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Data is current as of July 2, 2010

Title 7:
Agriculture

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PART 3016—UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS

Section Contents

Subpart
A—General
§ 3016.1   Purpose
and scope of this part.
§ 3016.2   Scope
of subpart.
§ 3016.3   Definitions.
§ 3016.4   Applicability.
§ 3016.5   Effect
on other issuances.
§ 3016.6   Additions
and exceptions.

Subpart
B—Pre-Award Requirements
§ 3016.10   Forms
for applying for grants.
§ 3016.11   State
plans.
§ 3016.12   Special
grant or subgrant conditions for “high-risk” grantees.

Subpart
C—Post-Award Requirements

Financial
Administration
§ 3016.20   Standards
for financial management systems.
§ 3016.21   Payment.
§ 3016.22   Allowable
costs.
§ 3016.23   Period
of availability of funds.
§ 3016.24   Matching
or cost sharing.
§ 3016.25   Program
income.
§ 3016.26   Non-Federal
audit.

Changes,
Property, and Subawards
§ 3016.30   Changes.
§ 3016.31   Real
property.
§ 3016.32   Equipment.
§ 3016.33   Supplies.
§ 3016.34   Copyrights.
§ 3016.35   Subawards
to debarred and suspended parties.
§ 3016.36   Procurement.
§ 3016.37   Subgrants.

Reports,
Records, Retention, and Enforcement
§ 3016.40   Monitoring
and reporting program performance.
§ 3016.41   Financial
reporting.
§ 3016.42   Retention
and access requirements for records.
§ 3016.43   Enforcement.
§ 3016.44   Termination
for convenience.

Subpart
D—After-the-Grant Requirements
§ 3016.50   Closeout.
§ 3016.51   Later
disallowances and adjustments.
§ 3016.52   Collection
of amounts due.

Subpart
E—Entitlement
§ 3016.60   Special
procurement provisions.
§ 3016.61   Financial
reporting.

Authority:   5 U.S.C. 301; 31 U.S.C.
901–903; 7 CFR 2.28.

Source:   53 FR 8044, 8087, Mar. 11,
1988, unless otherwise noted.

Editorial Note:   For additional
information, see related documents published at 49 FR 24958, June 18,
1984, 52 FR 20178, May 29, 1987, and 53 FR 8028, March 11,
1988.

Subpart A—General

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§ 3016.1   Purpose and scope of this
part.

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This part establishes uniform administrative rules for Federal grants
and cooperative agreements and subawards to State, local and Indian tribal
governments.

§ 3016.2   Scope of subpart.

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This subpart contains general rules pertaining to this part and
procedures for control of exceptions from this part.

§ 3016.3   Definitions.

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As used in this part:

Accrued expenditures mean the charges incurred by the grantee
during a given period requiring the provision of funds for: (1) Goods and
other tangible property received; (2) services performed by employees,
contractors, subgrantees, subcontractors, and other payees; and (3) other
amounts becoming owed under programs for which no current services or
performance is required, such as annuities, insurance claims, and other
benefit payments.

Accrued income means the sum of: (1) Earnings during a given
period from services performed by the grantee and goods and other tangible
property delivered to purchasers, and (2) amounts becoming owed to the
grantee for which no current services or performance is required by the
grantee.

Acquisition cost of an item of purchased equipment means the net
invoice unit price of the property including the cost of modifications,
attachments, accessories, or auxiliary apparatus necessary to make the
property usable for the purpose for which it was acquired. Other charges
such as the cost of installation, transportation, taxes, duty or
protective in-transit insurance, shall be included or excluded from the
unit acquisition cost in accordance with the grantee's regular accounting
practices.

Administrative requirements mean those matters common to grants
in general, such as financial management, kinds and frequency of reports,
and retention of records. These are distinguished from programmatic
requirements, which concern matters that can be treated only on a
program-by-program or grant-by-grant basis, such as kinds of activities
that can be supported by grants under a particular program.

Awarding agency means (1) with respect to a grant, the Federal
agency, and (2) with respect to a subgrant, the party that awarded the
subgrant.

Cash contributions means the grantee's cash outlay, including
the outlay of money contributed to the grantee or subgrantee by other
public agencies and institutions, and private organizations and
individuals. When authorized by Federal legislation, Federal funds
received from other assistance agreements may be considered as grantee or
subgrantee cash contributions.

Contract means (except as used in the definitions for grant
and subgrant in this section and except where qualified by
Federal ) a procurement contract under a grant or subgrant, and
means a procurement subcontract under a contract.

Cost sharing or matching means the value of the third party
in-kind contributions and the portion of the costs of a federally assisted
project or program not borne by the Federal Government.

Cost-type contract means a contract or subcontract under a grant
in which the contractor or subcontractor is paid on the basis of the costs
it incurs, with or without a fee.

Equipment means tangible, nonexpendable, personal property
having a useful life of more than one year and an acquisition cost of
$5,000 or more per unit. A grantee may use its own definition of equipment
provided that such definition would at least include all equipment defined
above.

Expenditure report means: (1) For nonconstruction grants, the
SF–269 Financial Status Report (or other equivalent report); (2)
for construction grants, the SF–271 Outlay Report and Request for
Reimbursement (or other equivalent report).

Federally recognized Indian tribal government means the
governing body or a governmental agency of any Indian tribe, band, nation,
or other organized group or community (including any Native village as
defined in section 3 of the Alaska Native Claims Settlement Act, 85 Stat
688) certified by the Secretary of the Interior as eligible for the
special programs and services provided by him through the Bureau of Indian
Affairs.

Government means a State or local government or a federally
recognized Indian tribal government.

Grant means an award of financial assistance, including
cooperative agreements, in the form of money, or property in lieu of
money, by the Federal Government to an eligible grantee. The term does not
include technical assistance which provides services instead of money, or
other assistance in the form of revenue sharing, loans, loan guarantees,
interest subsidies, insurance, or direct appropriations. Also, the term
does not include assistance, such as a fellowship or other lump sum award,
which the grantee is not required to account for.

Grantee means the government to which a grant is awarded and
which is accountable for the use of the funds provided. The grantee is the
entire legal entity even if only a particular component of the entity is
designated in the grant award document.

Local government means a county, municipality, city, town,
township, local public authority (including any public and Indian housing
agency under the United States Housing Act of 1937) school district,
special district, intrastate district, council of governments (whether or
not incorporated as a nonprofit corporation under state law), any other
regional or interstate government entity, or any agency or instrumentality
of a local government.

Obligations means the amounts of orders placed, contracts and
subgrants awarded, goods and services received, and similar transactions
during a given period that will require payment by the grantee during the
same or a future period.

OMB means the United States Office of Management and Budget.

Outlays (expenditures) mean charges made to the project or
program. They may be reported on a cash or accrual basis. For reports
prepared on a cash basis, outlays are the sum of actual cash disbursement
for direct charges for goods and services, the amount of indirect expense
incurred, the value of in-kind contributions applied, and the amount of
cash advances and payments made to contractors and subgrantees. For
reports prepared on an accrued expenditure basis, outlays are the sum of
actual cash disbursements, the amount of indirect expense incurred, the
value of inkind contributions applied, and the new increase (or decrease)
in the amounts owed by the grantee for goods and other property received,
for services performed by employees, contractors, subgrantees,
subcontractors, and other payees, and other amounts becoming owed under
programs for which no current services or performance are required, such
as annuities, insurance claims, and other benefit payments.

Percentage of completion method refers to a system under which
payments are made for construction work according to the percentage of
completion of the work, rather than to the grantee's cost incurred.

Prior approval means documentation evidencing consent prior to
incurring specific cost.

Real property means land, including land improvements,
structures and appurtenances thereto, excluding movable machinery and
equipment.

Share, when referring to the awarding agency's portion of real
property, equipment or supplies, means the same percentage as the awarding
agency's portion of the acquiring party's total costs under the grant to
which the acquisition costs under the grant to which the acquisition cost
of the property was charged. Only costs are to be counted—not the value of
third-party in-kind contributions.

