments, as defined in §200.449 Interest, must
be classified as an expenditure under the cat-
egory Facilities. These costs must be allo-
cated in the same manner as the deprecia- ,
tion on the buildings, equipment and capital
improvements to which the interest relates.
4. Operation and Maintenance Expenses
a. The expenses under this heading are
those that have been incurred for the admin-
istration, supervision, operation, mainte-
nance, preservation, and protection of the in-
stitution's physical plant. They include ex-
penses normally incurred for such items as
janitorial and utility services; repairs and
ordinary or normal alterations of buildings,
furniture and equipment; care of grounds;
maintenance and operation of buildings and
other plant facilities; security; earthquake
and disaster preparedness; environmental
safety; hazardous waste disposal; property,
liability and all other insurance relating to
property; space and capital leasing; facility
planning and management; and central re-
ceiving. The operation and maintenance ex-
pense category should also include its allo-
cable share of fringe benefit costs, deprecia-
tion, and interest costs.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated in
the same manner as described in subsection
2.b for depreciation.
c. A utility cost adjustment of up to 1.3
percentage points may be included in the ne-
gotiated indirect cost rate of the IHE for or-
ganized research, per the computation alter-
natives in paragraphs (c)(1) and (2) of this
section:
(1) Where space is devoted to a single func-
tion and metering allows unambiguous meas-
urement of usage related to that space, costs
must be assigned to the function located in
that space.
201
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Pt. 200, App. III
(2) Where space is allocated to different
functions and metering does not allow unam-
biguous measurement of usage by function,
costs must be allocated as follows:
(i) Utilities costs should be apportioned to
functions in the same manner as deprecia-
tion, based on the calculated difference be-
tween the site or building actual square foot-
age for monitored research laboratory space
(site, building, floor, or room), and a sepa-
rate calculation prepared by the IHE using
the "effective square footage" described in
subsection (e)(2)(ii) of this section.
(ii) "Effective square footage" allocated to
research laboratory space must be calculated
as the actual square footage times the rel-
ative energy utilization index (REUI) posted
on the OMB Web site at the time of a rate
determination.
A. This index is the ratio of a laboratory
energy use index (lab EUI) to the cor-
responding index for overall average college
or university space (college EUI).
B. In July 2012, values for these two indices
(taken respectively from the Lawrence
Berkeley Laboratory "Labs for the 21st Cen-
tury" benchmarking tool http: //
labs21 benchmarking .lbl.gov /CompareData.plip
and the US Department of Energy "Build-
ings Energy Databook" and http://
buildingsdatabook .eren.doe.gov/CBECS.aspx)
were 310 kBtu/sq ft -yr. and 155 kBtu/sq ft -yr.,
so that the adjustment ratio is 2.0 by this
methodology. To retain currency, OMB will
adjust the EUI numbers from time to time
(no more often than annually nor less often
than every 6 years), using reliable and pub-
licly disclosed data. Current values of both
the EUIs and the REUI will be posted on the
OMB Web site.
5. General Administration and General Expenses
a, The expenses under this heading are
those that have been incurred for the general
executive and administrative offices of edu-
cational institutions and other expenses of a
general character which do not relate solely
to any major function of the institution; i.e.,
solely to (1) instruction, (2) organized re-
search, (3) other sponsored activities, or (4)
other institutional activities. The general
administration and general expense category
should also include its allocable share of
fringe benefit costs, operation and mainte-
nance expense, depreciation, and interest
costs. Examples of general administration
and general expenses include: those expenses
incurred by administrative offices that serve
the entire university system of which the in-
stitution is a part; central offices of the in-
stitution such as the President's or
Chancellor's office, the offices for institu-
tion -wide financial management, business
services, budget and planning, personnel
management, and safety and risk manage-
ment; the office of the General Counsel; and
the operations of the central administrative
2 CFR Ch. II (1 -1 -15 Edition)
management information systems. General
administration and general expenses must
not include expenses incurred within non -
university -wide deans' offices, academic de-
partments, organized research units, or simi-
lar organizational units. (See subsection 6,
Departmental administration expenses.)
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be grouped first
according to common major functions of the
institution to which they render services or
provide benefits. The aggregate expenses of
each group must then be allocated to serv-
iced or benefitted functions on the modified
total cost basis. Modified total costs consist
of the same elements as those in Section C.2.
When an activity included in this indirect
(F &A) cost category provides a service or
product to another institution or organiza-
tion, an appropriate adjustment must be
made to either the expenses or the basis of
allocation or both, to assure a proper alloca-
tion of costs.
6. Departmental Administration Expenses
a. The expenses under this heading are
those that have been incurred for adminis-
trative and supporting services that benefit
common or joint departmental activities or
objectives in academic deans' offices, aca-
demic departments and divisions, and orga-
nized research units. Organized research
units include such units as institutes, study
centers, and research centers. Departmental
administration expenses are subject to the
following limitations.
(1) Academic deans' offices. Salaries and
operating expenses are limited to those at-
tributable to administrative functions.
(2) Academic departments:
(a) Salaries and fringe benefits attrib-
utable to the administrative work (including
bid and proposal preparation) of faculty (in-
cluding department heads) and other profes-
sional personnel conducting research and/or
instruction, must be allowed at a rate of 3.6
percent of modified total direct costs. This
category does not include professional busi-
ness or professional administrative officers.
This allowance must be added to the com-
putation of the indirect (F &A) cost rate for
major functions in Section C, Determination
and application of indirect (F &A) cost rate
or rates; the expenses covered by the allow-
ance must be excluded from the depart-
mental administration cost pool. No docu-
mentation is required to support this allow-
ance.
(b) Other administrative and supporting
expenses incurred within academic depart-
ments are allowable provided they are treat-
ed consistently in like circumstances. This
would include expenses such as the salaries
of secretarial and clerical staffs, the salaries
of administrative officers and assistants,
202
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Cn,X-emR.i -
travel, office supplies, stockrooms, and the
like.
(3) Other fringe benefit costs applicable to
the salaries and wages included in sub-
sections (1) and (2) are allowable, as well as
an appropriate share of general administra-
tion and general expenses, operation and
maintenance expenses, and depreciation.
(4) Federal agencies may authorize reim-
bursement of additional costs for department
heads and faculty only in exceptional cases
where an institution can demonstrate undue
hardship or detriment to project perform-
ance.
b. The following guidelines apply to the de-
termination of departmental administrative
costs as direct or indirect (F &A) costs.
(1) In developing the departmental admin-
istration cost pool, special care should be ex-
ercised to ensure that costs incurred for the
same purpose in like circumstances are
treated consistently as either direct or indi-
rect (F &A) costs, For example, salaries of
technical staff, laboratory supplies (e.g.,
chemicals), telephone toll charges, animals,
animal care costs, computer costs, travel
costs, and specialized shop costs must be
treated as direct costs wherever identifiable
to a particular cost objective. Direct charg-
ing of these costs may be accomplished
through specific identification of individual
costs to benefitting cost objectives, or
through recharge centers or specialized serv-
ice facilities, as appropriate under the cir-
cumstances. See § §200.413 Direct costs, para-
graph (c) and 200.468 Specialized service fa-
cilities.
(2) Items such as office supplies, postage,
local telephone costs, and memberships must
normally be treated as indirect (F &A) costs.
c. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated as
follows:
(1) The administrative expenses of the
dean's office of each college and school must
be allocated to the academic departments
within that college or school on the modified
total cost basis.
(2) The administrative expenses of each
academic department, and the department's
share of the expenses allocated in subsection
(1) must be allocated to the appropriate func-
tions of the department on the modified
total cost basis,
7. Sponsored Projects Administration
a. The expenses under this heading are lim-
ited to those incurred by a separate organi-
zation(s) established primarily to administer
sponsored projects, including such functions
as grant and contract administration (Fed-
eral and non - Federal), special security, pur-
chasing, personnel, administration, and edit-
ing and publishing of research and other re-
ports, They include the salaries and expenses
of the head of such organization, assistants,
Pt. 200, App. III
and immediate staff, together with the sala-
ries and expenses of personnel engaged in
supporting activities maintained by the or-
ganization, such as stock rooms, print shops,
and the like. This category also includes an
allocable share of fringe benefit costs, gen-
eral 'administration and general expenses,
operation and maintenance expenses, and de-
preciation. Appropriate adjustments will be
made for services provided to other functions
or organizations.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated to
the major functions of the institution under
which the sponsored projects are conducted
on the basis of the modified total cost of
sponsored projects.
c. An appropriate adjustment must be
made to eliminate any duplicate charges to
Federal awards when this category includes
similar or identical activities as those in-
cluded in the general administration and
general expense category or other indirect
(F &A) cost items, such as accounting, pro-
curement, or personnel administration.
8. Library. Expenses
a. The expenses under this heading are
those that have been incurred for the oper-
ation of the library, including the cost of
books and library materials purchased for
the library, less any items of library income
that qualify as applicable credits under
§200.406 Applicable credits. The library ex-
pense category should also include the fringe
benefits applicable to the salaries and wages
included therein, an appropriate share of
general administration and general expense,
operation and maintenance expense, and de-
preciation, Costs incurred in the purchases
of rare books (museum -type books) with no
value to Federal awards should not be allo-
cated to them.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in-
cluded in this category must be allocated
first on the basis of primary categories of
users, including students, professional em-
ployees, and other users.
(1) The student category must consist of
full -time equivalent students enrolled at the
institution, regardless of whether they earn
credits toward a degree or certificate.
(2) The professional employee category
must consist of all faculty members and
other professional employees of the institu-
tion, on a full -time equivalent basis. This
category may also include post- doctorate
fellows and graduate students.
(3) The other users category must consist
of a reasonable factor as determined by insti-
tutional records to account for all other
users of library facilities.
c. Amount allocated in paragraph b of this
section must be assigned further as follows:
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Pt. 200, App. III
(1) The amount in the student category
must be assigned to the instruction function
of the institution.
(2) The amount in the professional em-
ployee category must be assigned to the
major functions of the institution in propor-
tion to the salaries and wages of all faculty
members and other professional employees
applicable to those functions.
(3) The amount in the other users category
must be assigned to the other institutional
activities function of the institution.
9. Student Administration and Services
a. The expenses under this heading are
those that have been incurred for the admin-
istration of student affairs and for services
to students, including expenses of such ac-
tivities as deans of students, admissions, reg-
istrar, counseling and placement services,
student advisers, student health and infir-
mary services, catalogs, and commence-
ments and convocations. The salaries of
members of the academic staff whose respon-
sibilities to the institution require adminis-
trative work that benefits sponsored projects
may also be included to the extent that the
portion charged to student administration is
determined in accordance with Subpart E—
Cost Principles of this Part. This expense
category also includes the fringe benefit
costs applicable to the salaries and wages in-
cluded therein, an appropriate share of gen-
eral administration and general expenses,
operation and maintenance, interest ex-
pense, and depreciation.
b. In the absence of the alternatives pro-
vided for in Section A.2.d, the expenses in
this category must be allocated to the in-
struction function, and subsequently to Fed-
eral awards in that function.
10. Offset for Indirect (I' &A) Expenses Other-
wise Provided for by the Federal Govern-
ment
a. The items to be accumulated under this
heading are the reimbursements and other
payments from the Federal Government
which`are made to the institution to support
solely, specifically, and directly, in whole or
in part, any of the administrative or service
activities described in subsections 2 through
9.
b. The items in this group must be treated
as a credit to the affected individual indirect
(F &A) cost category before that category is
allocated to benefitting functions.
C. DETERMINATION AND APPLICATION OF
INDIRECT (F &A) COST RATE OR RATES
1. Indirect (F &A) Cost Pools
a. (1) Subject to subsection b, the separate
categories of indirect (F &A) costs allocated
to each major function of the institution as
prescribed in paragraph B of, this paragraph
2 CFR Ch. II (1 -1 -15 Edition)
C.1 Identification and assignment of indirect
(F &A) costs, must be aggregated and treated
as a common pool for that function. The
amount in each pool must be divided by the
distribution base described in subsection 2 to
arrive at a single indirect (F &A) cost rate for
each function.
(2) The rate for each function is used to
distribute indirect (F &A) costs to individual
Federal awards of that function. Since a
common pool is established for each major
function of the institution, a separate indi-
rect (F &A) cost rate would be established for
each of the major functions described in Sec-
tion A.1 under which Federal awards are car-
ried out,
(3) Each institution's indirect (F &A) cost
rate process must be appropriately designed
to ensure that Federal sponsors do not in
any way subsidize the indirect (F &A) costs of
other sponsors, specifically activities spon-
sored by industry and foreign governments.
Accordingly, each allocation method used to
identify and allocate the indirect (F &A) cost
pools, as described in Sections A.2, Criteria
for distribution, and B.2 through B.9, must
contain the full amount of the institution's
modified total costs or other appropriate
units of measurement used to make the com-
putations. In addition, the final rate dis-
tribution base (as defined in subsection 2) for
each major function (organized research, in-
struction, etc., as described in Section A.1,
Major functions of an institution) must con-
tain all the programs or activities which uti-
lize the indirect (F &A) costs allocated to
that major function. At the time an indirect
(F &A) cost proposal is submitted to a cog-
nizant agency for indirect costs, each insti-
tution must describe the process it uses to
ensure that Federal funds are not used to
subsidize industry and foreign government
funded programs.
b. In some instances a single rate basis for
use across the board on all work within a
major function at an institution may not be
appropriate. A single rate for research, for
example, might not take into account those
different environmental factors and other
conditions which may affect substantially
the indirect (F &A) costs applicable to a par-
ticular segment of research at the institu-
tion. A particular segment of research may
be that performed under a single sponsored
agreement or it may consist of research
under a group of Federal awards performed
in a common environment. The environ-
mental factors are not limited to the phys-
ical location of the work. Other important
factors are the level of the administrative
support required, the nature of the facilities
or other resources employed, the scientific
disciplines or technical skills involved, the
organizational arrangements used, or any
combination thereof. If a particular segment
of a sponsored agreement is performed with-
in an environment which appears to generate
204
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a significantly different level of indirect
(F &A) costs, provisions should be made for a
separate indirect (F &A) cost pool applicable
to such work. The separate indirect (F &A)
cost pool should be developed during the reg-
ular course of the rate determination process
and the separate indirect (F &A) cost rate re-
sulting therefrom should be utilized; pro-
vided it is determined that (1) such indirect
(F &A) cost rate differs significantly from
that which would have been obtained under
subsection a, and (2) the volume of work to
which such rate would apply is material in
relation to other Federal awards at the insti-
tution.
2. The Distribution Basis
Indirect (F &A) costs must be distributed to
applicable Federal awards and other benefit -
ting activities within each major function
(see section A.1, Major functions of an insti-
tution) on the basis of modified total direct
costs (MTDC), consisting of all salaries and
wages, fringe benefits, materials and sup-
plies, services, travel, and up to the first
$25,000 of each subaward (regardless of the
period covered by the subaward). MTDC is
defined in §200.68 Modified Total Direct Cost
(MTDC). For this purpose, an indirect (F &A)
cost rate should be determined for each of
the separate indirect (F &A) cost pools devel-
oped pursuant to subsection 1. The rate in
each case should be stated as the percentage
which the amount of the particular indirect
(F &A) cost pool is of the modified total di-
rect costs identified with such pool.