State means any of the several States of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, or any agency or instrumentality of a
State exclusive of local governments. The term does not include any public
and Indian housing agency under United States Housing Act of 1937.

Subgrant means an award of financial assistance in the form of
money, or property in lieu of money, made under a grant by a grantee to an
eligible subgrantee. The term includes financial assistance when provided
by contractual legal agreement, but does not include procurement
purchases, nor does it include any form of assistance which is excluded
from the definition of grant in this part.

Subgrantee means the government or other legal entity to which a
subgrant is awarded and which is accountable to the grantee for the use of
the funds provided.

Supplies means all tangible personal property other than
equipment as defined in this part.

Suspension means depending on the context, either (1) temporary
withdrawal of the authority to obligate grant funds pending corrective
action by the grantee or subgrantee or a decision to terminate the grant,
or (2) an action taken by a suspending official in accordance with agency
regulations implementing E.O. 12549 to immediately exclude a person from
participating in grant transactions for a period, pending completion of an
investigation and such legal or debarment proceedings as may ensue.

Termination means permanent withdrawal of the authority to
obligate previously-awarded grant funds before that authority would
otherwise expire. It also means the voluntary relinquishment of that
authority by the grantee or subgrantee. Termination does not
include: (1) Withdrawal of funds awarded on the basis of the grantee's
underestimate of the unobligated balance in a prior period; (2) Withdrawal
of the unobligated balance as of the expiration of a grant; (3) Refusal to
extend a grant or award additional funds, to make a competing or
noncompeting continuation, renewal, extension, or supplemental award; or
(4) voiding of a grant upon determination that the award was obtained
fraudulently, or was otherwise illegal or invalid from inception.

Terms of a grant or subgrant mean all requirements of the grant
or subgrant, whether in statute, regulations, or the award document.

Third party in-kind contributions mean property or services
which benefit a federally assisted project or program and which are
contributed by non-Federal third parties without charge to the grantee, or
a cost-type contractor under the grant agreement.

Unliquidated obligations for reports prepared on a cash basis
mean the amount of obligations incurred by the grantee that has not been
paid. For reports prepared on an accrued expenditure basis, they represent
the amount of obligations incurred by the grantee for which an outlay has
not been recorded.

Unobligated balance means the portion of the funds authorized by
the Federal agency that has not been obligated by the grantee and is
determined by deducting the cumulative obligations from the cumulative
funds authorized.

§ 3016.4   Applicability.

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(a) General. Subparts A–D of this part apply to all grants and
subgrants to governments, except where inconsistent with Federal statutes
or with regulations authorized in accordance with the exception provision
of §3016.6, or:

(1) Grants and subgrants to State and local institutions of higher
education or State and local hospitals.

(2) The block grants authorized by the Omnibus Budget Reconciliation
Act of 1981 (Community Services; Preventive Health and Health Services;
Alcohol, Drug Abuse, and Mental Health Services; Maternal and Child Health
Services; Social Services; Low-Income Home Energy Assistance; States'
Program of Community Development Block Grants for Small Cities; and
Elementary and Secondary Education other than programs administered by the
Secretary of Education under Title V, Subtitle D, Chapter 2, Section
583—the Secretary's discretionary grant program) and Titles I-III of the
Job Training Partnership Act of 1982 and under the Public Health Services
Act (Section 1921), Alcohol and Drug Abuse Treatment and Rehabilitation
Block Grant and Part C of Title V, Mental Health Service for the Homeless
Block Grant).

(3) Entitlement grants to carry out the following programs of the
Social Security Act:

(i) Aid to Needy Families with Dependent Children (Title IV-A of the
Act, not including the Work Incentive Program (WIN) authorized by section
402(a)19(G); HHS grants for WIN are subject to this part);

(ii) Child Support Enforcement and Establishment of Paternity (Title
IV-D of the Act);

(iii) Foster Care and Adoption Assistance (Title IV-E of the Act);

(iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and
XVI-AABD of the Act); and

(v) Medical Assistance (Medicaid) (Title XIX of the Act) not including
the State Medicaid Fraud Control program authorized by section
1903(a)(6)(B).

(4) A grant for an experimental, pilot, or demonstration project that
is also supported by a grant listed in paragraph (a)(3) of this
section;

(5) Grant funds awarded under subsection 412(e) of the Immigration and
Nationality Act (8 U.S.C. 1522(e)) 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 benefits
to refugees and entrants and the administrative costs of providing the
assistance and benefits;

(6) Grants to local education agencies under 20 U.S.C. 236 through
241–1(a), and 242 through 244 (portions of the Impact Aid program), except
for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for
Handicapped Children); and

(7) Payments under the Veterans Administration's State Home Per Diem
Program (38 U.S.C. 641(a)).

(b) Entitlement programs. In USDA, the entitlement programs
enumerated in this paragraph are subject to subparts A through D and the
modifications in subpart E of this part.

(1) Entitlement grants under the following programs authorized by The
National School Lunch Act:

(i) National School Lunch Program, General Assistance (section 4 of the
Act),

(ii) Commodity Assistance (section 6 of the Act),

(iii) National School Lunch Program, Special Meal Assistance (section
11 of the Act),

(iv) Summer Food Service Program for Children (section 13 of the Act),
and

(v) Child and Adult Care Food Program (section 17 of the Act);

(2) Entitlement grants under the following programs authorized by The
Child Nutrition Act of 1966:

(i) Special Milk Program for Children (section 3 of the Act),

(ii) School Breakfast Program (section 4 of the Act), and

(iii) Entitlement grants for State Administrative Expense Funds
(section 7 of the Act); and

(3) Entitlement grants under the following programs authorized by the
Food Stamp Act of 1977:

(i) Food Distribution Program on Indian Reservations (section 4(b) of
the Act), and

(ii) State Administrative Expense Funds (section 16 of the Act).

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 65 FR 49480, Aug. 14,
2000]

§ 3016.5   Effect on other issuances.

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All other grants administration provisions of codified program
regulations, program manuals, handbooks and other nonregulatory materials
which are inconsistent with this part are superseded, except to the extent
they are required by statute, or authorized in accordance with the
exception provision in §3016.6.

§ 3016.6   Additions and exceptions.

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(a) For classes of grants and grantees subject to this part, Federal
agencies may not impose additional administrative requirements except in
codified regulations published in theFederal Register.

(b) Exceptions for classes of grants or grantees may be authorized only
by OMB.

(c) Exceptions on a case-by-case basis and for subgrantees may be
authorized by the affected Federal agencies.

Subpart B—Pre-Award Requirements

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§ 3016.10   Forms for applying for
grants.

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(a) Scope. (1) This section prescribes forms and instructions to
be used by governmental organizations (except hospitals and institutions
of higher education operated by a government) in applying for grants. This
section is not applicable, however, to formula grant programs which do not
require applicants to apply for funds on a project basis.

(2) This section applies only to applications to Federal agencies for
grants, and is not required to be applied by grantees in dealing with
applicants for subgrants. However, grantees are encouraged to avoid more
detailed or burdensome application requirements for subgrants.

(b) Authorized forms and instructions for governmental
organizations. (1) In applying for grants, applicants shall only use
standard application forms or those prescribed by the granting agency with
the approval of OMB under the Paperwork Reduction Act of 1980.

(2) Applicants are not required to submit more than the original and
two copies of preapplications or applications.

(3) Applicants must follow all applicable instructions that bear OMB
clearance numbers. Federal agencies may specify and describe the programs,
functions, or activities that will be used to plan, budget, and evaluate
the work under a grant. Other supplementary instructions may be issued
only with the approval of OMB to the extent required under the Paperwork
Reduction Act of 1980. For any standard form, except the SF–424 facesheet,
Federal agencies may shade out or instruct the applicant to disregard any
line item that is not needed.

(4) When a grantee applies for additional funding (such as a
continuation or supplemental award) or amends a previously submitted
application, only the affected pages need be submitted. Previously
submitted pages with information that is still current need not be
resubmitted.

§ 3016.11   State plans.

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(a) Scope. The statutes for some programs require States to
submit plans before receiving grants. Under regulations implementing
Executive Order 12372, “Intergovernmental Review of Federal Programs,”
States are allowed to simplify, consolidate and substitute plans. This
section contains additional provisions for plans that are subject to
regulations implementing the Executive Order.

(b) Requirements. A State need meet only Federal administrative
or programmatic requirements for a plan that are in statutes or codified
regulations.

(c) Assurances. In each plan the State will include an assurance
that the State shall comply with all applicable Federal statutes and
regulations in effect with respect to the periods for which it receives
grant funding. For this assurance and other assurances required in the
plan, the State may:

(1) Cite by number the statutory or regulatory provisions requiring the
assurances and affirm that it gives the assurances required by those
provisions,

(2) Repeat the assurance language in the statutes or regulations,
or

(3) Develop its own language to the extent permitted by law.

(d) Amendments. A State will amend a plan whenever necessary to
reflect:

(1) New or revised Federal statutes or regulations or

(2) A material change in any State law, organization, policy, or State
agency operation. The State will obtain approval for the amendment and its
effective date but need submit for approval only the amended portions of
the plan.

§ 3016.12   Special grant or subgrant conditions
for “high-risk” grantees.

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(a) A grantee or subgrantee may be considered “high risk” if an
awarding agency determines that a grantee or subgrantee:

(1) Has a history of unsatisfactory performance, or

(2) Is not financially stable, or

(3) Has a management system which does not meet the management
standards set forth in this part, or

(4) Has not conformed to terms and conditions of previous awards,
or

(5) Is otherwise not responsible; and if the awarding agency determines
that an award will be made, special conditions and/or restrictions shall
correspond to the high risk condition and shall be included in the
award.

(b) Special conditions or restrictions may include:

(1) Payment on a reimbursement basis;

(2) Withholding authority to proceed to the next phase until receipt of
evidence of acceptable performance within a given funding period;

(3) Requiring additional, more detailed financial reports;

(4) Additional project monitoring;

(5) Requiring the grantee or subgrantee to obtain technical or
management assistance; or

(6) Establishing additional prior approvals.

(c) If an awarding agency decides to impose such conditions, the
awarding official will notify the grantee or subgrantee as early as
possible, in writing, of:

(1) The nature of the special conditions/restrictions;

(2) The reason(s) for imposing them;

(3) The corrective actions which must be taken before they will be
removed and the time allowed for completing the corrective actions;
and

(4) The method of requesting reconsideration of the
conditions/restrictions imposed.

Subpart C—Post-Award Requirements

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Financial Administration

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§ 3016.20   Standards for financial management
systems.

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(a) A State must expand and account for grant funds in accordance with
State laws and procedures for expending and accounting for its own funds.
Fiscal control and accounting procedures of the State, as well as its
subgrantees and cost-type contractors, must be sufficient to—

(1) Permit preparation of reports required by this part and the
statutes authorizing the grant, and

(2) Permit the tracing of funds to a level of expenditures adequate to
establish that such funds have not been used in violation of the
restrictions and prohibitions of applicable statutes.

(b) The financial management systems of other grantees and subgrantees
must meet the following standards:

(1) Financial reporting. Accurate, current, and complete
disclosure of the financial results of financially assisted activities
must be made in accordance with the financial reporting requirements of
the grant or subgrant.

(2) Accounting records. Grantees and subgrantees must maintain
records which adequately identify the source and application of funds
provided for financially-assisted activities. These records must contain
information pertaining to grant or subgrant awards and authorizations,
obligations, unobligated balances, assets, liabilities, outlays or
expenditures, and income.

(3) Internal control. Effective control and accountability must
be maintained for all grant and subgrant cash, real and personal property,
and other assets. Grantees and subgrantees must adequately safeguard all
such property and must assure that it is used solely for authorized
purposes.

(4) Budget control. Actual expenditures or outlays must be
compared with budgeted amounts for each grant or subgrant. Financial
information must be related to performance or productivity data, including
the development of unit cost information whenever appropriate or
specifically required in the grant or subgrant agreement. If unit cost
data are required, estimates based on available documentation will be
accepted whenever possible.

(5) Allowable cost. Applicable OMB cost principles, agency
program regulations, and the terms of grant and subgrant agreements will
be followed in determining the reasonableness, allowability, and
allocability of costs.

(6) Source documentation. Accounting records must be supported
by such source documentation as cancelled checks, paid bills, payrolls,
time and attendance records, contract and subgrant award documents,
etc.

(7) Cash management. Procedures for minimizing the time elapsing
between the transfer of funds from the U.S. Treasury and disbursement by
grantees and subgrantees must be followed whenever advance payment
procedures are used. Grantees must establish reasonable procedures to
ensure the receipt of reports on subgrantees' cash balances and cash
disbursements in sufficient time to enable them to prepare complete and
accurate cash transactions reports to the awarding agency. When advances
are made by letter-of-credit or electronic transfer of funds methods, the
grantee must make drawdowns as close as possible to the time of making
disbursements. Grantees must monitor cash drawdowns by their subgrantees
to assure that they conform substantially to the same standards of timing
and amount as apply to advances to the grantees.

(c) An awarding agency may review the adequacy of the financial
management system of any applicant for financial assistance as part of a
preaward review or at any time subsequent to award.

§ 3016.21   Payment.

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(a) Scope. This section prescribes the basic standard and the
methods under which a Federal agency will make payments to grantees, and
grantees will make payments to subgrantees and contractors.

(b) Basic standard. Methods and procedures for payment shall
minimize the time elapsing between the transfer of funds and disbursement
by the grantee or subgrantee, in accordance with Treasury regulations at
31 CFR part 205.

(c) Advances. Grantees and subgrantees shall be paid in advance,
provided they maintain or demonstrate the willingness and ability to
maintain procedures to minimize the time elapsing between the transfer of
the funds and their disbursement by the grantee or subgrantee.

(d) Reimbursement. Reimbursement shall be the preferred method
when the requirements in paragraph (c) of this section are not met.
Grantees and subgrantees may also be paid by reimbursement for any
construction grant. Except as otherwise specified in regulation, Federal
agencies shall not use the percentage of completion method to pay
construction grants. The grantee or subgrantee may use that method to pay
its construction contractor, and if it does, the awarding agency's
payments to the grantee or subgrantee will be based on the grantee's or
subgrantee's actual rate of disbursement.

(e) Working capital advances. If a grantee cannot meet the
criteria for advance payments described in paragraph (c) of this section,
and the Federal agency has determined that reimbursement is not feasible
because the grantee lacks sufficient working capital, the awarding agency
may provide cash or a working capital advance basis. Under this procedure
the awarding agency shall advance cash to the grantee to cover its
estimated disbursement needs for an initial period generally geared to the
grantee's disbursing cycle. Thereafter, the awarding agency shall
reimburse the grantee for its actual cash disbursements. The working
capital advance method of payment shall not be used by grantees or
subgrantees if the reason for using such method is the unwillingness or
inability of the grantee to provide timely advances to the subgrantee to
meet the subgrantee's actual cash disbursements.

(f) Effect of program income, refunds, and audit recoveries on
payment. (1) Grantees and subgrantees shall disburse repayments to and
interest earned on a revolving fund before requesting additional cash
payments for the same activity.

(2) Except as provided in paragraph (f)(1) of this section, grantees
and subgrantees shall disburse program income, rebates, refunds, contract
settlements, audit recoveries and interest earned on such funds before
requesting additional cash payments.

(g) Withholding payments. (1) Unless otherwise required by
Federal statute, awarding agencies shall not withhold payments for proper
charges incurred by grantees or subgrantees unless—

(i) The grantee or subgrantee has failed to comply with grant award
conditions or

(ii) The grantee or subgrantee is indebted to the United States.

(2) Cash withheld for failure to comply with grant award condition, but
without suspension of the grant, shall be released to the grantee upon
subsequent compliance. When a grant is suspended, payment adjustments will
be made in accordance with §3016.43(c).