3. Negotiated Lump Sum for Indirect (F &A)
Costs
A negotiated fixed amount in lieu of indi-
rect (F &A) costs may be appropriate for self -
contained, off - campus, or primarily subcon-
tracted activities where the benefits derived
from an institution's indirect (F &A) services
cannot be readily determined. Such nego-
tiated indirect (F &A) costs will be treated as
an offset before allocation to instruction, or-
ganized research, other sponsored activities,
and other institutional activities. The base
on which such remaining expenses are allo-
cated should be appropriately adjusted.
4. Predetermined Rates for Indirect (F &A) Costs
Public Law 87-638 (76 Stat. 437) as amended
(41 U.S.C. 4708) authorizes the use of pre-
determined rates in determining the "indi-
rect costs" (indirect (F &A) costs) applicable
under research agreements with educational
institutions. The stated objectives of the law
are to simplify the administration of cost -
type research and development contracts (in-
cluding grants) with educational institu-
tions, to facilitate the preparation of their
budgets, and to permit more expeditious
closeout of such contracts when the work is
completed, In view of the potential advan-
Pt. 200, App. III
tages offered by this procedure, negotiation
of predetermined rates for indirect (F &A)
costs for a period of two to four years should
be the norm in those situations where the
cost experience and other pertinent facts
available are deemed sufficient to enable the
parties involved to reach an informed judg-
ment as to the probable level of indirect
(F &A) costs during the ensuing accounting
periods.
5. Negotiated Fixed Rates and Carry- Forward
Provisions
When a fixed rate is negotiated in advance
for a fiscal year (or other time period), the
over- or under - recovery for that year may be
included as an adjustment to the indirect
(F &A) cost for the next rate negotiation.
When. the rate is negotiated before the carry -
forward adjustment is determined, the carry -
forward amount may be applied to the next
subsequent rate negotiation. When such ad-
justments are to be made, each fixed rate ne-
gotiated in advance for a given period will be
computed by applying the expected indirect
(F &A) costs allocable to Federal awards for
the forecast period plus or minus the carry -
forward adjustment (over- or under - recovery)
from the prior period, to the forecast dis-
tribution base. Unrecovered amounts under
lump -sum agreements or cost - sharing provi-
sions of prior years must not be carried for-
ward for consideration in the new rate nego-
tiation. There must, however, be an advance
understanding in each case between the in-
stitution and the cognizant agency for indi-
rect costs as to whether these differences
will be considered in the rate negotiation
rather than making the determination after
the differences are known. Further, institu-
tions electing to use this carry- forward pro-
vision may not subsequently change without
prior approval of the cognizant agency for
indirect costs. In the event that an institu-
tion returns to a post- determined rate, any
over- or under- recovery during the period in
which negotiated fixed rates and carry -for-
ward provisions were followed will be in-
cluded in the subsequent post- determined
rates. Where multiple rates are used, the
same procedure will be applicable for deter-
mining each rate.
6. Provisional and Final Rates for Indirect
(F &A) Costs
Where the cognizant agency for indirect
costs determines that cost experience and
other pertinent facts do not justify the use
of predetermined rates, or a fixed rate with
a carry - forward, or if the parties cannot
agree on an equitable rate, a provisional rate
must be established, To prevent substantial
overpayment or underpayment, the provi-
sional rate may be adjusted by the cognizant
agency for indirect costs during the institu-
tion's fiscal year. Predetermined or fixed
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Pt. 200, App. III
rates may replace provisional rates at any
time prior to the close of the institution's
fiscal year. If a provisional rate is not re-
placed by a predetermined or fixed rate prior
to the end of the institution's fiscal year, a
final rate will be established and upward or
downward adjustments will be made based on
the actual allowable costs incurred for the
period involved.
7. Fixed Rates for the Life of the Sponsored
Agreement
Except as provided in paragraph (c)(1) of
§200.414 Indirect (F &A) costs, Federal agen-
cies must use the negotiated rates, must
paragraph (b)(1) for indirect (F &A) costs in
effect at the time of the initial award
throughout the life of the Federal award.
Award levels for Federal awards may not be
adjusted in future years as a result of
changes in negotiated rates. "Negotiated
rates" per the rate agreement include final,
fixed, and predetermined rates and exclude
provisional rates. "Life" for the purpose of
this subsection means each competitive seg-
ment of a project. A competitive segment is
a period of years approved by the Federal
awarding agency at the time of the Federal
award. If negotiated rate agreements do not
extend through the life of the Federal award
at the time of the initial award, then the ne-
gotiated rate for the last year of the Federal
award must be extended through the end of
the life of the Federal award.
b. Except as provided in §200.414 Indirect
(F &A) costs, when an educational institution
does not have a negotiated rate with the
Federal Government at the time of an award
(because the educational institution is a new
recipient or the parties cannot reach agree-
ment on a rate), the provisional rate used at
the time of the award must be adjusted once
a rate is negotiated and approved by the cog-
nizant agency for indirect costs.
8. Limitation on Reimbursement of
Administrative Costs
a. Notwithstanding the provisions of sub-
section C.La, the administrative costs
charged to Federal awards awarded or
amended (including continuation and re-
newal awards) with effective dates beginning
on or after the start of the institution's first
fiscal year which begins on or after October
1, 1991, must be limited to 26% of modified
total direct costs (as defined in subsection 2)
for the total of General Administration and
General Expenses, Departmental Adminis-
tration, Sponsored Projects Administration,
and Student Administration and Services
(including their allocable share of deprecia-
tion, interest costs, operation and mainte-
nance expenses, and fringe benefits costs, as
provided by Section B, Identification and as-
signment of indirect (F &A) costs, and all
other types of expenditures not listed spe-
2 CFR Ch. II (1 -1 -15 Edition)
cifically under one of the subcategories of fa-
cilities in Section B,
b. Institutions should not change their ac-
counting or cost allocation methods if the ef-
fect is to change the charging of a particular
type of cost from F &A to direct, or to reclas-
sify costs, or increase allocations from the
administrative pools identified in paragraph
B.1 of this Appendix to the other F &A cost
pools or fringe benefits. Cognizant agencies
for indirect cost are authorized to allow
changes where an institution's charging
practices are at variance with acceptable
practices followed by a substantial majority
of other institutions.
9. Alternative Method for Administrative Costs
a. Notwithstanding the provisions of sub-
section C.La, an institution may elect to
claim a fixed allowance for the "Adminis-
tration" portion of indirect (F &A) costs. The
allowance could be either 24% of modified
total direct costs or a percentage equal to
95% of the most recently negotiated fixed or
predetermined rate for the cost pools in-
cluded under "Administration" as defined in
Section B.1, whichever is less. Under this al-
ternative, no cost proposal need be prepared
for the "Administration" portion of the indi-
rect (F &A) cost rate nor is further identifica-
tion or documentation of these costs re-
quired (see subsection c). Where a negotiated
indirect (F &A) cost agreement includes this
alternative, an institution must make no
further charges for the expenditure cat-
egories described in Section B.5, General ad-
ministration and general expenses, Section
B.6, Departmental administration expenses,
Section B.7, Sponsored projects administra-
tion, and Section B.9, Student administra-
tion and services.
b. In negotiations of rates for subsequent
periods, an institution that has elected the
option of subsection a may continue to exer-
cise it at the same rate without further iden-
tification or documentation of costs.
c. If an institution elects to accept a
threshold rate as defined in subsection a of
this section, it is not required to perform a
detailed analysis of its administrative costs.
However, in order to compute the facilities
components of its indirect (F &A) cost rate,
the institution must reconcile its indirect
(F &A) cost proposal to its financial state-
ments and make appropriate adjustments
and reclassifications to identify the costs of
each major function as defined in Section
A,l, as well as to identify and allocate the fa-
cilities components. Administrative costs
that are not identified as such by the insti-
tution's accounting system (such as those in-
curred in academic departments) will be
classified as instructional costs for purposes
of reconciling indirect (F &A) cost proposals
to financial statements and allocating facili-
ties costs.
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10. Individual Rate Components
In order to provide mutually agreed -upon
information for management purposes, each
indirect (F &A) cost rate negotiation or de-
termination must include development of a
rate for each indirect (F &A) cost pool as well
as the overall indirect (F &A) cost rate.
11. Negotiation and Approval of Indirect (F &A)
Rate
a. Cognizant agency for indirect costs is
defined in Subpart A— Acronyms and Defini-
tions.
(1) Cost negotiation cognizance is assigned
to the Department of Health and Human
Services (HHS) or the Department of De-
fense's Office of Naval Research (DOD), nor-
mally depending on which of the two agen-
cies (HHS or DOD) provides more funds to
the educational institution for the most re-
cent three years. Information on funding
must be derived from relevant data gathered
by the National Science Foundation. In cases
where neither HHS nor DOD provides Fed-
eral funding to an educational institution,
the cognizant agency for indirect costs as-
signment must default to HHS. Notwith-
standing the method for cognizance deter-
mination described in this section, other ar-
rangements for cognizance of a particular
educational institution may also be based in
part on the types of research performed at
the educational institution and must be de-
cided based on mutual agreement between
HHS and DOD. Where a non - Federal entity
only receives funds as a subrecipient, §200.331
Requirements for pass- through entities.
(2) After cognizance is established, it must
continue for a five -year period.
b, Acceptance of rates. See §200.414 Indi-
rect (F &A) costs.
c. Correcting deficiencies. The cognizant
agency for indirect costs must negotiate
changes needed to correct systems defi-
ciencies relating to accountability for Fed-
eral awards. Cognizant agencies for indirect
costs must address the concerns of other af-
fected agencies, as appropriate, and must ne-
gotiate� special rates for Federal agencies
that are required to limit recovery of indi-
rect costs by statute.
d. Resolving questioned costs. The cog-
nizant agency for indirect costs must con-
duct any necessary negotiations with an edu-
cational institution regarding amounts ques-
tioned by audit that are due the Federal
Government related to costs covered by a ne-
gotiated agreement.
e. Reimbursement. Reimbursement to cog-
nizant agencies for indirect costs for work
performed under this Part may be made by
reimbursement billing under the Economy
Act, 31 U.S.C. 1535.
f. Procedure for establishing facilities and
administrative rates must be established by
one of the following methods:
Pt. 200, App. III
(1) Formal negotiation. The cognizant
agency for indirect costs is responsible for
negotiating and approving rates for an edu-
cational institution on behalf of all Federal
agencies. Federal awarding agencies that do
not have cognizance for indirect costs, must
notify the cognizant agency for indirect
costs of specific concerns (i.e., a need to es-
tablish special cost rates) which could affect
the negotiation process. The cognizant agen-
cy for indirect costs must address the con-
cerns of all interested agencies, as appro-
priate. A pre - negotiation conference may be
scheduled among all interested agencies, if
necessary. The cognizant agency for indirect
costs must then arrange a negotiation con-
ference with the educational institution.
(2) Other than formal negotiation. The cog-
nizant agency for indirect costs and edu-
cational institution may reach an agreement
on rates without a formal negotiation con-
ference; for example, through correspond-
ence or use of the simplified method de-
scribed in this section D of this Appendix.
g. Formalizing determinations and agree-
ments. The cognizant agency for indirect
costs must formalize all determinations or
agreements reached with an educational in-
stitution and provide copies to other agen-
cies having an interest. Determinations
should include a description of any adjust-
ments, the actual amount, both dollar and
percentage adjusted, and, the reason for mak-
ing adjustments.
h. Disputes and disagreements. Where the
cognizant agency for indirect costs is unable
to reach agreement with an educational in-
stitution with regard to rates or audit reso-
lution, the appeal system of the cognizant
agency for indirect costs must be followed
for resolution of the disagreement.
'12. Standard Format for Submission
For facilities and administrative (indirect
(F &A)) rate proposals, educational institu-
tions must use the standard format, shown
in section E of this appendix, to submit their
indirect (F &A) rate proposal to the cog-
nizant agency for indirect costs. The cog-
nizant agency for indirect costs may, on an
institution -by- institution basis, grant excep-
tions from all or portions of Part II of the
standard format requirement. This require-
ment does not apply to educational institu-
tions that use the simplified method for cal-
culating indirect (F &A) rates, as described in
Section D of this Appendix.
As provided in section C.10 of this appen-
dix, each F &A cost rate negotiation or deter-
mination must include development of a rate
for each F &A cost pool as well as the overall
F &A rate.
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Pt. 200, App. III
D. SIMPLIFIED METHOD FOR SMALL
INSTITUTIONS
1. General
a. Where the total direct cost of work cov-
ered by this Part at an institution does not
exceed $10 million in a fiscal year, the sim-
plified procedure described in subsections 2
or 3 may be used in determining allowable
indirect (F &A) costs. Under this simplified
procedure, the institution's most recent an-
nual financial report and immediately avail-
able supporting information must be utilized
as a basis for determining the indirect (F &A)
cost rate applicable to all Federal awards.
The institution may use either the salaries
and wages (see subsection 2) or modified
total direct costs (see subsection 3) as the
distribution basis.
b. The simplified procedure should not be
used where it produces results which appear
inequitable to the Federal Government or
the institution. In any such case, indirect
(F &A) costs should be determined through
use of the regular procedure.
2. Simplified Procedure— Salaries and Wages
Base
a. Establish the total amount of salaries
and wages paid to all employees of the insti-
tution.
b. Establish an indirect (F &A) cost pool
consisting of the expenditures (exclusive of
capital items and. other costs specifically
identified as unallowable) which customarily
are classified under the following titles or
their equivalents:
(1) General administration and general ex-
penses (exclusive of costs of student adminis-
tration and services, student activities, stu-
dent aid, and scholarships).
(2) Operation and maintenance of physical
plant and depreciation (after appropriate ad-
justment for costs applicable to other insti-
tutional activities).
(3) Library.
(4) Department administration expenses,
which -will be computed as 20 percent of the
salaries and expenses of deans and heads of
departments.
In those cases where expenditures classi-
fied under subsection (1) have previously
been allocated to other institutional activi-
ties, they may be included in the indirect
(F &A) cost pool. The total amount of Sala-
ries and wages included in the indirect (F &A)
cost pool must be separately identified.
c. Establish a salary and wage distribution
base, determined by deducting from the total
of salaries and wages as established in sub-
section a from the amount of salaries and
wages included under subsection b.
d. Establish the indirect (F &A) cost rate,
determined by dividing the amount in the in-
direct (F &A) cost pool, subsection b, by the
2 CPR Ch. II (1 -1 -15 Edition)
amount of the distribution base, subsection
e. Apply the indirect (F &A) cost rate to di-
rect salaries and wages for individual agree-
ments to determine the amount of indirect
(F &A) costs allocable to such agreements.
3. Simplified Procedure — Modified Total Direct
Cost Base
a. Establish the total costs incurred by the
institution for the base period.
b. Establish an indirect (F &A) cost pool
consisting of the expenditures (exclusive of
capital items and other costs specifically
identified as unallowable) which customarily
are classified under the following titles or
their equivalents:
(1) General administration and general ex-
penses (exclusive of costs of student adminis-
tration and services, student activities, stu-
dent aid, and scholarships).
(2) Operation and maintenance of physical
plant and depreciation (after appropriate ad-
justment for costs applicable to other insti-
tutional activities).
(3) Library.