(3) A Federal agency shall not make payment to grantees for amounts
that are withheld by grantees or subgrantees from payment to contractors
to assure satisfactory completion of work. Payments shall be made by the
Federal agency when the grantees or subgrantees actually disburse the
withheld funds to the contractors or to escrow accounts established to
assure satisfactory completion of work.

(h) Cash depositories. (1) Consistent with the national goal of
expanding the opportunities for minority business enterprises, grantees
and subgrantees are encouraged to use minority banks (a bank which is
owned at least 50 percent by minority group members). A list of minority
owned banks can be obtained from the Minority Business Development Agency,
Department of Commerce, Washington, DC 20230.

(2) A grantee or subgrantee shall maintain a separate bank account only
when required by Federal-State agreement.

(i) Interest earned on advances. Except for interest earned on
advances of funds exempt under the Intergovernmental Cooperation Act (31
U.S.C. 6501 et seq. ) and the Indian Self-Determination Act (23
U.S.C. 450), grantees and subgrantees shall promptly, but at least
quarterly, remit interest earned on advances to the Federal agency. The
grantee or subgrantee may keep interest amounts up to $100 per year for
administrative expenses.

§ 3016.22   Allowable costs.

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(a) Limitation on use of funds. Grant funds may be used only
for:

(1) The allowable costs of the grantees, subgrantees and cost-type
contractors, including allowable costs in the form of payments to
fixed-price contractors; and

(2) Reasonable fees or profit to cost-type contractors but not any fee
or profit (or other increment above allowable costs) to the grantee or
subgrantee.

(b) Applicable cost principles. For each kind of organization,
there is a set of Federal principles for determining allowable costs.
Allowable costs will be determined in accordance with the cost principles
applicable to the organization incurring the costs. The following chart
lists the kinds of organizations and the applicable cost principles.

For the costs of a—

Use the principles in—

State, local or Indian
tribal government

OMB Circular A–87.

Private nonprofit
organization other than an (1) institution of higher education, (2)
hospital, or (3) organization named in OMB Circular A–122 as not
subject to that circular

OMB Circular A–122.

Educational
institutions.

OMB Circular A–21.

For-profit organization
other than a hospital and an organization named in OMB Circular
A–122 as not subject to that circular

48 CFR part 31. Contract Cost
Principles and Procedures, or uniform cost accounting standards that
comply with cost principles acceptable to the Federal
agency.

§ 3016.23   Period of availability of
funds.

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(a) General. Where a funding period is specified, a grantee may
charge to the award only costs resulting from obligations of the funding
period unless carryover of unobligated balances is permitted, in which
case the carryover balances may be charged for costs resulting from
obligations of the subsequent funding period.

(b) Liquidation of obligations. A grantee must liquidate all
obligations incurred under the award not later than 90 days after the end
of the funding period (or as specified in a program regulation) to
coincide with the submission of the annual Financial Status Report
(SF–269). The Federal agency may extend this deadline at the request of
the grantee.

§ 3016.24   Matching or cost sharing.

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(a) Basic rule: Costs and contributions acceptable. With the
qualifications and exceptions listed in paragraph (b) of this section, a
matching or cost sharing requirement may be satisfied by either or both of
the following:

(1) Allowable costs incurred by the grantee, subgrantee or a cost-type
contractor under the assistance agreement. This includes allowable costs
borne by non-Federal grants or by others cash donations from non-Federal
third parties.

(2) The value of third party in-kind contributions applicable to the
period to which the cost sharing or matching requirements applies.

(b) Qualifications and exceptions —(1) Costs borne by other
Federal grant agreements. Except as provided by Federal statute, a
cost sharing or matching requirement may not be met by costs borne by
another Federal grant. This prohibition does not apply to income earned by
a grantee or subgrantee from a contract awarded under another Federal
grant.

(2) General revenue sharing. For the purpose of this section,
general revenue sharing funds distributed under 31 U.S.C. 6702 are not
considered Federal grant funds.

(3) Cost or contributions counted towards other Federal
costs-sharing requirements. Neither costs nor the values of third
party in-kind contributions may count towards satisfying a cost sharing or
matching requirement of a grant agreement if they have been or will be
counted towards satisfying a cost sharing or matching requirement of
another Federal grant agreement, a Federal procurement contract, or any
other award of Federal funds.

(4) Costs financed by program income. Costs financed by program
income, as defined in §3016.25, shall not count towards satisfying a cost
sharing or matching requirement unless they are expressly permitted in the
terms of the assistance agreement. (This use of general program income is
described in §3016.25(g).)

(5) Services or property financed by income earned by contractors.
Contractors under a grant may earn income from the activities carried
out under the contract in addition to the amounts earned from the party
awarding the contract. No costs of services or property supported by this
income may count toward satisfying a cost sharing or matching requirement
unless other provisions of the grant agreement expressly permit this kind
of income to be used to meet the requirement.

(6) Records. Costs and third party in-kind contributions
counting towards satisfying a cost sharing or matching requirement must be
verifiable from the records of grantees and subgrantee or cost-type
contractors. These records must show how the value placed on third party
in-kind contributions was derived. To the extent feasible, volunteer
services will be supported by the same methods that the organization uses
to support the allocability of regular personnel costs.

(7) Special standards for third party in-kind contributions. (i)
Third party in-kind contributions count towards satisfying a cost sharing
or matching requirement only where, if the party receiving the
contributions were to pay for them, the payments would be allowable
costs.

(ii) Some third party in-kind contributions are goods and services
that, if the grantee, subgrantee, or contractor receiving the contribution
had to pay for them, the payments would have been an indirect costs. Costs
sharing or matching credit for such contributions shall be given only if
the grantee, subgrantee, or contractor has established, along with its
regular indirect cost rate, a special rate for allocating to individual
projects or programs the value of the contributions.

(iii) A third party in-kind contribution to a fixed-price contract may
count towards satisfying a cost sharing or matching requirement only if it
results in:

(A) An increase in the services or property provided under the contract
(without additional cost to the grantee or subgrantee) or

(B) A cost savings to the grantee or subgrantee.

(iv) The values placed on third party in-kind contributions for cost
sharing or matching purposes will conform to the rules in the succeeding
sections of this part. If a third party in-kind contribution is a type not
treated in those sections, the value placed upon it shall be fair and
reasonable.

(c) Valuation of donated services —(1) Volunteer services.
Unpaid services provided to a grantee or subgrantee by individuals
will be valued at rates consistent with those ordinarily paid for similar
work in the grantee's or subgrantee's organization. If the grantee or
subgrantee does not have employees performing similar work, the rates will
be consistent with those ordinarily paid by other employers for similar
work in the same labor market. In either case, a reasonable amount for
fringe benefits may be included in the valuation.

(2) Employees of other organizations. When an employer other
than a grantee, subgrantee, or cost-type contractor furnishes free of
charge the services of an employee in the employee's normal line of work,
the services will be valued at the employee's regular rate of pay
exclusive of the employee's fringe benefits and overhead costs. If the
services are in a different line of work, paragraph (c)(1) of this section
applies.

(d) Valuation of third party donated supplies and loaned equipment
or space. (1) If a third party donates supplies, the contribution will
be valued at the market value of the supplies at the time of donation.

(2) If a third party donates the use of equipment or space in a
building but retains title, the contribution will be valued at the fair
rental rate of the equipment or space.

(e) Valuation of third party donated equipment, buildings, and land.
If a third party donates equipment, buildings, or land, and title
passes to a grantee or subgrantee, the treatment of the donated property
will depend upon the purpose of the grant or subgrant, as follows:

(1) Awards for capital expenditures. If the purpose of the grant
or subgrant is to assist the grantee or subgrantee in the acquisition of
property, the market value of that property at the time of donation may be
counted as cost sharing or matching,

(2) Other awards. If assisting in the acquisition of property is
not the purpose of the grant or subgrant, paragraphs (e)(2) (i) and (ii)
of this section apply:

(i) If approval is obtained from the awarding agency, the market value
at the time of donation of the donated equipment or buildings and the fair
rental rate of the donated land may be counted as cost sharing or
matching. In the case of a subgrant, the terms of the grant agreement may
require that the approval be obtained from the Federal agency as well as
the grantee. In all cases, the approval may be given only if a purchase of
the equipment or rental of the land would be approved as an allowable
direct cost. If any part of the donated property was acquired with Federal
funds, only the non-federal share of the property may be counted as
cost-sharing or matching.