(4) Department administration expenses,
which will be computed as 20 percent of the
salaries and expenses of deans and heads of
departments. In those cases where expendi-
tures classified under subsection (1) have
previously been allocated to other institu-
tional activities, they may be included in the
indirect (F &A) cost pool. The modified total
direct costs amount included in the indirect
(F &A) cost pool must be separately identi-
fied.
c. Establish a modified total direct cost
distribution base, as defined in Section C.2,
The distribution basis, that consists of all
institution's direct functions.
d. Establish the indirect (F &A) cost rate,
determined by dividing the amount in the in-
direct (F &A) cost pool, subsection b, by the
amount of the distribution base, subsection
e. Apply the indirect (F &A) cost rate to
the modified total direct costs for individual
agreements to determine the amount of indi-
rect (F &A) costs allocable to such agree-
ments.
E. DOCUMENTATION REQUIREMENTS
The standard format for documentation re-
quirements for indirect (indirect (F &A)) rate
proposals for claiming costs under the reg-
ular method is available on the OMB Web
site here: http://www.wlzitehouse.govlomb/
grants forms.
F. CERTIFICATION
1. Certification of Charges
To assure that expenditures for Federal
awards are proper and in accordance with
the agreement documents and approved
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project budgets, the annual and/or final fis-
cal reports or vouchers requesting payment
under the agreements will include a certifi-
cation, signed by an authorized official of
the university, which reads "By signing this
report, I certify to the best of my knowledge
and belief that the report is true, complete,
and accurate, and the expenditures, disburse-
ments and cash receipts are for the purposes
and intent set forth in the award documents.
I am aware that any false, fictitious, or
fraudulent information, or the omission of
any material fact, may subject me to crimi-
nal, civil or administrative penalties for
fraud, false statements, false claims or oth-
erwise.(U.S. Code, Title 18, Section 1001 and
Title 31, Sections 3729 -3733 and 3801 - 3812) ".
2. Certification of Indirect (F &A) Costs
a. Policy. Cognizant agencies must not ac-
cept a proposed indirect cost rate unless
such costs have been certified by the edu-
cational institution using the Certificate of
indirect (F &A) Costs set forth in subsection
F.2, c
b, The certificate must be signed on behalf
of the institution by the chief financial offi-
cer or an individual designated by an indi-
vidual at a level no lower than vice president
or chief financial officer.
An indirect (F &A) cost rate is not binding
upon the Federal Government if the most re-
cent required proposal from the institution
has not been certified. Where it is necessary
to establish indirect (F &A) cost rates, and
the institution has not submitted a certified
proposal for establishing such rates in ac-
cordance with the requirements of this 'sec-
tion, the Federal Government must unilater-
ally establish such rates. Such rates may be
based upon audited historical data or such
other data that have been furnished to the
cognizant agency for indirect costs and for
which it can be demonstrated that all unal-
lowable costs have been excluded. When indi-
rect (F &A) cost rates are unilaterally estab-
lished by the Federal Government because of
failure of the institution to submit a cer-
tified proposal for establishing such rates in
accordance with this section, the rates es-
tablished will be set at a level low enough to
ensure that potentially unallowable costs
will not be reimbursed.
c. Certificate. The certificate required by
this section must be in the following form:
CERTIFICATE OF INDIRECT (F &A) COSTS
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F &A) cost
proposal submitted herewith;
(2) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect (F &A) costs rate for [identify period
covered by rate] are allowable in accordance
with the requirements of the Federal agree-
Pt. 200, App. IV
ment(s) to which they apply and with the
cost principles applicable to those agree-
ments.
(3) This proposal does not include any costs
which are unallowable under applicable cost
principles such as (without limitation): pub-
lic relations costs, contributions and dona-
tions, entertainment costs, fines and pen-
alties, lobbying costs, and defense of fraud
proceedings; and
(4) All costs included in this proposal are
properly allocable to Federal agreements on
the basis of a beneficial or causal relation-
ship between the expenses incurred and the
agreements to which they are allocated in
accordance with applicable requirements.
I declare that the foregoing is true and cor-
rect.
Institution of Higher Education:
Signature:
Name of Official:
Title:
Date of Execution:
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75888, Dec. 19, 20141
APPENDIX IV TO PART 200 — INDIRECT
(F &A) COSTS IDENTIFICATION AND
ASSIGNMENT,- AND RATE DETERMINA-
TION FOR NONPROFIT ORGANIZA-
TIONS
A. GENERAL
1. Indirect costs are those that have been
incurred for common or joint objectives and
cannot be readily identified with a par-
ticular final cost objective. Direct cost of
minor amounts may be treated as indirect
costs under the conditions described in
§200.413 Direct costs paragraph (d) of this
Part. After direct costs have been deter-
mined and assigned directly to awards or
other work as appropriate, indirect costs are
those remaining to be allocated to benefit -
ting cost objectives. A cost may not be allo-
cated to a Federal award as an indirect cost
if any other cost incurred for the same pur-
pose, in like circumstances, has been as-
signed to a Federal award as a direct cost.
"Major nonprofit organizations" are de-
fined in §200.414 Indirect (F &A) costs. See in-
direct cost rate reporting requirements in
sections B.2.e and B.3.g of this Appendix.
B. ALLOCATION OF INDIRECT COSTS AND
DETERMINATION OF INDIRECT COST RATES
1. General
a. If a nonprofit organization has only one
major function, or where all its major func-
tions benefit from its indirect costs to ap-
proximately the same degree, the allocation
of indirect costs and the computation of an
indirect cost rate may be accomplished
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Pt. 200, App. IV
through simplified allocation procedures, as
described in section B.2 of this Appendix.
b. If an organization has several major
functions which benefit from its indirect
costs in varying degrees, allocation of indi-
rect costs may require the accumulation of
such costs into separate cost groupings
which then are allocated individually to ben -
efitting functions by means of a base which
best measures the relative degree of benefit.
The indirect costs allocated to each function
are then distributed to individual Federal
awards and other activities included in that
function by means of an indirect cost rate(s).
c. The determination of what constitutes
an organization's major functions will de-
pend on its purpose in being; the types of
services it renders to the public, its clients,
and its members; and the amount of effort it
devotes to such activities as fundraising,
public information and membership activi-
ties.
d. Specific methods for allocating indirect
costs and computing indirect cost rates
along with the conditions under which each
method should be used are described in sec-
tion B.2 through B.6 of this Appendix.
e. The base period for the allocation of in-
direct costs is the period in which such costs
are incurred and accumulated for allocation
to work performed in that period. The base
period normally should coincide with the or-
ganization's fiscal year but, in any event,
must be so selected as to avoid inequities in
the allocation of the costs.
2. Simplified Allocation Method
a. Where an organization's major functions
benefit from its indirect costs to approxi-
mately the same degree, the allocation of in-
direct costs may be accomplished by (f) sepa-
rating the organization's total costs for the
base period as either direct or indirect, and
(ii) dividing the total allowable indirect
costs (net of applicable credits) by an equi-
table distribution base. The result of this
process is an indirect cost rate which is used
to distribute indirect costs to individual
Federal awards. The rate should be expressed
as the percentage which the total amount of
allowable indirect costs bears to the base se-
lected. This method should also be used
where an organization has only one major
function encompassing a number of indi-
vidual projects or activities, and may be
used where the level of Federal awards to an
organization is relatively small.
b. Both the direct costs and the indirect
costs must exclude capital expenditures and
unallowable costs. However, unallowable
costs which represent activities must be in-
cluded in the direct costs under the condi-
tions described in §200.413 Direct costs, para-
graph (e) of this Part.
c. The distribution base may be total di-
rect costs (excluding capital expenditures
and other distorting items, such as sub-
2 CFR Ch. II (1 -1 -15 Edition)
awards for $25,000 or more), direct salaries
and wages, or other base which results in an
equitable distribution. The distribution base
must exclude participant support costs as de-
fined in § 200.76 Participant support costs.
d. Except where a special rate(s) is re-
quired in accordance with section B.6 of this
Appendix, the indirect cost rate developed
under the above principles is applicable to
all Federal awards of the organization. If a
special rate(s) is required, appropriate modi-
fications must be made in order to develop
the special rate(s).
e. For an organization that receives more
than $10 million in Federal funding of direct
costs in a fiscal year, a breakout of the indi-
rect cost component into two broad cat-
egories, Facilities and Administration as de-
fined in section A.3 of this Appendix, is re-
quired. The rate in each case must be stated
as the percentage which the amount of the
particular indirect cost category (i.e., Facili-
ties or Administration) is of the distribution
base identified with that category.
3. Multiple Allocation Base Method
a. General. Where an organization's indi-
rect costs benefit its major functions in
varying degrees, indirect costs must be accu-
mulated into separate cost groupings, as de-
scribed in subparagraph b. Each grouping
must then be allocated individually to bene-
fitting functions by means of a base which
best measures the relative benefits. The de-
fault allocation bases by cost pool are de-
scribed in section B.3.c of this Appendix.
b. Identification of indirect costs. Cost
groupings must be established so as to per-
mit the allocation of each grouping on the
basis of benefits provided to the major func-
tions. Each grouping must constitute a pool
of expenses that are of like character in
terms of functions they benefit and in terms
of the allocation base which best measures
the relative benefits provided to each func-
tion. The groupings are classified within the
two broad categories: "Facilities" and "Ad-
ministration," as described in section A.3 of
this Appendix. The indirect cost pools are de-
fined as follows:
(1) Depreciation. The expenses under this
heading are the portion of the costs of the
organization's buildings, capital improve-
ments to land and buildings, and equipment
which are computed in accordance with
§200.436 Depreciation.
(2) Interest. Interest on debt associated
with certain buildings, equipment and cap-
ital improvements are computed in accord-
ance with §200.449 Interest.
(3) Operation and maintenance expenses.
The expenses under this heading are those
that have been incurred for the administra-
tion, operation, maintenance, preservation,
and protection of the organization's physical
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plant. They include expenses normally in-
curred for such items as: janitorial and util-
ity services; repairs and ordinary or normal
alterations of buildings, furniture and equip-
ment; care of grounds; maintenance and op-
eration of buildings and other plant facili-
ties; security; earthquake and disaster pre-
paredness; environmental safety; hazardous
waste disposal; property, liability and other
insurance relating to property; space and
capital leasing; facility planning and man-
agement; and central receiving. The oper-
ation and maintenance expenses category
must also include its allocable share of
fringe benefit costs, depreciation, and inter-
est costs.
(4) General administration and general ex-
penses. The expenses under this heading are
those that have been incurred for the overall
general executive and administrative offices
of the organization and other expenses of a
general nature which do not relate solely to
any major function of the organization. This
category must also include its allocable
share of fringe benefit costs, operation and
maintenance expense, depreciation, and in-
terest costs. Examples of this category in-
clude central offices, such as the director's
office, the office of finance, business serv-
ices, budget and planning, personnel, safety
and risk management, general counsel, man-
agement information systems, and library
costs.
In developing this cost pool, special care
should be exercised to ensure that costs in-
curred for the same purpose in like cir-
cumstances are treated consistently as ei-
ther direct or indirect costs, For example,
salaries of technical staff, project supplies,
project publication, telephone toll charges,
computer costs, travel costs, and ,specialized
services costs must be treated as direct costs
wherever identifiable to a particular pro-
gram. The salaries and wages of administra-
tive and pooled clerical staff should nor-
mally be treated- as indirect costs. Direct
charging of these costs may be appropriate
as described in §200.413 Direct Costs. Items
such as office supplies, postage, local tele-
phone - costs, periodicals and memberships
should normally be treated as indirect costs.
c. Allocation bases. Actual conditions
must be taken into account in selecting the
base to be used in allocating the expenses in
each grouping to benefitting functions. The
essential consideration in selecting a method
or a base is that it is the one best suited for
assigning the pool of costs to cost objectives
in accordance with benefits derived; a trace-
able cause and effect relationship; or logic
and reason, where neither the cause nor the
effect of the relationship is determinable.
When an allocation can be made by assign-
ment of a cost grouping directly to the func-
tion benefitted, the allocation must be made
in that manner. When the expenses in a cost
grouping are more general in nature, the al-
Pt. 200, App. IV
location must be made through the use of a
selected base which produces results that are
equitable to both the Federal Government
and the organization. The distribution must
be made in accordance with the bases de-
scribed herein unless it can be demonstrated
that the use of a different base would result
in a more equitable allocation of the costs,
or that a more readily available base would
not increase the costs charged to Federal
awards. The results of special cost studies
(such as an engineering utility study) must
not be used to determine and allocate the in-
direct costs to Federal awards.
(1) Depreciation. Depreciation expenses
must be allocated in the following manner:
(a) Depreciation on buildings used exclu-
sively in the conduct of a single function,
and on capital improvements and equipment
used in such buildings, must be assigned to
that function.
(b) Depreciation on buildings used for more
than one function, and on capital improve-
ments and equipment used in such buildings,
must be allocated to the individual functions
performed in each building on the basis of
usable square feet of space, excluding com-
mon areas, such as hallways, stairwells, and
restrooms.
(c) Depreciation on buildings, capital im-
provements and equipment related space
(e.g., individual rooms, and 'laboratories)
used jointly by more than one function (as
determined by the users of the space) must
be treated as follows. The cost of each joint-
ly used unit of space must be allocated to
the benefitting functions on the basis of:
(i) the employees and other users on a full-
time equivalent (FTE) basis or salaries and
wages of those individual functions benefit-
ting from the use of that space; or
(ii) organization -wide employee FTEs or
salaries and wages applicable to the benefit-
ting functions of the organization.
(d) Depreciation on certain capital im-
provements to land, such as paved parking
areas, fences, sidewalks, and the like, not in-
cluded in the cost of buildings, must be allo-
cated to user categories on a FTE basis and
distributed to major functions in proportion
to the salaries and wages of all employees
applicable to the functions.
(2) Interest. Interest costs must be allo-
cated in the same manner as the deprecia-
tion on the buildings, equipment and capital
equipment to which the interest relates.
(3) Operation and maintenance expenses.
Operation and maintenance expenses must
be allocated in the same manner as the de-
preciation.
(4) General administration and general ex-
penses. General administration and general
expenses must be allocated to benefitting
functions based on modified total costs
(MTC). The MTC is the modified total direct
costs (MTDC), as described in Subpart A—
Acronyms and Definitions of Part 200, plus
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Pt. 200, App. IV
the allocated indirect cost proportion. The
expenses included in this category could be
grouped first according to major functions of
the organization to which they render serv-
ices or provide benefits. The aggregate ex-
penses of each group must then be allocated
to benefitting functions based on MTC.
d. Order of distribution.
(1) Indirect cost categories consisting of
depreciation, interest, operation and mainte-
nance, and general administration and gen-
eral expenses must be allocated in that order
to the remaining indirect cost categories as
well as to the major functions of the organi-
zation. Other cost categories should be allo-
cated in the order determined to be most ap-
propriate by the organization. This order of
allocation does not apply if cross allocation
of costs is made as provided in section B.3.d.2
of this Appendix,
(2) Normally, an indirect cost category will
be considered closed once it has been allo-
cated to other cost objectives, and costs
must not be subsequently allocated to it.
However, a cross allocation of costs between
two or more indirect costs categories could
be used if such allocation will result in a
more equitable allocation of costs. If a cross
allocation is used, an appropriate modifica-
tion to the composition of the indirect cost
categories is required.
e. Application of indirect cost rate or
rates. Except where a special indirect cost
rate(s) is required in accordance with section
B.b of this Appendix, the separate groupings
of indirect costs allocated to each major
function must be aggregated and treated as a
common pool for that function. The costs in
the common pool must then be distributed to
individual Federal awards included in that
function by use of a single indirect cost rate.
f. Distribution basis. Indirect costs must
be distributed to applicable Federal awards
and other benefitting activities within each
major function on the basis of MTDC (see
definition in §200.68 Modified Total Direct
Cost (MTDC) of Part 200.
g. Individual Rate Components. An indi-
rect cost rate must be determined for each
separate indirect cost pool developed. The
rate in each case must be stated as the per-
centage which the amount of the particular
indirect cost pool is of the distribution base
identified with that pool. Each indirect cost
rate negotiation or determination agreement
must include development of the rate for
each indirect cost pool as well as the overall
indirect cost rate. The indirect cost pools
must be classified within two broad cat-
egories: "Facilities" and "Administration,"
as described in section A.3 of this Appendix.
4. Direct Allocation Method
a. Some nonprofit organizations treat all
costs as direct costs except general adminis-
tration and general expenses. These organi-
zations generally separate their costs into
2 CFR Ch. II (1 -1 -15 Edition)
three basic categories: (i) General adminis-
tration and general expenses, (ii) fund-
raising, and (iii) other direct functions (in-
cluding projects performed under Federal
awards). Joint costs, such as depreciation,
rental costs, operation and maintenance of
facilities, telephone expenses, and the like
are prorated individually as direct costs to
each category and to each Federal award or
other activity using a base most appropriate
to the particular cost being prorated.
b. This method is acceptable, provided each
joint cost is prorated using a base which ac-
curately measures the benefits provided to
each Federal award or other activity. The
bases must be established in accordance with
reasonable criteria, and be supported by cur-
rent data. This method is compatible with
the Standards of Accounting and Financial
Reporting for Voluntary Health and Welfare
Organizations issued jointly by the National
Health Council, Inc., the National Assembly
of Voluntary Health and Social Welfare Or-
ganizations, and the United Way of America.
c. Under this method, indirect costs con-
sist exclusively of general administration
and general expenses. In all other respects,
the organization's indirect cost rates must
be computed in the same manner as that de-
scribed in section B.2 Simplified allocation
method of this Appendix.
5. Special Indirect Cost Rates
In some instances, a single indirect cost
rate for all activities of an organization or
for each major function of the organization
may not be appropriate, since it would not
take into account those different factors
which may substantially affect the indirect
costs applicable to a particular segment of
work. For this purpose, a particular segment
of work may be that performed under a sin-
gle Federal award or it may consist of work
under a group of Federal awards performed
in a common environment. These factors
may include the physical location of the
work, the level of administrative support re-
quired, the nature of the facilities or other
resources employed, the scientific disciplines
or technical skills involved, the organiza-
tional arrangements used, or any combina-
tion thereof. When a particular segment of
work is performed in an environment which
appears to generate a significantly different
level of indirect costs, provisions should be
made for a separate indirect cost pool appli-
cable to such work. The separate indirect
cost pool should be developed during the
course of the regular allocation process, and
the separate indirect cost rate resulting
therefrom should be used, provided it is de-
termined that (i) the rate differs signifi-
cantly from that which would have been ob-
tained under sections B.2, B.3, and B.4 of this
Appendix, and (ii) the volume of work to
which the rate would apply is material.
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C. NEGOTIATION AND APPROVAL OF INDIRECT
COST RATES
1. Definitions
As used in this section, the following terms
have the meanings set forth in this section:
a. Cognizant agency for indirect costs means
the Federal agency responsible for negoti-
ating and approving indirect cost rates for a
nonprofit organization on behalf of all Fed-
eral agencies.
b. Predetermined rate means an indirect cost
rate, applicable to a specified current or fu-
ture period, usually the organization's fiscal
year. The rate is based on an estimate of the
costs to be incurred during the period. A pre-
determined rate is not subject to adjust-
ment.
c. Fixed rate means an indirect cost rate
which has the same characteristics as a pre-
determined rate, except that the difference
between the estimated costs and the actual
costs of the period covered by the rate is car-
ried forward as an adjustment to the rate
computation of a subsequent period.
d. Final rate means an indirect cost rate
applicable to a specified past period which is
based on the actual costs of the period. A
final rate is not subject to adjustment.
e. Provisional rate or billing rate means a
temporary indirect cost rate applicable to a
specified period which is used for funding, in-
terim reimbursement, and reporting indirect
costs on Federal awards pending the estab-
lishment of a final rate for the period.
I. Indirect cost proposal means the docu-
mentation prepared by an organization to
substantiate its claim for the reimbursement
of indirect costs. This proposal provides the
basis for the review and negotiation leading
to the establishment of an organization's in-
direct cost rate.
g. Cost objective means a function, organiza-
tional subdivision, contract, Federal award,
or other work unit for which cost data are
desired and for which provision is made to
accumulate and measure the cost of proc-
esses, projects, jobs and capitalized projects,
2. Negotiation and Approval of Rates
a. Unless different arrangements are
agreed to by the Federal agencies concerned,
the Federal agency with the largest dollar
value of Federal awards with an organization
will be designated as the cognizant agency
for indirect costs for the negotiation and ap-
proval of the indirect cost rates and, where
necessary, other rates such as fringe benefit
and computer charge -out rates. Once an
agency is assigned cognizance for a par-
ticular nonprofit organization, the assign-
ment will not be changed unless there is a
shift in the dollar volume of the Federal
awards to the organization for at least three
years. All concerned Federal agencies must
be given the opportunity to participate in
Pt. 200, App. IV
the negotiation process but, after a Tate has
been agreed upon, it will be accepted by all
Federal agencies. When a Federal agency has
reason to believe that special operating fac-
tors affecting its Federal awards necessitate
special indirect cost rates in accordance
with section B.b of this Appendix, it will,
prior to the time the rates are negotiated,
notify the cognizant agency for indirect
costs. (See also §200.414 Indirect (F &A) costs
of Part 200.) Where a non - Federal entity only
receives funds as a subrecipient, see the re-
quirements of §200.331 Requirements for
pass- through entities.
b. Except as otherwise provided in §200.414
Indirect (F &A) costs paragraph (e) of this
Part, a nonprofit organization which has not
previously established an indirect cost rate
with a Federal agency must submit its ini-
tial indirect cost proposal immediately after
the organization is advised that a Federal
award will be made and, in no event, later
than three months after the effective date of
the Federal award.
c. Unless approved by the cognizant agency
for indirect costs in accordance with §200.414
Indirect (F &A) costs paragraph (f) of this
Part, organizations that have previously es-
tablished indirect cost rates must submit a
new indirect cost proposal to the cognizant
agency for indirect costs within six months
after the close of each fiscal year.
d. A predetermined rate may be negotiated
for use on Federal awards where there is rea-
sonable assurance, based on past experience
and reliable projection of the organization's
costs, that the rate is not likely to exceed a
rate based on the organization's actual costs.
e. Fixed rates may be negotiated where
predetermined rates are not considered ap-
propriate. A fixed rate, however, must not be
negotiated if (i) all or a substantial portion
of the organization's Federal awards are ex-
pected to expire before the carry- forward ad-
justment can be made; (ii) the mix of Federal
and non - Federal work at the organization is
too erratic to permit an equitable carry -for-
ward adjustment; or (iii) the organization's
operations fluctuate significantly from year
to year.
f, Provisional and final rates must be nego-
tiated where neither predetermined nor fixed
rates are appropriate. Predetermined or
fixed rates may replace provisional rates at
any time prior to the close of the organiza-
tion's fiscal year. If that event does not
occur, a final rate will be established and up-
ward or downward adjustments will be made
based on the actual allowable costs incurred
for the period involved.
g. The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the nonprofit organization. The cognizant
agency for indirect costs must make avail-
able copies of the agreement to all concerned
Federal agencies.
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Pt. 200, App. V
h. If a dispute arises in a negotiation of an
indirect cost rate between the cognizant
agency for indirect costs and the nonprofit
organization, the dispute must be resolved in
accordance with the appeals procedures of
the cognizant agency for indirect costs.
i. To the extent that problems are encoun-
tered among the Federal agencies in connec-
tion with the negotiation and approval proc-
ess, OMB will lend assistance as required to
resolve such problems in a timely manner.
D. Certification of Indirect (F &A) Costs
(1) Required Certification. No proposal to
establish indirect (F &A) cost rates must be
acceptable unless such costs have been cer-
tified by the non - profit organization using
the Certificate of Indirect (F &A) Costs set
forth in section j. of this appendix. The cer-
tificate must be signed on behalf of the orga-
nization by an individual at a level no lower
than vice president or chief financial officer
for the organization.
(2) Each indirect cost rate proposal must
be accompanied by a certification in the fol-
lowing form:
Certificate of Indirect (F &A) Costs
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F &A) cost
proposal submitted herewith;
(2) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect (F &A) costs rate for [identify period
covered by rate] are allowable in accordance
with the requirements of the Federal awards
to which they apply and with Subpart F_
Cost Principles of Part 200.
(3) This proposal does not include any costs
which are unallowable under Subpart F_
Cost Principles of Part 200 such as (without
limitation): public relations costs, contribu-
tions and donations, entertainment costs,
fines and penalties, lobbying costs, and de-
fense of fraud proceedings; and
(4) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the Fed-
eral awards to.which they are allocated in
accordance with applicable requirements.
I declare that the foregoing is true and cor-
rect.
Nonprofit Organization:
Signature:
Name of Official:
Title:
Date of Execution:
2 CFR Ch. II (1 -1 -15 Edition)
APPENDIX V TO PART 200— STATEJLOCAL
GOVERNMENTWIDE CENTRAL SERVICE
COST ALLOCATION PLANS
A. GENERAL
1. Most governmental units provide certain
services, such as motor pools, computer cen-
ters, purchasing, accounting, etc., to oper-
ating agencies on a centralized basis. Since
federally - supported awards are performed
within the individual operating agencies,
there needs to be a process whereby these
central service costs can be identified and
assigned to benefitted activities on a reason-
able and consistent basis. The central service
cost allocation plan provides that process.
All costs and other data used to distribute
the costs included in the plan should be sup-
ported by formal accounting and other
records that will support the propriety of the
costs assigned to Federal awards.
2. Guidelines and illustrations of central
service cost allocation plans are provided in
a brochure published by the Department of
Health and Human Services entitled "A
Guide for State, Local and Indian Tribal Gov-
ernments: Cost Principles and Procedures for
Developing Cost Allocation Plans and Indirect
Cost Rates for Agreements with the Federal
Government." A copy of this brochure may be
obtained from the HHS Cost Allocation Serv-
ices or at their Web site at litips: //
rates.pse.gov.
B. DEFINITIONS
1. Agency or operating agency means an or-
ganizational unit or sub- division within a
governmental unit that is responsible for the
performance or administration of Federal
awards or activities of the governmental
unit.
2. Allocated central services means central
services that benefit operating agencies but
are not billed to the agencies on a fee -for-
service or similar basis. These costs are allo-
cated to benefitted agencies on some reason-
able basis. Examples of such services might
include general accounting, personnel ad-
ministration, purchasing, etc.
3. Billed central services means central serv-
ices that are billed to benefitted agencies or
programs on an individual fee - for - service or
similar basis. Typical examples of billed cen-
tral services include computer services,
transportation services, insurance, and
fringe benefits.
4. Cognizant agency for indirect costs is de-
fined in §200.19 Cognizant agency for indirect
costs of this Part. The determination of cog-
nizant agency for indirect costs for states
and local governments is described in section
F.1, Negotiation and Approval of Central
Service Plans.
5. Major local government means local gov-
ernment that receives more than $100 million
in direct Federal awards subject to this Part.
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C. SCOPE OF THE CENTRAL SERVICE COST
ALLOCATION PLANS
The central service cost allocation plan
will include all central service costs that
will be claimed (either as a billed or an allo-
cated cost) under Federal awards and will be
documented as described in section E. Costs
of central services omitted from the plan
will not be reimbursed.
D. SUBMISSION REQUIREMENTS
1. Each state will submit a plan to the De-
partment of Health and Human Services for
each year in which it claims central service
costs under Federal awards. The plan should
include (a) a projection of the next year's al-
located central service cost (based either on
actual costs for the most recently completed
year or the budget projection for the coming
year), and (b) a reconciliation of actual allo-
cated central service costs to the estimated
costs used for either the most recently com-
pleted year or the year immediately pre-
ceding the most recently completed year.
2. Each major local government is also re-
quired to submit a plan to its cognizant
agency for indirect costs annually.
3. All other local governments claiming
central service costs must develop a plan in
accordance with the requirements described
in this Part and maintain the plan and re-
lated supporting documentation for audit.
These local governments are not required to
submit their plans for Federal approval un-
less they are specifically requested to do so
by the cognizant agency for indirect costs.
Where a local government only receives
funds as a subrecipient, the pass - through en-
tity will be responsible for monitoring the
subrecipient's plan,
4. All central service cost allocation plans
will be prepared and, when required, sub-
mitted within six months prior to the begin-
ning of each of the governmental unit's fis-
cal years in which it proposes to claim cen-
tral service costs. Extensions may be grant-
ed by the cognizant agency for indirect costs
on a case -by -case basis.
E. DOCUMENTATION REQUIREMENTS FOR
SUBMITTED PLANS
The documentation requirements described
in this section may be modified, expanded, or
reduced by the cognizant agency for indirect
costs on a case -by -case basis. For example,
the requirements may be reduced for those
central services which have little or no im-
pact on Federal awards. Conversely, if a re-
view of a plan indicates that certain addi-
tional information is needed, and will likely
be needed in future years, it may be rou-
tinely requested in future plan submissions.
Items marked with an asterisk ( *) should be
submitted only once; subsequent plans
should merely indicate any changes since the
last plan.
Pt. 200, App. V
1. General
All proposed plans must be accompanied by
the following: an organization chart suffi-
ciently detailed to show operations including
the central service activities of the state/
local government whether or not they are
shown as benefitting from central service
functions; a copy of the Comprehensive An-
nual Financial Report (or a copy of the Exec-
utive Budget if budgeted costs are being pro-
posed) to support the allowable costs of each
central service activity included in the plan;
and, a certification (see subsection 4.) that
the plan was prepared in accordance with
this Part, contains only allowable costs, and
was prepared in a manner that treated simi-
lar costs consistently among the various
Federal awards and between Federal and
non - Federal awards /activities.
2. Allocated Central Services
For each allocation central service *, the
plan must also include the following: a brief
description of the service, an identification
of the unit rendering the service and the op-
erating agencies receiving the service, the
items of expense included in the cost of the
service, the method used to distribute the
cost of the service to benefitted agencies,
and a summary schedule showing the alloca-
tion of each service to the specific benefitted
agencies. If any self- insurance funds or
fringe benefits costs are treated as allocated
(rather than billed) central services, docu-
mentation discussed in subsections 3.b. and
c, must also be included.
3. Billed Services
a. General. The information described in
this section must be provided for all billed
central services, including internal service
funds, self - insurance funds, and fringe ben-
efit funds.
b. Internal service funds.