(ii) If approval is not obtained under paragraph (e)(2)(i) of this
section, no amount may be counted for donated land, and only depreciation
or use allowances may be counted for donated equipment and buildings. The
depreciation or use allowances for this property are not treated as third
party in-kind contributions. Instead, they are treated as costs incurred
by the grantee or subgrantee. They are computed and allocated (usually as
indirect costs) in accordance with the cost principles specified in
§3016.22, in the same way as depreciation or use allowances for purchased
equipment and buildings. The amount of depreciation or use allowances for
donated equipment and buildings is based on the property's market value at
the time it was donated.

(f) Valuation of grantee or subgrantee donated real property for
construction/acquisition. If a grantee or subgrantee donates real
property for a construction or facilities acquisition project, the current
market value of that property may be counted as cost sharing or matching.
If any part of the donated property was acquired with Federal funds, only
the non-federal share of the property may be counted as cost sharing or
matching.

(g) Appraisal of real property. In some cases under paragraphs
(d), (e) and (f) of this section, it will be necessary to establish the
market value of land or a building or the fair rental rate of land or of
space in a building. In these cases, the Federal agency may require the
market value or fair rental value be set by an independent appraiser, and
that the value or rate be certified by the grantee. This requirement will
also be imposed by the grantee on subgrantees.

§ 3016.25   Program income.

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(a) General. Grantees are encouraged to earn income to defray
program costs. Program income includes income from fees for services
performed, from the use or rental of real or personal property acquired
with grant funds, from the sale of commodities or items fabricated under a
grant agreement, and from payments of principal and interest on loans made
with grant funds. Except as otherwise provided in regulations of the
Federal agency, program income does not include interest on grant funds,
rebates, credits, discounts, refunds, etc. and interest earned on any of
them.

(b) Definition of program income. Program income means gross
income received by the grantee or subgrantee directly generated by a grant
supported activity, or earned only as a result of the grant agreement
during the grant period. “During the grant period” is the time between the
effective date of the award and the ending date of the award reflected in
the final financial report.

(c) Cost of generating program income. If authorized by Federal
regulations or the grant agreement, costs incident to the generation of
program income may be deducted from gross income to determine program
income.

(d) Governmental revenues. Taxes, special assessments, levies,
fines, and other such revenues raised by a grantee or subgrantee are not
program income unless the revenues are specifically identified in the
grant agreement or Federal agency regulations as program income.

(e) Royalties. Income from royalties and license fees for
copyrighted material, patents, and inventions developed by a grantee or
subgrantee is program income only if the revenues are specifically
identified in the grant agreement or Federal agency regulations as program
income. (See §3016.34.)

(f) Property. Proceeds from the sale of real property or
equipment will be handled in accordance with the requirements of §§3016.31
and 3016.32.

(g) Use of program income. Program income shall be deducted from
outlays which may be both Federal and non-Federal as described below,
unless the Federal agency regulations or the grant agreement specify
another alternative (or a combination of the alternatives). In specifying
alternatives, the Federal agency may distinguish between income earned by
the grantee and income earned by subgrantees and between the sources,
kinds, or amounts of income. When Federal agencies authorize the
alternatives in paragraphs (g) (2) and (3) of this section, program income
in excess of any limits stipulated shall also be deducted from
outlays.

(1) Deduction. Ordinarily program income shall be deducted from
total allowable costs to determine the net allowable costs. Program income
shall be used for current costs unless the Federal agency authorizes
otherwise. Program income which the grantee did not anticipate at the time
of the award shall be used to reduce the Federal agency and grantee
contributions rather than to increase the funds committed to the
project.

(2) Addition. When authorized, program income may be added to
the funds committed to the grant agreement by the Federal agency and the
grantee. The program income shall be used for the purposes and under the
conditions of the grant agreement.

(3) Cost sharing or matching. When authorized, program income
may be used to meet the cost sharing or matching requirement of the grant
agreement. The amount of the Federal grant award remains the same.

(h) Income after the award period. There are no Federal
requirements governing the disposition of program income earned after the
end of the award period ( i.e. , until the ending date of the final
financial report, see paragraph (a) of this section), unless the terms of
the agreement or the Federal agency regulations provide otherwise.

§ 3016.26   Non-Federal audit.

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(a) Basic rule. Grantees and subgrantees are responsible for
obtaining audits in accordance with the Single Audit Act Amendments of
1996 (31 U.S.C. 7501–7507) and revised OMB Circular A–133, “Audits of
States, Local Governments, and Non-Profit Organizations.” The audits shall
be made by an independent auditor in accordance with generally accepted
government auditing standards covering financial audits.

(1) In USDA, revised OMB Circular A–133 is implemented in 7 CFR part
3052, “Audits of States, Local Governments, and Non-Profit
Organizations.”

(2) [Reserved]

(b) Subgrantees. State or local governments, as those terms are
defined for purposes of the Single Audit Act Amendments of 1996, that
provide Federal awards to a subgrantee, which expends $300,000 or more (or
other amount as specified by OMB) in Federal awards in a fiscal year,
shall:

(1) Determine whether State or local subgrantees have met the audit
requirements of the Act and whether subgrantees covered by OMB Circular
A–110, “Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations,” have met the audit requirements of the Act. Commercial
contractors (private for-profit and private and governmental
organizations) providing goods and services to State and local governments
are not required to have a single audit performed. State and local
governments should use their own procedures to ensure that the contractor
has complied with laws and regulations affecting the expenditure of
Federal funds;

(2) Determine whether the subgrantee spent Federal assistance funds
provided in accordance with applicable laws and regulations. This may be
accomplished by reviewing an audit of the subgrantee made in accordance
with the Act, Circular A–110, or through other means (e.g., program
reviews) if the subgrantee has not had such an audit;

(3) Ensure that appropriate corrective action is taken within six
months after receipt of the audit report in instance of noncompliance with
Federal laws and regulations;

(4) Consider whether subgrantee audits necessitate adjustment of the
grantee's own records; and

(5) Require each subgrantee to permit independent auditors to have
access to the records and financial statements.

(c) Auditor selection. In arranging for audit services, §3016.36
shall be followed.

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 62 FR 45939, Aug. 29,
1997]

Changes, Property, and Subawards

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§ 3016.30   Changes.

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(a) General. Grantees and subgrantees are permitted to rebudget
within the approved direct cost budget to meet unanticipated requirements
and may make limited program changes to the approved project. However,
unless waived by the awarding agency, certain types of post-award changes
in budgets and projects shall require the prior written approval of the
awarding agency.

(b) Relation to cost principles. The applicable cost principles
(see §3016.22) contain requirements for prior approval of certain types of
costs. Except where waived, those requirements apply to all grants and
subgrants even if paragraphs (c) through (f) of this section do not.

(c) Budget changes —(1) Nonconstruction projects. Except
as stated in other regulations or an award document, grantees or
subgrantees shall obtain the prior approval of the awarding agency
whenever any of the following changes is anticipated under a
nonconstruction award:

(i) Any revision which would result in the need for additional
funding.

(ii) Unless waived by the awarding agency, cumulative transfers among
direct cost categories, or, if applicable, among separately budgeted
programs, projects, functions, or activities which exceed or are expected
to exceed ten percent of the current total approved budget, whenever the
awarding agency's share exceeds $100,000.

(iii) Transfer of funds allotted for training allowances ( i.e.
, from direct payments to trainees to other expense categories).

(2) Construction projects. Grantees and subgrantees shall obtain
prior written approval for any budget revision which would result in the
need for additional funds.