(1) For each internal service fund or simi-
lar activity with an operating budget of $5
million or more, the plan must include: a
brief description of each service; a balance
sheet for each fund based on individual ac-
counts contained in the governmental unit's
accounting system; a revenue /expenses state-
ment, with revenues broken out by source,
e.g., regular billings, interest earned, etc.; a
listing of all non - operating transfers (as de-
fined by Generally Accepted Accounting
Principles (GAAP)) into and out of the fund;
a description of the procedures (method-
ology) used to charge the costs of each serv-
ice to users, including how billing rates are
determined; a schedule of current rates; and,
a schedule comparing total revenues (includ-
ing imputed revenues) generated by the serv-
ice to the allowable costs of the service, as
determined under this Part, with an expla-
nation of how variances will be handled.
215
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Pt. 200, App. V
(2) Revenues must consist of all revenues
generated by the service, including unbilled
and uncollected revenues. If some users were
not billed for the services (or were not billed
at the full rate for that class of users), a
schedule showing the full imputed revenues
associated with these users must be pro-
vided, Expenses must be broken out by ob-
ject cost categories (e,g., salaries, supplies,
etc.).
c. Self- insurance funds. For each self- insur-
ance fund, the plan must include: the fund
balance sheet; a statement of revenue and
expenses including a summary of billings
and claims paid by agency; a listing of all
non - operating transfers into and out of the
fund; the type(s) of risk(s) covered by the
fund (e.g., automobile liability, workers'
compensation, etc.); an explanation of how
the level of fund contributions are deter-
mined, including a copy of the current actu-
arial report (with the actuarial assumptions
used) if the contributions are determined on
an actuarial basis; and, a description of the
procedures used to charge or allocate fund
contributions to benefitted activities. Re-
serve levels in excess of claims (1) submitted
and adjudicated but not paid, (2) submitted
but not adjudicated, and (3) incurred but not
submitted must be identified and explained:
d. Fringe benefits. For fringe benefit costs,
the plan must include: a listing of fringe ben-
efits provided to covered employees, and the
overall annual cost of each type of benefit;
current fringe benefit policies; and proce-
dures used to charge or allocate the costs of
the benefits to benefitted activities. In addi-
tion, for pension and post - retirement health
Insurance plans, the following information
must be provided: the governmental unit's
funding policies, e.g., legislative bills, trust
agreements, or state - mandated contribution
rules, if different from actuarially deter-
mined rates; the pension plan's costs accrued
for the year; the amount funded, and date(s)
of funding; a copy of the current actuarial
report (including the actuarial assumptions);
the plan trustee's report; and, a schedule
from irhe activity showing the value of the
interest cost associated with late funding.
4. Required Certification
Each central service cost allocation plan
will be accompanied by a certification in the
following form;
CERTIFICATE OF COST ALLOCATION
PLAN
This is to certify that I have reviewed the
cost allocation plan submitted herewith and
to the best of my knowledge and belief:
(1) All costs included in this proposal [iden-
tify date] to establish cost allocations or bil-
lings for [identify period covered by plan] are
allowable in accordance with the require-
ments of this Part and the Federal award(s)
2 CFR Ch. II (1 -1 -15 Edition)
to which they apply. Unallowable costs have
been adjusted for in allocating costs as indi-
cated in the cost allocation plan.
(2) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the Fed-
eral awards to which they are allocated in
accordance with applicable requirements.
Further, the same costs that have been
treated as indirect costs have not been
claimed as direct costs. Similar types of
costs have been accounted for consistently.
I declare that the foregoing is true and cor-
rect.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:
F. NEGOTIATION AND APPROVAL OF CENTRAL
SERVICE PLANS
1. Federal Cognizant Agency for Indirect Costs
Assignments for Cost Negotiation
In general, unless different arrangements
are agreed to by the concerned Federal agen-
cies, for central service cost allocation
plans, the cognizant agency responsible for
review and approval is the Federal agency
with the largest dollar value of total Federal
awards with a governmental unit. For indi-
rect cost rates and departmental indirect
cost allocation plans, the cognizant agency
is the Federal agency with the largest dollar
value of direct Federal awards with a govern-
mental unit or component, as appropriate.
Once designated as the cognizant agency for
indirect costs, the Federal agency must re-
main so for a period of five years. In addi-
tion, the following Federal agencies continue
to be responsible for the indicated govern-
mental entities:
Department of Health and Human Services —
Public assistance and state -wide cost alloca-
tion plans for all states (including the Dis-
trict of Columbia and Puerto Rico), state
and local hospitals, libraries and health dis-
tricts.
Department of the Interior — Indian tribal
governments, territorial governments, and
state and local park and recreational dis-
tricts.
Department of Labor —State and local labor
departments.
Department of Education— School districts
and state and local education agencies.
Department of Agriculture —State and local
agriculture departments.
Department of Transportation —State and
local airport and port authorities and transit
districts.
Department of Commerce —State and local
economic development districts.
216
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Department of Housing and Urban Develop-
ment —State and local housing and develop-
ment districts.
Environmental Protection Agency —State and
local water and sewer districts.
2. Review
All proposed central service cost allocation
plans that are required to be submitted will
be reviewed, negotiated, and approved by the
cognizant agency for indirect costs on a
timely basis. The cognizant agency for indi-
rect costs will review the proposal within six
months of receipt of the proposal and either
negotiate /approve the proposal or advise the
governmental unit of the additional docu-
mentation needed to support /evaluate the
proposed plan or the changes required to
make the proposal acceptable. Once an
agreement with the governmental unit has
been reached, the agreement will be accepted
and used by all Federal agencies, unless pro-
hibited or limited by statute. where a Fed-
eral awarding agency has reason to believe
that special operating factors affecting its
Federal awards necessitate special consider-
ation, the funding agency will, prior to the
time the plans are negotiated, notify the
cognizant agency for indirect costs.
3. Agreement
The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the governmental unit. This agreement will
be subject to re- opening if the agreement is
subsequently found to violate a statute or
the information upon which the plan was ne-
gotiated is later found to be materially in-
complete or inaccurate. The results of the
negotiation must be made available to all
Federal agencies for their use.
4. Adjustments
Negotiated cost allocation plans based on a
proposal later found to have included costs
that: (a) are unallowable (i) as specified by
law or,regulation, (ii) as identified in subpart
F, General Provisions for selected Items of
Cost of this Part, or (iii) by the terms and
conditions of Federal awards, or (b) are unal-
lowable because they are clearly not allo-
cable to Federal awards, must be adjusted, or
a refund must be made at the option of the
cognizant agency for indirect costs, includ-
ing earned or imputed interest from the date
of transfer and debt interest, if applicable,
chargeable in accordance with applicable
Federal cognizant agency for indirect costs
regulations. Adjustments or cash refunds
may include, at the option of the cognizant
agency for indirect costs, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency claims collection regulations. These
Pt. 200, App. V
adjustments or refunds are designed to cor-
rect the plans and do not constitute a re-
opening of the negotiation.
G. OTHER POLICIES
1. Billed Central Service Activities
Each billed central service activity must
separately account for all revenues (includ-
ing imputed revenues) generated by the serv-
ice, expenses incurred to furnish the service,
and profit/loss.
2. Working Capital Reserves
Internal service funds are dependent upon
a reasonable level of working capital reserve
to operate from one billing cycle to the next.
Charges by an internal service activity to
provide for the establishment and mainte-
nance of a reasonable level of working cap-
ital reserve, in addition to the full recovery
of costs, are allowable. A working capital re-
serve as part of retained earnings of up to 60
calendar days cash expenses for normal oper-
ating purposes is considered reasonable. A
working capital reserve exceeding 60 cal-
endar days may be approved by the cog-
nizant agency for indirect costs in excep-
tional cases.
3, Carry - Forward Adjustments of Allocated
Central Service Costs
Allocated central service costs are usually
negotiated and approved for a future fiscal
year on a "fixed with carry- forward" basis.
Under this procedure, the fixed amounts for
the future year covered by agreement are
not subject to adjustment for that year.
However, when the actual costs of the year
involved become known, the differences be-
tween the fixed amounts previously approved
and the actual costs will be carried forward
and used as an adjustment to the fixed
amounts established for a later year. This
"carry- forward" procedure applies to all cen-
tral services whose costs were fixed in the
approved plan. However, a carry - forward ad-
justment is not permitted, for a central serv-
ice activity that was not included in the ap-
proved plan, or for unallowable costs that
must be reimbursed immediately.
4. Adjustments of Billed Central Services
Billing rates used to charge Federal awards
must be based on the estimated costs of pro-
viding the services, including an estimate of
the allocable central service costs. A com-
parison of the revenue generated by each
billed service (including total revenues
whether or not billed or collected) to the ac-
tual allowable costs of the service will be
made at least annually, and an adjustment
will be made for the difference between the
revenue and the allowable costs. These ad-
justments will be made through one of the
217
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Pt. 200, App. VI
following adjustment methods: (a) a cash re-
fund including earned or imputed interest
from the date of transfer and debt interest, if
applicable, chargeable in accordance with
applicable Federal cognizant agency for indi-
rect costs regulations to the Federal Govern-
ment for the Federal share of the adjust-
ment, (b) credits to the amounts charged to
the individual programs, (c) adjustments to
future billing rates, or (d) adjustments to al-
located central service costs. Adjustments to
allocated central services will not be per-
mitted where the total amount of the adjust-
ment for a particular service (Federal share
and non - Federal) share exceeds $500,000. Ad-
justment methods may include, at the option
of the cognizant agency, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency claims collection regulations.
5. Records Retention
All central service cost allocation plans
and related documentation used as a basis
for claiming costs under Federal awards
must be retained for audit in accordance
with the records retention requirements con-
tained in Subpart D —Post Federal Award
Requirements, of Part 200.
6. Appeals
If a dispute arises in the negotiation of a
plan between the cognizant agency for indi-
rect costs and the governmental unit, the
dispute must be resolved in accordance with
the appeals procedures of the cognizant
agency for indirect costs.
7. OMB Assistance
To the extent that problems are encoun-
tered among the Federal agencies or govern-
mental units in connection with the negotia-
tion and approval process, OMB will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
APPENDIX VI TO PART 200 — PUBLIC
ASSISTANCE COST ALLOCATION PLANS
A. GENERAL
Federally- financed programs administered
by state public assistance agencies are fund-
ed predominately by the Department of
Health and Human Services (HHS). In sup-
port of its stewardship requirements, HHS
has published requirements for the develop-
ment, documentation, submission, negotia-
tion, and approval of public assistance cost
allocation plans in Subpart E of 45 CFR Part
95. All administrative costs (direct and indi-
rect) are normally charged to Federal awards
by implementing the public assistance cost
allocation plan. This Appendix extends these
requirements to all Federal awarding agen-
cies whose programs are administered by a
2 CFR Ch. II (1 -1 -15 Edition)
state public assistance agency. Major feder-
ally- financed programs typically adminis-
tered by state public assistance agencies in-
clude: Temporary Aid to Needy Families
(TANF), Medicaid, Food Stamps, Child Sup-
port Enforcement, Adoption Assistance and
Foster Care, and Social Services Block
Grant.
B. DEFINITIONS
1. State public assistance agency means a
state agency administering or supervising
the administration of one or more public as-
sistance programs operated by the state as
identified in Subpart E of 46 CFR Part 95.
For the purpose of this Appendix, these pro-
grams include all programs administered by
the state public assistance agency.
2. State public assistance agency costs means
all costs incurred by, or allocable to, the
state public assistance agency, except ex-
penditures for financial assistance, medical
contractor payments, food stamps, and pay-
ments for services and goods provided di-
rectly to program recipients.
C. POLICY
State public assistance agencies will de-
velop, document and implement, and the
Federal Government will review, negotiate,
and approve, public assistance cost alloca-
tion plans in accordance with Subpart E of 45
CFR Part 95. The plan will include all pro-
grams administered by the state public as-
sistance agency. Where a letter of approval
or disapproval is transmitted to a state pub-
lic assistance agency in accordance with
Subpart E, the letter will apply to all Fed-
eral agencies and programs. The remaining
sections of this Appendix (except for the re-
quirement for certification) summarize the
provisions of Subpart E of 46 CFR Part 95.
D. SUBMISSION, DOCUMENTATION, AND AP-
PROVAL OF PUBLIC ASSISTANCE COST ALLO-
CATION PLANS
1. State public assistance agencies are re-
quired to promptly submit amendments to
the cost allocation plan to HHS for review
and approval.
2. Under the coordination process outlined
in section E, Review of Implementation of
Approved Plans, affected Federal agencies
will review all new plans and plan amend-
ments and provide comments, as appro-
priate, to HHS. The effective date of the plan
or plan amendment will be the first day of
the calendar quarter following the event
that required the amendment, unless an-
other date is specifically approved by HHS.
HHS, as the cognizant agency for indirect
costs acting on behalf of all affected Federal
agencies, will, as necessary, conduct negotia-
tions with the state public assistance agency
and will inform the state agency of the ac-
tion taken on the plan or plan amendment.
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E. REVIEW OF IMPLEMENTATION OF APPROVED
PLANS
1. Since public assistance cost allocation
plans are of a narrative nature, the review
during the plan approval process consists of
evaluating the appropriateness of the pro-
posed groupings of costs (cost centers) and
the related allocation bases. As such, the
Federal Government needs some assurance
that the cost allocation plan has been imple-
mented as approved. This is accomplished by
reviews by the Federal awarding agencies,
single audits, or audits conducted by the the
cognizant agency for indirect costs.
2. Where inappropriate charges affecting
more than one Federal awarding agency are
identified, the cognizant HHS cost negotia-
tion office will be advised and will take the
lead in resolving the issue(s) as provided for
in Subpart E of 45 CFR Part 96.
3. If a dispute arises in the negotiation of
a plan or from a disallowance involving two
or more Federal awarding agencies, the dis-
pute must be resolved in accordance with the
appeals procedures set out in 46 CFR Part 16.
Disputes involving only one Federal award-
ing agency will be resolved in accordance
with the Federal awarding agency's appeal
process.
4. To the extent that problems are encoun-
tered among the Federal awarding agencies
or governmental units in connection with
the negotiation and approval process, the Of-
fice of Management and Budget will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
F. UNALLOWABLE COSTS
Claims developed under approved cost allo-
cation plans will be based on allowable costs
as identified in this Part. Where unallowable
costs have been claimed and reimbursed,
they will be refunded to the program that re-
imbursed the unallowable cost using one of
the following methods: (a) a cash refund, (b)
Offset to a subsequent claim, or (c) credits to
the amounts charged to individual Federal
awards. Cash refunds, offsets, and credits
may include at the option of the cognizant
agency for indirect cost, earned or imputed
interest from the date of expenditure and de-
linquent debt interest, if applicable, charge-
able in accordance with applicable cognizant
agency for indirect cost claims collection
regulations.
APPENDIX VII TO PART 200 — STATES AND
LOCAL GOVERNMENT AND INDIAN
TRIBE INDIRECT COST PROPOSALS
A. GENERAL
1. Indirect costs are those that have been
incurred for common or joint purposes.
These costs benefit more than one cost ob-
jective and cannot be readily identified with
a particular final cost objective without ef-
Pt. 200, App. VII
fort disproportionate to the results achieved.