(3) Combined construction and nonconstruction projects. When a
grant or subgrant provides funding for both construction and
nonconstruction activities, the grantee or subgrantee must obtain prior
written approval from the awarding agency before making any fund or budget
transfer from nonconstruction to construction or vice versa.

(d) Programmatic changes. Grantees or subgrantees must obtain
the prior approval of the awarding agency whenever any of the following
actions is anticipated:

(1) Any revision of the scope or objectives of the project (regardless
of whether there is an associated budget revision requiring prior
approval).

(2) Need to extend the period of availability of funds.

(3) Changes in key persons in cases where specified in an application
or a grant award. In research projects, a change in the project director
or principal investigator shall always require approval unless waived by
the awarding agency.

(4) Under nonconstruction projects, contracting out, subgranting (if
authorized by law) or otherwise obtaining the services of a third party to
perform activities which are central to the purposes of the award. This
approval requirement is in addition to the approval requirements of
§3016.36 but does not apply to the procurement of equipment, supplies, and
general support services.

(e) Additional prior approval requirements. The awarding agency
may not require prior approval for any budget revision which is not
described in paragraph (c) of this section.

(f) Requesting prior approval. (1) A request for prior approval
of any budget revision will be in the same budget formal the grantee used
in its application and shall be accompanied by a narrative justification
for the proposed revision.

(2) A request for a prior approval under the applicable Federal cost
principles (see §3016.22) may be made by letter.

(3) A request by a subgrantee for prior approval will be addressed in
writing to the grantee. The grantee will promptly review such request and
shall approve or disapprove the request in writing. A grantee will not
approve any budget or project revision which is inconsistent with the
purpose or terms and conditions of the Federal grant to the grantee. If
the revision, requested by the subgrantee would result in a change to the
grantee's approved project which requires Federal prior approval, the
grantee will obtain the Federal agency's approval before approving the
subgrantee's request.

§ 3016.31   Real property.

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(a) Title. Subject to the obligations and conditions set forth
in this section, title to real property acquired under a grant or subgrant
will vest upon acquisition in the grantee or subgrantee respectively.

(b) Use. Except as otherwise provided by Federal statutes, real
property will be used for the originally authorized purposes as long as
needed for that purposes, and the grantee or subgrantee shall not dispose
of or encumber its title or other interests.

(c) Disposition. When real property is no longer needed for the
originally authorized purpose, the grantee or subgrantee will request
disposition instructions from the awarding agency. The instructions will
provide for one of the following alternatives:

(1) Retention of title. Retain title after compensating the
awarding agency. The amount paid to the awarding agency will be computed
by applying the awarding agency's percentage of participation in the cost
of the original purchase to the fair market value of the property.
However, in those situations where a grantee or subgrantee is disposing of
real property acquired with grant funds and acquiring replacement real
property under the same program, the net proceeds from the disposition may
be used as an offset to the cost of the replacement property.

(2) Sale of property. Sell the property and compensate the
awarding agency. The amount due to the awarding agency will be calculated
by applying the awarding agency's percentage of participation in the cost
of the original purchase to the proceeds of the sale after deduction of
any actual and reasonable selling and fixing-up expenses. If the grant is
still active, the net proceeds from sale may be offset against the
original cost of the property. When a grantee or subgrantee is directed to
sell property, sales procedures shall be followed that provide for
competition to the extent practicable and result in the highest possible
return.

(3) Transfer of title. Transfer title to the awarding agency or
to a third-party designated/approved by the awarding agency. The grantee
or subgrantee shall be paid an amount calculated by applying the grantee
or subgrantee's percentage of participation in the purchase of the real
property to the current fair market value of the property.

§ 3016.32   Equipment.

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(a) Title. Subject to the obligations and conditions set forth
in this section, title to equipment acquired under a grant or subgrant
will vest upon acquisition in the grantee or subgrantee respectively.

(b) States. A State will use, manage, and dispose of equipment
acquired under a grant by the State in accordance with State laws and
procedures. Other grantees and subgrantees will follow paragraphs (c)
through (e) of this section.

(c) Use. (1) Equipment shall be used by the grantee or
subgrantee in the program or project for which it was acquired as long as
needed, whether or not the project or program continues to be supported by
Federal funds. When no longer needed for the original program or project,
the equipment may be used in other activities currently or previously
supported by a Federal agency.

(2) The grantee or subgrantee shall also make equipment available for
use on other projects or programs currently or previously supported by the
Federal Government, providing such use will not interfere with the work on
the projects or program for which it was originally acquired. First
preference for other use shall be given to other programs or projects
supported by the awarding agency. User fees should be considered if
appropriate.

(3) Notwithstanding the encouragement in §3016.25(a) to earn program
income, the grantee or subgrantee must not use equipment acquired with
grant funds to provide services for a fee to compete unfairly with private
companies that provide equivalent services, unless specifically permitted
or contemplated by Federal statute.

(4) When acquiring replacement equipment, the grantee or subgrantee may
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, subject
to the approval of the awarding agency.

(d) Management requirements. Procedures for managing equipment
(including replacement equipment), whether acquired in whole or in part
with grant funds, until disposition takes place will, as a minimum, meet
the following requirements:

(1) Property records must be maintained that include a description of
the property, a serial number or other identification number, the source
of property, who holds title, the acquisition date, and cost of the
property, percentage of Federal participation in the cost of the property,
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 property must be taken and the results
reconciled with the property records at least once every two years.

(3) A control system must be developed to ensure adequate safeguards to
prevent loss, damage, or theft of the property. Any loss, damage, or theft
shall be investigated.

(4) Adequate maintenance procedures must be developed to keep the
property in good condition.

(5) If the grantee or subgrantee is authorized or required to sell the
property, proper sales procedures must be established to ensure the
highest possible return.

(e) Disposition. When original or replacement equipment acquired
under a grant or subgrant is no longer needed for the original project or
program or for other activities currently or previously supported by a
Federal agency, disposition of the equipment will be made as follows:

(1) Items of equipment with a current per-unit fair market value of
less than $5,000 may be retained, sold or otherwise disposed of with no
further obligation to the awarding agency.

(2) Items of equipment with a current per unit fair market value in
excess of $5,000 may be retained or sold and the awarding agency shall
have a right to an amount calculated by multiplying the current market
value or proceeds from sale by the awarding agency's share of the
equipment.

(3) In cases where a grantee or subgrantee fails to take appropriate
disposition actions, the awarding agency may direct the grantee or
subgrantee to take excess and disposition actions.

(f) Federal equipment. In the event a grantee or subgrantee is
provided federally-owned equipment:

(1) Title will remain vested in the Federal Government.

(2) Grantees or subgrantees will manage the equipment in accordance
with Federal agency rules and procedures, and submit an annual inventory
listing.

(3) When the equipment is no longer needed, the grantee or subgrantee
will request disposition instructions from the Federal agency.

(g) Right to transfer title. The Federal awarding agency may
reserve the right to transfer title to the Federal Government or a third
part named by the awarding agency when such a third party is otherwise
eligible under existing statutes. Such transfers shall be subject to the
following standards:

(1) The property shall be identified in the grant or otherwise made
known to the grantee in writing.

(2) The Federal awarding agency shall issue disposition instruction
within 120 calendar days after the end of the Federal support of the
project for which it was acquired. If the Federal awarding agency fails to
issue disposition instructions within the 120 calendar-day period the
grantee shall follow §3016.32(e).

(3) When title to equipment is transferred, the grantee shall be paid
an amount calculated by applying the percentage of participation in the
purchase to the current fair market value of the property.

§ 3016.33   Supplies.

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(a) Title. Title to supplies acquired under a grant or subgrant
will vest, upon acquisition, in the grantee or subgrantee
respectively.

(b) Disposition. If there is a residual inventory of unused
supplies exceeding $5,000 in total aggregate fair market value upon
termination or completion of the award, and if the supplies are not needed
for any other federally sponsored programs or projects, the grantee or
subgrantee shall compensate the awarding agency for its share.

§ 3016.34   Copyrights.