After direct costs have been determined and
assigned directly to Federal awards and
other activities as appropriate, indirect costs
are those remaining to be allocated to bene-
fitted cost objectives. A cost may not be al-
located to a Federal award as an indirect
cost if any other cost incurred for the some
purpose, in like circumstances, has been as-
signed to a Federal award as a direct cost.
2. Indirect costs include (a) the indirect
costs originating in each department or
agency of the governmental unit carrying
out Federal awards and (b) the costs of cen-
tral governmental services distributed
through the central service cost allocation
plan (as described in Appendix V to Part
200— State/Local Government and Indian
Tribe -Wide Central Service Cost Allocation
Plans) and not otherwise treated as direct
costs.
3. Indirect costs are normally charged to
Federal awards by the use of an indirect cost
rate. A separate indirect cost rate(s) is usu-
ally necessary for each department or agen-
cy of the governmental unit claiming indi-
rect costs under Federal awards. Guidelines
and illustrations of indirect cost proposals
are provided in a brochure published by the
Department of Health and Human Services
entitled "A Guide for States and Local Govern-
ment Agencies: Cost Principles and Procedures
for Establishing Cost Allocation Plans and Indi-
rect Cost Rates for Grants and Contracts with
the Federal Government." A copy of this bro-
chure may be obtained from the HHS Cost
Allocation Services or at their Web site at
Itttps: /frates.psc.gov.
4. Because of the diverse characteristics
and accounting practices of governmental
units, the types of costs which may be classi-
fied as indirect costs cannot be specified in
all situations. However, typical examples of
indirect costs may include certain state/
local -wide central service costs, general ad-
ministration of the non - Federal entity ac-
counting and personnel services performed
within the non - Federal entity, depreciation
on buildings and equipment, the costs of op-
erating and maintaining facilities.
b. This Appendix does not apply to state
public assistance agencies. These agencies
should refer instead to Appendix VI to Part
200 — Public Assistance Cost Allocation
Plans.
B. DEFINITIONS
1. Base means the accumulated direct costs
(normally either total direct salaries and
wages or total direct costs exclusive of any
extraordinary or distorting expenditures)
used to distribute indirect costs to indi-
vidual Federal awards. The direct cost base
selected should result in each Federal award
bearing a fair share of the indirect costs in
reasonable relation to the benefits received
from the costs.
219
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Pt. 200, App. VII
2, Base period for the allocation of indirect
costs is the period in which such costs are in-
curred and accumulated for allocation to ac-
tivities performed in that period. The base
period normally should coincide with the
governmental unit's fiscal year, but in any
event, must be so selected as to avoid inequi-
ties in the allocation of costs.
3. Cognizant agency for indirect costs means
the Federal agency responsible for reviewing
and approving the governmental unit's indi-
rect cost rate(s) on the behalf of the Federal
Government. The cognizant agency for indi-
rect costs assignment is described in Appen-
dix V, section F, Negotiation and Approval
of Central Service Plans.
4. Final rate means an indirect cost rate ap-
plicable to a specified past period which is
based on the actual allowable costs of the pe-
riod. A final audited rate is not subject to
adjustment.
b. Fred rate means an indirect cost rate
which has the same characteristics as a pre-
determined rate, except that the difference
between the estimated costs and the actual,
allowable costs of the period covered by the
rate is carried forward as an adjustment to
the rate computation of a subsequent period.
6. Indirect cost pool is the accumulated
costs that jointly benefit two or more pro-
grams or other cost objectives.
7. Indirect cost rate is a device for deter-
mining in a reasonable manner the propor-
tion of indirect costs each program should
bear. It is the ratio (expressed as a percent-
age) of the indirect costs to a direct cost
base.
8, Indirect cost rate proposal means the doc-
umentation prepared by a governmental unit
or subdivision thereof to substantiate its re-
quest for the establishment of an indirect
cost rate.
9. Predetermined rate means an indirect cost
rate, applicable to a specified current or fu-
ture period, usually the governmental unit's
fiscal year. This rate is based on an estimate
of the costs to be incurred during the period.
Except under very unusual circumstances, a
predetermined rate is not subject to adjust-
ment. (Because of legal constraints, pre-
determined rates are not permitted for Fed-
eral contracts; they may, however, be used
for grants or cooperative agreements.) Pre-
determined rates may not be used by govern-
mental units that have not submitted and
negotiated the rate with the cognizant agen-
cy for indirect costs. In view of the potential
advantages offered by this procedure, nego-
tiation of predetermined rates for indirect
costs for a period of two to four years should
be the norm in those situations where the
cost experience and other pertinent facts
available are deemed sufficient to enable the
parties involved to reach an informed judg-
ment as to the probable level of indirect
costs during the ensuing accounting periods.
2 CFR Ch. II (1 -1 -15 Edition)
10. Provisional rate means a temporary indi-
rect cost rate applicable to a specified period
which is used for funding, interim reimburse-
ment, and reporting indirect costs on Fed-
eral awards pending the establishment of a
"final" rate for that period.
C. ALLOCATION OF INDIRECT COSTS AND
DETERMINATION OF INDIRECT COST RATES
1. General
a. Where a governmental unit's depart-
ment or agency has only one major function,
or where all its major functions benefit from
the indirect costs to approximately the same
degree, the allocation of indirect costs and
the computation of an indirect cost rate may
be accomplished through simplified alloca-
tion procedures as described in subsection 2.
b. Where a governmental unit's depart-
ment or agency has several major functions
which benefit from its indirect costs in vary-
ing degrees, the allocation of indirect costs
may require the accumulation of such costs
into separate cost groupings which then are
allocated individually to benefitted func-
tions by means of a base which best meas-
ures the relative degree of benefit. The indi-
rect costs allocated to each function are
then distributed to individual Federal
awards and other activities included in that
function by means of an indirect cost rate(s).
c. Specific methods for allocating indirect
costs and computing indirect cost rates
along with the conditions under which each
method should be used are described in sub-
sections 2, 3 and 4.
2. Simplified Method
a, Where a non - Federal entity's major
functions benefit from its indirect costs to
approximately the same degree, the alloca-
tion of indirect costs may be accomplished
by (1) classifying the non - Federal entity's
total costs for the base period as either di-
rect or indirect, and (2) dividing the total al-
lowable indirect costs (net of applicable
credits) by an equitable distribution base.
The result of this process is an indirect cost
rate which is used to distribute indirect
costs to individual Federal awards. The rate
should be expressed as the percentage which
the total amount of allowable indirect costs
beats to the base selected, This method
should also be used where a governmental
unit's department or agency has only one
major function encompassing a number of in-
dividual projects or activities, and may be
used where the level of Federal awards to
that department or agency is relatively
small.
b. Both the direct costs and the indirect
costs must exclude capital expenditures and
unallowable costs. However, unallowable
costs must be included in the direct costs if
they represent activities to which indirect
costs are properly allocable.
220
ATTACHMENT ...................
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OMB Guidance
c. The distribution base may be (1) total di-
rect costs (excluding capital expenditures
and other distorting items, such as pass -
through funds, subcontracts in excess of
$26,000, participant support costs, etc.), (2)
direct salaries and wages, or (3) another base
which results in an equitable distribution,
3. Multiple Allocation Base Method
a. Where a non - Federal entity's indirect
costs benefit its major functions in varying
degrees, such costs must be accumulated
into separate cost groupings. Each grouping
must then be allocated individually to bene-
fitted functions by means of a base which
best measures the relative benefits.
b. The cost groupings should be established
so as to permit the allocation of each group-
ing on the basis of benefits provided to the
major functions. Each grouping should con-
stitute a pool of expenses that are of like
character in terms of the functions they ben-
efit and in terms of the allocation base
which best measures the relative benefits
provided to each function, The number of
separate groupings should be held within
practical limits, taking into consideration
the materiality of the amounts involved and
the degree of precision needed.
c. Actual conditions must be taken into ac-
count in selecting the base to be used in allo-
cating the expenses in each grouping to ben-
efitted functions. When an allocation can be
made by assignment of a cost grouping di-
rectly to the function benefitted, the alloca-
tion must be made in that manner. When the
expenses in a grouping are more general in
nature, the allocation should be made
through the use of a selected base which pro-
duces results that are equitable to both the
Federal Government and the governmental
unit. In general, any cost element or related
factor associated with the governmental
unit's activities is potentially adaptable for
use as an allocation base provided that: (1) it
can readily be expressed in terms of dollars
or other quantitative measures (total direct
costs, direct salaries and wages, staff hours
applied, square feet used, hours of usage,
number of documents processed, population
served, and the like), and (2) it is common to
the benefitted functions during the base pe-
riod.
d. Except where a special indirect cost
rate(s) is required in accordance with para-
graph (C)(4) of this Appendix, the separate
groupings of indirect costs allocated to each
major function must be aggregated and
treated as a common pool for that function.
The costs in the common pool must then be
distributed to individual Federal awards in-
cluded in that function by use of a single in-
direct cost rate,
e. The distribution base used in computing
the indirect cost rate for each function may
be (1) total direct costs (excluding capital ex-
penditures and other distorting items such
Pt. 200, App. VII
as pass - through funds, subawards in excess of
$26,000, participant support costs, etc.), (2)
direct salaries and wages, or (3) another base
which results in an equitable distribution.
An indirect cost rate should be developed for
each separate indirect cost pool developed,
The rate in each case should be stated as the
percentage relationship between the par-
ticular indirect cost pool and the distribu-
tion base identified with that pool.
4. Special Indirect Cost Rates
a. In some instances, a single indirect cost
rate for all activities of a non - Federal entity
or for each major function of the agency may
not be appropriate. It may not take into ac-
count those different factors which may sub-
stantially affect the indirect costs applicable
to a particular program or group of pro-
grams. The factors may include the physical
location of the work, the level of administra-
tive support required, the nature of the fa-
cilities or other resources employed, the or-
ganizational arrangements used, or any com-
bination thereof, When a particular Federal
award is carried out in an environment
which appears to generate a significantly
different level of indirect costs, provisions
should be made for a separate indirect cost
pool applicable to that Federal award. The
separate indirect cost pool should be devel-
oped during the course of the regular alloca-
tion process, and the separate indirect cost
rate resulting therefrom should be used, pro-
vided that: (1) The rate differs significantly
from the rate which would have been devel-
oped under paragraphs (C)(2) and (C)(3) of
this Appendix, and (2) the Federal award to
which the rate would apply is material in
amount.
b. Where Federal statutes restrict the re-
imbursement of certain indirect costs, it
may be necessary to develop a special rate
for the affected Federal award. Where a "re-
stricted rate" is required, the same proce-
dure for developing a non - restricted rate will
be used except for the additional step of the
elimination from the indirect cost pool those
costs for which the law prohibits reimburse-
ment.
D. SUBMISSION AND DOCUMENTATION OF
PROPOSALS
1. Submission of Indirect Cost Rate Proposals
a. All departments or agencies of the gov-
ernmental unit desiring to claim indirect
costs under Federal awards must prepare an
indirect cost rate proposal and related docu-
mentation to support those costs. The pro-
posal and related documentation must be re-
tained for audit in accordance with the
records retention requirements contained in
§200.333 Retention Requirements for Records.
b. A governmental department or agency
unit that receives more than $36 million in
221
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Pt. 200, App. VII
direct Federal funding must submit its indi-
rect cost rate proposal to its cognizant agen-
cy for indirect costs, Other governmental de-
partment or agency must develop an indirect
cost proposal in accordance with the require-
ments of this Part and maintain the proposal
and related supporting documentation for
audit. These governmental departments or
agencies are not required to submit their
proposals unless they are specifically re-
quested to do so by the cognizant agency for
indirect costs. Where a non - Federal entity
only receives funds as a subrecipient, the
pass - through entity will be responsible for
negotiating and/or monitoring the subrecipi-
ent's indirect costs.
c. Each Indian tribal government desiring
reimbursement of indirect costs must submit
its indirect cost proposal to the Department
of the Interior (its cognizant agency for indi-
rect costs).
d. Indirect cost proposals must be devel-
oped (and, when required, submitted) within
six months after the close of the govern-
mental unit's fiscal year, unless an exception
is approved by the cognizant agency for indi-
rect costs. If the proposed central service
cost allocation plan for the same period has
not been approved by that time, the indirect
cost proposal may be prepared including an
amount for central services that is based on
the latest federally - approved central service
cost allocation plan. The difference between
these central service amounts and the
amounts ultimately approved will be com-
pensated for by an adjustment in a subse-
quent period.
2. Documentation of Proposals
The following must be included with each
indirect cost proposal:
a. The rates proposed, including subsidiary
work sheets and other relevant data, cross
referenced and reconciled to the financial
data noted in subsection b. Allocated central
service costs will be supported by the sum-
mary table included in the approved central
service cost allocation plan. This summary
table is not required to be submitted with
the indirect cost proposal if the central serv-
ice cost allocation plan for the same fiscal
year has been approved by the cognizant
agency for indirect costs and is available to
the funding agency.
b. A copy of the financial data (financial
statements, comprehensive annual financial
report, executive budgets, accounting re-
ports, etc.) upon which the rate is based. Ad-
justments resulting from the use of
unaudited data will be recognized, where ap-
propriate, by the Federal cognizant agency
for indirect costs in a subsequent proposal.
c. The approximate amount of direct base
costs incurred under Federal awards. These
costs should be broken out between salaries
and wages and other direct costs.
2 CFR Ch. II (1 -1 -15 Edition)
d. A chart showing the organizational
structure of the agency during the period for
which the proposal applies, along with a
functional statement(s) noting the duties
and/or responsibilities of all units that com-
prise the agency. (Once this is submitted,
only revisions need be submitted with subse-
quent proposals.)
3. Required certification.
Each indirect cost rate proposal must be
accompanied by a certification in the fol-
lowing form:
CERTIFICATE OF INDIRECT COSTS
This is to certify that I have reviewed the
indirect cost rate proposal submitted here-
with and to the best of my knowledge and
belief:
(1) All costs included in this proposal [iden-
tify date] to establish billing or final indi-
rect costs rates for [identify period covered
by rate] are allowable in accordance with the
requirements of the Federal award(s) to
which they apply and the provisions of this
Part. Unallowable costs have been adjusted
for in allocating costs as indicated in the in-
direct cost proposal
(2) All costs included in this proposal are
properly allocable to Federal awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the agree-
ments to which they are allocated in accord-
ance with applicable requirements. Further,
the same costs that have been treated as in-
direct costs have not been claimed as direct
costs. Similar types of costs have been ac-
counted for consistently and the Federal
Government will be notified of any account-
ing changes that would affect the predeter-
mined rate.
I declare that the foregoing is true and cor-
rect.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:
E. NEGOTIATION AND APPROVAL OF RATES.
1. Indirect cost rates will be reviewed, ne-
gotiated, and approved by the cognizant
agency on a timely basis. Once a rate has
been agreed upon, it will be accepted and
used by all Federal agencies unless prohib-
ited or limited by statute. Where a Federal
awarding agency has reason to believe that
special operating factors affecting its Fed-
eral awards necessitate special indirect cost
rates, the funding agency will, prior to the
time the rates are negotiated, notify the cog-
nizant agency for indirect costs.
2. The use of predetermined rates, if al-
lowed, is encouraged where the cognizant
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OMB Guidance
agency for indirect costs has reasonable as-
surance based on past experience and reli-
able projection of the non - Federal entity's
costs, that the rate is not likely to exceed a
rate based on actual costs. Long -term agree-
ments utilizing predetermined rates extend-
ing over two or more years are encouraged,
where appropriate.
3. The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the governmental unit. This agreement will
be subject to re- opening if the agreement is
subsequently found to violate a statute, or
the information upon which the plan was ne-
gotiated is later found to be materially in-
complete or inaccurate. The agreed upon
rates must be made available to all Federal
agencies for their use.
4. Refunds must be made if proposals are
later found to have included costs that (a)
are unallowable (1) as specified by law or reg-
ulation, (ii) as identified in §200.420 Consider-
ations for selected items of cost, of this Part,
or (iii) by the terms and conditions of Fed-
eral awards, or (b) are unallowable because
they are clearly not allocable to Federal
awards. These adjustments or refunds will be
made regardless of the type of rate nego-
tiated (predetermined, final, fixed, or provi-
sional).
F. OTHER POLICIES
1. Fringe Benefit Rates
If overall fringe benefit rates are not ap-
proved for the governmental unit as part of
the central service cost allocation plan,
these rates will be reviewed, negotiated and
approved for individual recipient agencies
during the indirect cost negotiation process.
In these cases, a proposed fringe benefit rate
computation should accompany the indirect
cost proposal. If fringe benefit rates are not
used at the recipient agency level (i.e., the
agency specifically identifies fringe benefit
costs to individual employees), the govern-
mental unit should so advise the cognizant
agency for indirect costs.
2. Billed Services Provided by the Recipient
Agency
In some cases, governmental departments
or agencies (components of the govern-
mental unit) provide and bill for services
similar to those covered by central service
cost allocation plans (e.g., computer cen-
ters). Where this occurs, the governmental
departments or agencies (components of the
governmental unit)should be guided by the
requirements in Appendix V relating to the
development of billing rates and documenta-
tion requirements, and should advise the
cognizant agency for indirect costs of any
billed services. Reviews of these types of
services (including reviews of costing/billing
methodology, profits or losses, etc.) will be
Pt. 200, App. VIII
made on a case -by -case basis as warranted by
the circumstances involved.
3. Indirect Cost Allocations Not Using Rates
In certain situations, governmental de-
partments or agencies (components of the
governmental unit), because of the nature of
their Federal awards, may be required to de-
velop a cost allocation plan that distributes
indirect (and, in some cases, direct) costs to
the specific funding sources. In these cases, a
narrative cost allocation methodology
should be developed, documented, main-
tained for audit, or submitted, as appro-
priate, to the cognizant agency for indirect
costs for review, negotiation, and approval.
4. Appeals
If a dispute arises in a negotiation of an in-
direct cost rate (or other rate) between the
cognizant agency for indirect costs and the
governmental unit, the dispute must be re-
solved in accordance with the appeals proce-
dures of the cognizant agency for indirect
costs.
5. Collection of Unallowable Costs and
Erroneous Payments
Costs specifically identified as unallowable
and charged to Federal awards either di-
rectly or indirectly will be refunded (includ-
ing interest chargeable in accordance with
applicable Federal cognizant agency for indi-
rect costs regulations).
6. OMB Assistance
To the extent that problems are encoun-
tered among the Federal agencies or govern-
mental units in connection with the negotia-
tion and approval process, OMB will lend as-
sistance, as required, to resolve such prob-
lems in a timely manner.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76889, Dec. 19, 2014]
APPENDIX VIII TO PART 200 — NONPROFIT
ORGANIZATIONS EXEMPTED FROM
SUBPART FTCOST PRINCIPLES OF
PART 200
1. Advance Technology Institute (ATI),
Charleston, South Carolina
2. Aerospace Corporation, E1 Segundo, Cali-
. forma
3. American Institutes of Research (AIR),
Washington, DC
4. Argonne National Laboratory, Chicago, Il-
linois
b. Atomic Casualty Commission, Wash-
ington, DC
6. Battelle Memorial Institute,
Headquartered in Columbus, Ohio
7. Brookhaven National Laboratory, Upton,
New York
223
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Pt. 200, App. IX
8, Charles Stark Draper Laboratory, Incor-
porated, Cambridge, Massachusetts
9, CNA Corporation (CNAC), Alexandria, Vir-
ginia
10, Environmental Institute of Michigan,
Ann Arbor, Michigan
11. Georgia Institute of Technology /Georgia
Tech Applied Research Corporation/Geor-
gia Tech Research Institute, Atlanta,
Georgia
12. Hanford Environmental Health Founda-
tion, Richland, Washington
13. IIT Research Institute, Chicago, Illinois
14. Institute of Gas Technology, Chicago, Il-
linois
15. Institute for Defense Analysis, Alexan-
dria, Virginia
16, LMI, McLean, Virginia
17. Mitre Corporation, Bedford, Massachu-
setts
18. Noblis, Inc., Falls Church, Virginia
19, National Radiological Astronomy Observ-
atory, Green Bank, West Virginia
20, National Renewable Energy Laboratory,
Golden, Colorado
21. Oak Ridge Associated Universities, Oak
Ridge, Tennessee
22. Rand Corporation, Santa Monica, Cali-
fornia
23. Research Triangle Institute, Research
Triangle Park, North Carolina
24. Riverside Research Institute, New York,
New York
25, South Carolina Research Authority
(SCRA), Charleston, South Carolina
26, Southern Research Institute, Bir-
mingham, Alabama
27. Southwest Research Institute, San Anto-
nio, Texas
28. SRI International, Menlo Park, California
29. Syracuse Research Corporation, Syra-
cuse, New York
2 CFR Ch. II (1 -1 -15 Edition)
30. Universities Research Association, Incor-
porated (National Acceleration Lab), Ar-
gonne, Illinois
31. Urban Institute, Washington DC
32. Non - profit insurance companies, such as
Blue Cross and Blue Shield Organizations
33. Other non - profit organizations as nego-
tiated with Federal awarding agencies
APPENDIX IX TO PART 200 — HOSPITAL
COST PRINCIPLES
Based on initial feedback, OMB proposes to
establish a review process to consider exist-
ing hospital cost determine how best to up-
date and align them with this Part. Until
such time as revised guidance is proposed
and implemented for hospitals, the existing
principles located at 45 CFR Part 75 Appen-
dix E, entitled "Principles for Determining
Cost Applicable to Research and Develop-
ment Under Grants and Contracts with Hos-
pitals," remain in effect.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 76889, Dec. 19, 2014]
APPENDIX X TO PART 200 —DATA
COLLECTION FORM (FORM SF –SAC)
The Data Collection Form SF –SAC is
available on the FAC Web site.
APPENDIX XI TO PART 200 — COMPLIANCE
SUPPLEMENT
The compliance supplement is available on
the OMB Web site: (e.g. for 2013 here http ✓1
www .whitehouse.govlombleircularsl)
224
PARTS 201 -299 [RESERVED]
ATTACHMENT ...... �!.........
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1
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CITY OF LONG BEACH
DEPARTMENT OF HEALTH AND HUMAN SERVICES
2525 GRAND AVENUE • LONG BEACH, CALIFORNIA 90815 • (562) 570 -4000 • FAX: (562) 570 -4049
Health Information In Compliance With the Health Insurance Portability
And Accountability Act of 1996 (HIPAA) and the Health Information Technology
for Economic and Clinical Health Act (HITECH Act)
BUSINESS ASSOCIATE AGREEMENT
THIS BUSINESS ASSOCIAT
entered as f
Sm Ve
[corpora =�A'L, partnership,
°` ,
REEM ENT ( "Agreement ") is made and
20 %' by and between
a �'r ".. !
whose business address is
(hereinafter referred to as "Business Associate "), and the CITY OF LONG BEACH, a
municipal corporation (hereinafter referred to as "City" or "Covered Entity ").
WHEREAS, the City has a Department of Health that provides a multitude of
health care and related services; and
WHEREAS, in the course of providing health care and related services the City
obtains protected health information; and
WHEREAS, Business Associate performs particular duties and /or provides
particular services to the City; and
WHEREAS, the City wishes to disclose some information to Business Associate,
some of which may contain protected health information; and
WHEREAS, the City and Business Associate intend to protect the privacy and
provide for the security of protected health information in compliance with the Health
Insurance Portability and Accountability Act of 1996, Public Law 104 -191 ( "HIPAA "), the
Health Information Technology for Economic and Clinical Health Act, Public Law 111-
005 (the "HITECH Act "), and regulations promulgated thereunder by the U.S.
Department of Health and Human Services (the "HIPAA Regulations ") and other
applicable laws.
NOW, THEREFORE, in consideration of the mutual terms covenants, and
conditions in this Agreement, the parties agree as follows:
1. DEFINITIONS. Terms used, but not otherwise defined, in this Agreement
shall have the same meaning as those terms in the HIPAA Regulations,
including the Privacy Rule and the Security Rule codified in Title 45,
Sections 160 -164 of the Code of Federal Regulations, and under the
HITECH Act.
ATTACHMENT ...... .........
PAGE ..... OF .... ..... PAGES
Business Associate Agreement
Page 2
2. OBLIGATIONS AND ACTIVITIES OF BUSINESS ASSOCIATE.
a. Non- disclosure. Business Associate agrees to not use or disclose
protected health information other than as permitted or required by
the Agreement or as required by law.
b. Safeguards. Business Associate agrees to use appropriate
safeguards to prevent use or disclosure of the protected health
information. Business Associate shall comply with the policies and
procedures and documentation requirements of the HIPAA
Regulations.
C. Mitigation. Business Associate agrees to mitigate, to the extent
practicable, any harmful effect that is known to Business Associate
of a use or disclosure of protected health information by Business
Associate in violation of the requirements of this Agreement.
d. Notice of Use or Disclosure, Security Incident or Breach. Business
Associate agrees to notify the designated privacy official of the
Covered Entity of any use or disclosure of protected health
information by Business Associate not permitted by this Agreement,
any security incident, involving electronic protected health
information, and any breach of unsecured protected health
information without unreasonable delay, but in no case more than
thirty (30) days following discovery of breach.
1. Business Associate shall provide the following information in
such notice to Covered Entity:
(a) The identification of each individual whose unsecured
protected health information has been, or is
reasonably believed by Business Associate to have
been, accessed, acquired, or disclosed during such
breach;
(b) A description of the nature of the breach including the
types of unsecured protected health information that
were involved, the date of the breach and the date of
discovery;
(c) A description of the type of unsecured protected
health information acquired, accessed, used or
disclosed in the breach (e.g., full name, social security
number, date of birth, etc.);
(d) The identity of the person who made and who
received (if known) the unauthorized acquisition,
access, use or disclosure;
(e) A description of what the Business Associate is doing
to mitigate the damages and protect against future
breaches; and
(f) Any other details necessary for Covered Entity to
assess risk of harm to individual(s), including
identification of each individual whose unsecured
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protected health information has been breached and
steps such individuals should take to protect
themselves.
2. Covered Entity shall be responsible for providing notification
to individuals whose unsecured protected health information
has been disclosed, as well as the Secretary and the media,
as required by the HITECH Act.
3. Business Associate agrees to establish procedures to
investigate the breach, mitigate losses, and protect against
any future breaches, and to provide a description of these
procedures and the specific findings of the investigation to
Covered Entity in the time and manner reasonably requested
by Covered Entity.
4. The parties agree that this section satisfies any notice
requirements of Business Associate to Covered Entity of the
ongoing existence and occurrence of attempted but
unsuccessful security incidents for which no additional notice
to Covered Entity shall be required. For purposes of this
Agreement, unsuccessful security incidents include activity
such as pings and other broadcast attacks on Business
Associate's firewall, port scans, unsuccessful log -on
attempts, denials of service and any combination of the
above, so long as no such incident results in unauthorized
access, use or disclosure of electronic public health
information.
e. Reporting of disclosures. Business Associate agrees to report to
Covered Entity any use or disclosure of the protected health
information not provided for by this Agreement of which it becomes
aware.
f. Business Associate's Agents. Business Associate agrees to
ensure that any agent, including a subcontractor, to whom it
provides protected health information received from, or created or
received by Business Associate on behalf of Covered Entity agrees
to the same restrictions and conditions that apply through this
Agreement to Business Associate with respect to such information.
g. Availability. of Information to City. Business Associate agrees to
provide prompt access to protected health information in a
designated record set to Covered Entity or, as directed by Covered
Entity, to an individual upon Covered Entity's request in order to
meet the requirements under 45 CFR § 164.524. If Business
Associate maintains an electronic health record, Business
Associate shall provide such information in electronic format to
enable Covered Entity to fulfill its obligations under the HITECH
Act.
h. Amendment of Protected Health Information. Business Associate
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agrees to promptly make any amendment(s) to protected health
information in a designated record set that the Covered Entity
directs or agrees to pursuant to 45 CFR § 164.526 at the request of
Covered Entity or an individual.
L Internal Practices. Business Associate agrees to make internal
practices, books, and records, including policies and procedures
and protected health information, relating to the use and disclosure
of protected ;health information received from, or created or
received by Business Associate on behalf of, covered entity
available to the Secretary of the U.S. Department of Health and
Human Services for purposes of the Secretary determining the
Business Associate's compliance with the Privacy Rule.
j. Reporting of Disclosures. Business Associate agrees to document
such disclosures of protected health information and information
related to such disclosures as would be required for the City to
respond to a request by an individual for an accounting of
disclosures of protected health information in accordance with the
Privacy Rule, including but not limited to 45 CFR § 164.528, and
the HITECH Act.
k. Availability of Information to Covered Entity. Business Associate
agrees to promptly provide to Covered Entity or an individual
information collected in accordance with Section 2(j) of this
Agreement, to permit Covered Entity to respond to a request by an
individual for an accounting of disclosures of protected health
information in accordance with the Privacy Rule, including but not
limited to 45 CFR § 164.528, and the HITECH Act.
3. PERMITTED USES AND DISCLOSURES BY BUSINESS ASSOCIATE.
Except as otherwise limited in this Agreement, Business Associate may
use or disclose protected health information to perform functions,
activities, or services for, or on behalf of, Covered Entity as specified in
this Agreement, provided that such use or disclosure would not violate the
Privacy Rule or the HITECH Act if done by Covered Entity or the minimum
necessary policies and procedures of the Covered Entity. The specific
use and disclosure provisions are as follows:
a.` Except as otherwise limited in this Agreement, Business Associate
may use protected health information for the proper management
and administration of the Business Associate.
b. Except as otherwise limited in this Agreement, Business Associate
may disclose protected health information for the proper
management, and administration of the Business Associate,
provided that disclosures are required by law, or Business
Associate obtains reasonable assurances from the person to whom
the information is disclosed that it will remain confidential and used
or further disclosed only as required by law or for the purpose for
which it was disclosed to the person, and the person notifies the
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business associate of any instances of which it is aware in which
the confidentiality of the information has been breached.
C. Except as otherwise limited in this Agreement, Business Associate
may use protected health information to provide data aggregation
services to covered entity as permitted by 42 CFR §
164.504(e) (2) (i) (B).
d. Business Associate may use protected health information to report
violations of law to appropriate federal and state authorities,
consistent with § 164.502(j)(1).