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The Federal awarding agency reserves a royalty-free, nonexclusive, and
irrevocable license to reproduce, publish or otherwise use, and to
authorize others to use, for Federal Government purposes:

(a) The copyright in any work developed under a grant, subgrant, or
contract under a grant or subgrant; and

(b) Any rights of copyright to which a grantee, subgrantee or a
contractor purchases ownership with grant support.

§ 3016.35   Subawards to debarred and suspended
parties.

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Grantees and subgrantees must not make any award or permit any award
(subgrant or contract) at any tier to any party which is debarred or
suspended or is otherwise excluded from or ineligible for participation in
Federal assistance programs under Executive Order 12549, “Debarment and
Suspension.”

§ 3016.36   Procurement.

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(a) States. When procuring property and services under a grant,
a State will follow the same policies and procedures it uses for
procurements from its non-Federal funds. The State will ensure that every
purchase order or other contract includes any clauses required by Federal
statutes and executive orders and their implementing regulations. Other
grantees and subgrantees will follow paragraphs (b) through (i) in this
section.

(b) Procurement standards. (1) Grantees and subgrantees will use
their own procurement procedures which reflect applicable State and local
laws and regulations, provided that the procurements conform to applicable
Federal law and the standards identified in this section.

(2) Grantees and subgrantees will maintain a contract administration
system which ensures that contractors perform in accordance with the
terms, conditions, and specifications of their contracts or purchase
orders.

(3) Grantees and subgrantees will maintain a written code of standards
of conduct governing the performance of their employees engaged in the
award and administration of contracts. No employee, officer or agent of
the grantee or subgrantee shall participate in selection, or in the award
or administration of a contract supported by Federal funds if a conflict
of interest, real or apparent, would be involved. Such a conflict would
arise when:

(i) The employee, officer or agent,

(ii) Any member of his immediate family,

(iii) His or her partner, or

(iv) An organization which employs, or is about to employ, any of the
above, has a financial or other interest in the firm selected for award.
The grantee's or subgrantee's officers, employees or agents will neither
solicit nor accept gratuities, favors or anything of monetary value from
contractors, potential contractors, or parties to subagreements. Grantee
and subgrantees may set minimum rules where the financial interest is not
substantial or the gift is an unsolicited item of nominal intrinsic value.
To the extent permitted by State or local law or regulations, such
standards or conduct will provide for penalties, sanctions, or other
disciplinary actions for violations of such standards by the grantee's and
subgrantee's officers, employees, or agents, or by contractors or their
agents. The awarding agency may in regulation provide additional
prohibitions relative to real, apparent, or potential conflicts of
interest.

(4) Grantee and subgrantee procedures will provide for a review of
proposed procurements to avoid purchase of unnecessary or duplicative
items. Consideration should be given to consolidating or breaking out
procurements to obtain a more economical purchase. Where appropriate, an
analysis will be made of lease versus purchase alternatives, and any other
appropriate analysis to determine the most economical approach.

(5) To foster greater economy and efficiency, grantees and subgrantees
are encouraged to enter into State and local intergovernmental agreements
for procurement or use of common goods and services.

(6) Grantees and subgrantees are encouraged to use Federal excess and
surplus property in lieu of purchasing new equipment and property whenever
such use is feasible and reduces project costs.

(7) Grantees and subgrantees are encouraged to use value engineering
clauses in contracts for construction projects of sufficient size to offer
reasonable opportunities for cost reductions. Value engineering is a
systematic and creative analysis of each contract item or task to ensure
that its essential function is provided at the overall lower cost.

(8) Grantees and subgrantees will make awards only to responsible
contractors possessing the ability to perform successfully under the terms
and conditions of a proposed procurement. Consideration will be given to
such matters as contractor integrity, compliance with public policy,
record of past performance, and financial and technical resources.

(9) Grantees and subgrantees will maintain records sufficient to detail
the significant history of a procurement. These records will include, but
are not necessarily limited to the following: rationale for the method of
procurement, selection of contract type, contractor selection or
rejection, and the basis for the contract price.

(10) Grantees and subgrantees will use time and material type contracts
only—

(i) After a determination that no other contract is suitable, and

(ii) If the contract includes a ceiling price that the contractor
exceeds at its own risk.

(11) Grantees and subgrantees alone will be responsible, in accordance
with good administrative practice and sound business judgment, for the
settlement of all contractual and administrative issues arising out of
procurements. These issues include, but are not limited to source
evaluation, protests, disputes, and claims. These standards do not relieve
the grantee or subgrantee of any contractual responsibilities under its
contracts. Federal agencies will not substitute their judgment for that of
the grantee or subgrantee unless the matter is primarily a Federal
concern. Violations of law will be referred to the local, State, or
Federal authority having proper jurisdiction.

(12) Grantees and subgrantees will have protest procedures to handle
and resolve disputes relating to their procurements and shall in all
instances disclose information regarding the protest to the awarding
agency. A protestor must exhaust all administrative remedies with the
grantee and subgrantee before pursuing a protest with the Federal agency.
Reviews of protests by the Federal agency will be limited to:

(i) Violations of Federal law or regulations and the standards of this
section (violations of State or local law will be under the jurisdiction
of State or local authorities) and

(ii) Violations of the grantee's or subgrantee's protest procedures for
failure to review a complaint or protest. Protests received by the Federal
agency other than those specified above will be referred to the grantee or
subgrantee.

(c) Competition. (1) All procurement transactions will be
conducted in a manner providing full and open competition consistent with
the standards of §3016.36. Some of the situations considered to be
restrictive of competition include but are not limited to:

(i) Placing unreasonable requirements on firms in order for them to
qualify to do business,

(ii) Requiring unnecessary experience and excessive bonding,

(iii) Noncompetitive pricing practices between firms or between
affiliated companies,

(iv) Noncompetitive awards to consultants that are on retainer
contracts,

(v) Organizational conflicts of interest,

(vi) Specifying only a “brand name” product instead of allowing “an
equal” product to be offered and describing the performance of other
relevant requirements of the procurement, and

(vii) Any arbitrary action in the procurement process.

(2) Grantees and subgrantees will conduct procurements in a manner that
prohibits the use of statutorily or administratively imposed in-State or
local geographical preferences in the evaluation of bids or proposals,
except in those cases where applicable Federal statutes expressly mandate
or encourage geographic preference. Nothing in this section preempts State
licensing laws. When contracting for architectural and engineering (A/E)
services, geographic location may be a selection criteria provided its
application leaves an appropriate number of qualified firms, given the
nature and size of the project, to compete for the contract.

(3) Grantees will have written selection procedures for procurement
transactions. These procedures will ensure that all solicitations:

(i) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. Such
description shall not, in competitive procurements, contain features which
unduly restrict competition. The description may include a statement of
the qualitative nature of the material, product or service to be procured,
and when necessary, shall set forth those minimum essential
characteristics and standards to which it must conform if it is to satisfy
its intended use. Detailed 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
equal” description may be used as a means to define the performance or
other salient requirements of a procurement. The specific features of the
named brand which must be met by offerors shall be clearly stated; and

(ii) Identify all requirements which the offerors must fulfill and all
other factors to be used in evaluating bids or proposals.

(4) Grantees and subgrantees will ensure that all prequalified lists of
persons, firms, or products which are used in acquiring goods and services
are current and include enough qualified sources to ensure maximum open
and free competition. Also, grantees and subgrantees will not preclude
potential bidders from qualifying during the solicitation period.

(d) Methods of procurement to be followed. (1) Procurement by
small purchase procedures. Small purchase procedures are those
relatively simple and informal procurement methods for securing services,
supplies, or other property that do not cost more than the simplified
acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at
$100,000). If small purchase procedures are used, price or rate quotations
shall be obtained from an adequate number of qualified sources.

(2) Procurement by sealed bids (formal advertising). Bids are
publicly solicited and a firm-fixed-price contract (lump sum or unit
price) is awarded to the responsible bidder whose bid, conforming 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
procuring construction, if the conditions in §3016.36(d)(2)(i) apply.