4. PROHIBITED USES AND DISCLOSURES BY BUSINESS ASSOCIATE.
a. Business Associate shall not use or disclose protected health
information for fundraising or marketing purposes.
b. Business Associate shall not disclose protected health information
to a health plan for payment or health care operations purposes if
the individual has requested this special restriction and has paid out
of pocket in full for the health care item or service to which the
protected health information solely relates.
C. Business Associate shall not directly or indirectly receive payment
or remuneration in exchange for protected health information,
except with the prior written consent of Covered Entity and as
permitted by law, including HIPAA and the HITECH Act. This
prohibition shall not effect payment by Covered Entity to Business
Associate.
5. OBLIGATIONS OF COVERED ENTITY.
a. Notification of Limitations in Notice of Privacy Practices. Covered
Entity shall notify Business Associate of any limitation(s) in its
notice of privacy practices of covered entity in accordance with 45
CFR § 164.520, to the extent that such limitation may affect
Business Associate's use or disclosure of protected health
information.
b. Notification of Change or Revocation of Permission. Covered entity
shall notify Business Associate of any changes in, or revocation of,
permission by individual to use or disclose protected health
information, to the extent that such changes may affect Business
Associate's use or disclosure of protected health information.
C. Notification of Restrictions. Covered Entity shall notify Business
Associate of any restriction to the use or disclosure of protected
health information that Covered Entity has agreed to in accordance
with 45 CFR § 164.522, to the extent that such restriction may
effect Business Associate's use or disclosure of protected health
information.
6. PERMISSIBLE REQUESTS BY COVERED ENTITY. Covered Entity shall
not request Business Associate to use or disclose protected health
information in any manner that would not be permissible under the Privacy
Rule if done by Covered Entity, except that this restriction is not intended
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and shall not be construed to limit Business Associate's capacity to use or
disclose protected health information for the proper management and
administration of the Business Associate or to provide data aggregation
services to Covered Entity as provided for and expressly permitted under
Section 3 (a), (b), and (c) of this Agreement.
7. TERM AND TERMINATION.
a. Term. The term of this Agreement shall be effective upon
execution, and shall terminate when all of the protected health
information provided by Covered Entity to Business Associate, or
created or received by Business Associate on behalf of Covered
Entity, is destroyed or returned to Covered Entity, or, if it is
infeasible to return or destroy protected health information,
protections are extended to such information, in accordance with
the termination provisions in this Section.
b. Termination for Cause. Upon either party's knowledge of a material
breach by the other party, the party with knowledge of the other
party's breach shall either:
1. Provide an opportunity for the breaching party to cure the
breach or end the violation and terminate this Agreement if
the breaching party does not cure the breach or end the
violation within the time specified by the non - breaching
party;
2. Immediately terminate this Agreement if Business Associate
has breached a material term of this Agreement and cure is
not possible; or
3. If neither termination nor cure is feasible, the violation shall
be reported to the Secretary.
C. Effect of Termination.
1. Except as provided in paragraph (2) of this Section, upon
termination of this Agreement for any reason, Business
Associate shall return or destroy all protected health
information received from Covered Entity, or created or
received by Business Associate on behalf of Covered Entity.
This provision shall apply to protected health information that
is in the possession of subcontractors or agents of Business
Associate. Business Associate shall retain no copies of the
protected health information.
2. In the event that Business Associate determines that
returning or destroying the protected health information is
infeasible, Business Associate shall provide to Covered
Entity notification of the conditions that make return or
destruction infeasible and shall extend the protections of this
Agreement to such protected health information and limit
further uses and disclosures of such protected health
information to those purposes that make the return or
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destruction infeasible, for so long as Business Associate
maintains such protected health information.
8. ASSISTANCE IN LITIGATION OR ADMINISTRATIVE PROCEEDINGS.
Business Associate shall make itself and any subcontractors, employees,
or agents assisting Business Associate in the performance of its
obligations under this Agreement with the Covered Entity, available to
Covered Entity, at no cost to Covered Entity to testify as witnesses or
otherwise, in the event of litigation or administrative proceedings
commenced against Covered Entity, its directors, officers, or employees
based on a claimed violation of HIPAA, the HIPAA Regulations, the
HITECH Act, or other laws relating to security or privacy, except where
Business Associate or its subcontractors, employees or agents are named
as an adverse party.
9. MISCELLANEOUS.
a. References. A reference in this Agreement to a section in the
HIPAA Regulations or the HITECH Act means the section as in
effect or as amended.
b. Amendment. The parties agree to take such action as is necessary
to amend this Agreement from time to time as is necessary for
covered entity to comply with the requirements of the Privacy Rule,
the Security Rule, HIPAA, the HITECH Act and other privacy laws
governing protected health information. Amendments must be in
writing and signed by the parties to the Agreement.
C. Survival. The respective rights and obligations of Business
Associate under Section 6(c) of this Agreement shall survive the
termination of this Agreement.
d. Interpretation. Any ambiguity in this Agreement shall be resolved to
permit Covered Entity to comply with the HIPAA Regulations and
the HITECH Act.
10. LAW. This Agreement shall be governed by and construed pursuant to
federal law and the laws of the State of California (except those provisions
of California law pertaining to conflicts of laws). Business Associate shall
comply with all laws, ordinances, rules and regulations of all federal, state
and local governmental authorities.
11. ENTIRE AGREEMENT. This Agreement, including Exhibits, constitutes
the entire understanding between the parties and supersedes all other
agreements, oral or written, with respect to the subject matter herein.
12. INDEMNITY. Business Associate shall protect, defend, indemnify and
hold City, its officials, employees, and agents (collectively in this Section
referred to as "City ") harmless from and against any and all claims,
demands, causes of action, losses, damages, and liabilities, whether or
not reduced to judgment, which may be asserted against City arising from
or attributable to or caused directly or indirectly by Business Associate,
Business Associate's employees, or agents in the performance of the
duties under this Agreement or any alleged negligent or intentional act,
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omission or misrepresentation by Business Associate, Business
Associate's employees or agents, which act, omission or
misrepresentation is connected in any way with performance of the duties
under this Agreement. If it is necessary for purposes of resisting,
adjusting, compromising, settling, or defending any claim, demand, cause
of action, loss, damage, or liability, or of enforcing this provision, for City to
incur or to pay any expense or cost, including attorney's fees or court
costs, Business Associate agrees to and shall reimburse City within a
reasonable time. Business Associate shall give City notice of any claim,
demand, cause of action, loss, damage or liability within ten (10) calendar
days.
13. AMBIGUITY. In the event of any conflict or ambiguity in this Agreement,
such ambiguity shall be resolved in favor of a meaning that complies and
is consistent with HIPAA, HIPAA Regulations, the HITECH Act and
California law.
14. COSTS. If there is any legal proceeding between the parties to enforce or
interpret this Agreement or to protect or establish any rights or remedies
hereunder, the prevailing party shall be entitled to its costs and expenses,
including reasonable attorneys' fees and court costs, including appeals.
15. NOTICES. Any notice or approval required hereunder by either party shall
be in writing and personally delivered or deposited in the U.S. Postal
Service, first class, postage prepaid, addressed to Business Associate at
the address first stated herein, and to the City at 333 West Ocean
Boulevard, Long Beach, California 90802 Attention: Director, Health
Department. Notice of change of address shall be given in the same
manner as stated herein for other notices. Notice shall be deemed given
on the date deposited in the mail or on the date personal delivery is made,
whichever first occurs.
16. WAIVER. The acceptance of any services or the payment of any money
by City shall not operate as a waiver of any provision of this Agreement, or
of any right to damages or indemnity stated in this Agreement. The waiver
of any breach of this Agreement shall not constitute a waiver of any other
or subsequent breach of this Agreement.
17. CONTINUATION. Termination or expiration of this Agreement shall not
affect rights or liabilities of the parties which accrued pursuant to Sections
7,12 and 14 prior to termination or expiration of this Agreement, and shall
not extinguish any warranties hereunder.
18. ADVERTISING. Business Associate shall not use the name of City, its
officials or employees in any advertising or solicitation for business, nor as
a reference, without the prior approval of the City Manager or designee.
19. THIRD PARTY BENEFICIARY. This Agreement is intended by the parties
to benefit themselves only and is not in any way intended or designed to
or entered for the purpose of creating any benefit or right for any person or
entity of any kind that is not a party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed with all of the formalities required by law as of the date first stated herein.
Aucm-502M 2015
Cj
,20—
20
(Name of Business Associate)
a t' M
(corporatio artnershiU 1)
By
Title: x v. V- v ;v-c -J o f
Title:
CITY OF LONG BEACH, a municipal
corporation /assistant City Manager
By
City Manager or designee
"City"
Y -FOUTM 1 unsuA,,4 r
T,9 9FOTION 30.1 OF
TW, CITY CHAHTER,
The foregoing Agreement is hereby approved as to form this � day of
,J, 20.
CHARLES PARKIN, .ty Attorney
By .
Deputy
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CITY OF LONG BEACH
DEPARTMENT OF HEALTH AND HUMAN SERVICES
2525 GRAND AVENUE • LONG BEACH, CALIFORNIA 90815 • (562) 570 -4000 • FAX: (562) 570 -4049
CERTIFICATION REGARDING DEBARMENT
By signing and submitting this document, the recipient of federal assistance funds is
providing the certification as set out below:
The certification in this clause is a material representation of fact upon which
reliance was placed when this transaction was entered into. If it is later determined
that the recipient of federal assistance funds knowingly rendered an erroneous
certification, in addition to other remedies available to the Federal Government, the
department or agency with which this transaction originated may pursue available
remedies, including suspension and /or debarment.
2. The recipient of Federal assistance funds shall provide immediate written notice to
the person to which this agreement is entered, if at any time the recipient of Federal
Assistance funds learns that its certification was erroneous, when submitted or has
become erroneous by reason of changed circumstance.
3. The terms "covered transaction," "debarred," "suspended," "ineligible," "lower tier
covered transaction," "participant," "person," "primary covered transaction,"
"principal," "proposal," and "voluntarily excluded," as used in this clause, have the
meanings set out in the Definitions and Coverage sections of rules implementing
Executive Order 12549.
4. The recipient of Federal assistance funds agrees by submitting this document that it
shall not knowingly enter into any lower tier covered transaction with a person who is
debarred, suspended, declared ineligible, or voluntarily excluded from participation in
this covered transaction, unless authorized by the department or agency with which
this transaction originated.
5. The recipient of Federal assistance funds further agrees by submitting this document
that it will include the clause titled "Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion — Lower Tier Covered Transactions," without
modification, in all lower tier covered transactions and in all solicitations for lower tier
covered transactions.
6. A participant in a covered transaction may rely upon a certification of participant in a
lower tier covered transaction that it is not debarred, suspended, ineligible, or
voluntarily excluded from the covered transaction, unless it knows that the
certification is erroneous. A participant may decide the method and frequency by
which it determines the eligibility of its principals. Each participant may, but is not
required to, check the list of parties excluded from procurement or non - procurement
programs.
7. Nothing contained in the foregoing shall be constructed to require establishment of a
system of records in order to render in good faith the certification required by this
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clause. The knowledge and information of a participant is not required to exceed
that which is normally possessed by a prudent person in the ordinary course of
business dealings.
8. Except for transactions authorized under Paragraph 4 of these instructions, if a
participant in a covered transaction knowingly enters into a lower tier covered
transaction with a person who is suspended, debarred, ineligible, or voluntarily
excluded from participation in this transaction, in addition to other remedies available
to the Federal Government, the department or agency with which the transaction
originated may pursue available remedies, including suspension and /or debarment.
The regulations implementing Executive Order 12549, Debarment and Suspension, 24
CFR Part 24 Section 24.510, Participants' Responsibilities require this certification.
1. The recipient of Federal assistance funds certifies that neither it nor its
principals are presently debarred, suspended, proposed for debarment,
declared ineligible, or voluntarily excluded from participation in this
transaction by any Federal department or agency.
2. Where the recipient of Federal assistance funds is unable to certify to any
of the statements in this certification, such participants shall attach an
explanation to this document.
Agreement Number: Contract Agency: 'vim
Name a itl�g of 6Ahorjzqd R fesentat : F. C,5os�� c , F-
Signature
SV ac, ac)
Date
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
2525 GRAND AVENUE • LONG BEACH, CALIFORNIA 90815 • (562) 570 -4000 • FAX: (562) 5704049
CERTIFICATION REGARDING LOBBYING
Contractor(s) and lobbyist firm(s), as defined in the Los Angeles County Code Chapter
2.160 (ordinance 93- 0031), retained by the Contractor, shall fully comply with the
requirements as set forth in said County Code. The Contractor must also certify in writing
that it is familiar with the Los Angeles County Code Chapter 2.160 and that all persons
acting on behalf of the Contractor will comply with the County Code.
Failure on the part of the Contractor and /or Lobbyist to fully comply with the County's
Lobbyist requirement shall constitute a material breach of the contract upon which the City
of Long Beach may immediately terminate this contract and the Contractor shall be liable for
civil action.
The Contractor is prohibited by the Department of Interior and Related Agencies
Appropriations Act, known as the Byrd Amendments, and the Housing and Urban
Development Code of Federal Regulations 24 part 87, from using federally appropriated
funds for the purpose of influencing or attempting to influence an officer.or employee of any
agency, a Member of Congress, an officer or employee of Congress, or any employee of a
Member of Congress in connection with the awarding of any Federal contract, the making of
any Federal grant, loan or cooperative agreement, and any extension, continuation,
renewal, amendment or modification of said documents.
The Contractor must certify in writing that they are familiar with the Federal Lobbyist
Requirements and that all persons and /or subcontractors acting on behalf of the Contractor
will comply with the Lobbyist Requirements.
Failure on the part of the Contractor or persons /subcontractors acting on behalf of the
Contractor to fully comply with Federal Lobbyist Requirements shall be subject to civil
penalties. The undersigned certifies, to the best of his /her knowledge and belief, that:
No Federal appropriated funds have been paid or will be paid, by or on behalf of the
undersigned, to any person for influencing or attempting to influence an officer or
employee of an agency, a Member of Congress, an officer or employee of Congress,
or an employee of a Member of Congress in connection with the awarding of any
Federal contract, the making of any Federal grant, loan or cooperative agreement,
and any extension, continuation, renewal, amendment or modification of said
documents.
2. If any funds other than Federal appropriated funds have been paid or will be paid to
any person for influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an employee
of a Member of Congress in connection with this Federal contract, grant, loan, or
cooperative agreement, the undersigned shall complete and submit Standard Form -
LLL "Disclosure Form to Report Lobbying" in accordance with its instructions.
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3. The undersigned shall require that the language of this certification be included in
the award documents for all sub- awards at all tiers (including subcontracts, sub -
grants, and contracts under grants, loans, and cooperative agreements) and that all
sub - recipients shall certify and disclose accordingly.
4. This certification is a material representation of fact upon which reliance was placed
when this transaction was made or entered into. Submission of this certification is a
prerequisite for making or entering into this transaction imposed by Section 1352
Title 31, U.S. Code. Any person who fails to file the required certification shall be
subject to a civil penalty of not less than $10,000 and not more than $100,000 for
each such failure.
Agreement Number: 107- Contract Agency:
Signature uaie
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