(i) In order for sealed bidding to be feasible, the following
conditions should be present:

(A) A complete, adequate, and realistic specification or purchase
description is available;

(B) Two or more responsible bidders are willing and able to compete
effectively and for the business; and

(C) The procurement lends itself to a firm fixed price contract and the
selection of the successful bidder can be made principally on the basis of
price.

(ii) If sealed bids are used, the following requirements apply:

(A) The invitation for bids will be publicly advertised and bids shall
be solicited from an adequate number of known suppliers, providing them
sufficient time prior to the date set for opening the bids;

(B) The invitation for bids, which will include any specifications and
pertinent attachments, shall define the items or services in order for the
bidder to properly respond;

(C) All bids will be publicly opened at the time and place prescribed
in the invitation for bids;

(D) 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, transportation cost, and life cycle
costs shall 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

(E) Any or all bids may be rejected if there is a sound documented
reason.

(3) Procurement by competitive proposals. 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 awarded. It is generally used when conditions are not
appropriate for the use of sealed bids. If this method is used, the
following requirements apply:

(i) Requests for proposals will be publicized and identify all
evaluation factors and their relative importance. Any response to
publicized requests for proposals shall be honored to the maximum extent
practical;

(ii) Proposals will be solicited from an adequate number of qualified
sources;

(iii) Grantees and subgrantees will have a method for conducting
technical evaluations of the proposals received and for selecting
awardees;

(iv) Awards will be made to the responsible firm whose proposal is most
advantageous to the program, with price and other factors considered;
and

(v) Grantees and subgrantees may use competitive proposal procedures
for qualifications-based procurement of architectural/engineering (A/E)
professional services whereby competitors' qualifications are evaluated
and the most qualified competitor is selected, subject to negotiation of
fair and reasonable compensation. The method, where price is not used as a
selection factor, can only be used in procurement of A/E professional
services. It cannot be used to purchase other types of services though A/E
firms are a potential source to perform the proposed effort.

(4) Procurement by noncompetitive proposals is procurement
through solicitation of a proposal from only one source, or after
solicitation of a number of sources, competition is determined
inadequate.

(i) Procurement by noncompetitive proposals may be used only when the
award of a contract is infeasible under small purchase procedures, sealed
bids or competitive proposals and one of the following circumstances
applies:

(A) The item is available only from a single source;

(B) The public exigency or emergency for the requirement will not
permit a delay resulting from competitive solicitation;

(C) The awarding agency authorizes noncompetitive proposals; or

(D) After solicitation of a number of sources, competition is
determined inadequate.

(ii) Cost analysis, i.e. , verifying the proposed cost data, the
projections of the data, and the evaluation of the specific elements of
costs and profits, is required.

(iii) Grantees and subgrantees may be required to submit the proposed
procurement to the awarding agency for pre-award review in accordance with
paragraph (g) of this section.

(e) Contracting with small and minority firms, women's business
enterprise and labor surplus area firms. (1) The grantee and
subgrantee will take all necessary affirmative steps to assure that
minority firms, women's business enterprises, and labor surplus area firms
are used when possible.

(2) Affirmative steps shall include:

(i) Placing qualified small and minority businesses and women's
business enterprises on solicitation lists;

(ii) Assuring that small and minority businesses, and women's business
enterprises are solicited whenever they are potential sources;

(iii) Dividing total requirements, when economically feasible, into
smaller tasks or quantities to permit maximum participation by small and
minority business, and women's business enterprises;

(iv) Establishing delivery schedules, where the requirement permits,
which encourage participation by small and minority business, and women's
business enterprises;

(v) Using the services and assistance of the Small Business
Administration, and the Minority Business Development Agency of the
Department of Commerce; and

(vi) Requiring the prime contractor, if subcontracts are to be let, to
take the affirmative steps listed in paragraphs (e)(2) (i) through (v) of
this section.

(f) Contract cost and price. (1) Grantees and subgrantees must
perform a cost or price analysis in connection with every procurement
action including contract modifications. The method and degree of analysis
is dependent on the facts surrounding the particular procurement
situation, but as a starting point, grantees must make independent
estimates before receiving bids or proposals. A cost analysis must be
performed when the offeror is required to submit the elements of his
estimated cost, e.g., under professional, consulting, and architectural
engineering services contracts. A cost analysis will be necessary when
adequate price competition is lacking, and for sole source procurements,
including contract modifications or change orders, unless price
reasonableness can be established on the basis of a catalog or market
price of a commercial product sold in substantial quantities to the
general public or based on prices set by law or regulation. A price
analysis will be used in all other instances to determine the
reasonableness of the proposed contract price.

(2) Grantees and subgrantees will negotiate 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 profit, consideration will be given to the
complexity of the work to be performed, the risk borne by the contractor,
the contractor's investment, the amount of subcontracting, the quality of
its record of past performance, and industry profit rates in the
surrounding geographical area for similar work.

(3) Costs or prices based on estimated costs for contracts under grants
will be allowable only to the extent that costs incurred or cost estimates
included in negotiated prices are consistent with Federal cost principles
(see §3016.22). Grantees may reference their own cost principles that
comply with the applicable Federal cost principles.

(4) The cost plus a percentage of cost and percentage of construction
cost methods of contracting shall not be used.

(g) Awarding agency review. (1) Grantees and subgrantees must
make available, upon request of the awarding agency, technical
specifications on proposed procurements where the awarding agency believes
such review is needed to ensure that the item and/or service specified is
the one being proposed for purchase. This review generally will take place
prior to the time the specification is incorporated into a solicitation
document. However, if the grantee or subgrantee desires to have the review
accomplished after a solicitation has been developed, the awarding agency
may still review the specifications, with such review usually limited to
the technical aspects of the proposed purchase.

(2) Grantees and subgrantees must on request make available for
awarding agency pre-award review procurement documents, such as requests
for proposals or invitations for bids, independent cost estimates, etc.
when:

(i) A grantee's or subgrantee's procurement procedures or operation
fails to comply with the procurement standards in this section; or

(ii) 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; or

(iii) The procurement, which is expected to exceed the simplified
acquisition threshold, specifies a “brand name” product; or

(iv) The proposed award 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

(v) A proposed contract modification changes the scope of a contract or
increases the contract amount by more than the simplified acquisition
threshold.

(3) A grantee or subgrantee will be exempt from the pre-award review in
paragraph (g)(2) of this section if the awarding agency determines that
its procurement systems comply with the standards of this section.

(i) A grantee or subgrantee may request that its procurement system be
reviewed by the awarding agency to determine whether its system meets
these standards in order for its system to be certified. Generally, these
reviews shall occur where there is a continuous high-dollar funding, and
third-party contracts are awarded on a regular basis.

(ii) A grantee or subgrantee may self-certify its procurement system.
Such self-certification shall not limit the awarding agency's right to
survey the system. Under a self-certification procedure, awarding agencies
may wish to rely on written assurances from the grantee or subgrantee that
it is complying with these standards. A grantee or subgrantee will cite
specific procedures, regulations, standards, etc., as being in compliance
with these requirements and have its system available for review.

(h) Bonding requirements. For construction or facility
improvement contracts or subcontracts exceeding the simplified acquisition
threshold, the awarding agency may accept the bonding policy and
requirements of the grantee or subgrantee provided the awarding agency has
made a determination that the awarding agency's interest is adequately
protected. If such a determination has not been made, the minimum
requirements shall be as follows:

(1) A bid guarantee from each bidder equivalent to five percent of
the bid price. The “bid guarantee” shall consist of a firm commitment
such as a bid bond, certified check, or other negotiable instrument
accompanying a bid as assurance that the bidder will, upon acceptance of
his bid, execute such contractual documents as may be required within the
time specified.

(2) A performance bond on the part of the contractor for 100 percent
of the contract price. A “performance bond” is one executed in
connection with a contract to secure fulfillment of all the contractor's
obligations under such contract.

(3) A payment bond on the part of the contractor for 100 percent of
the contract price. A “payment bond” is one executed in connection
with a contract to assure payment as required by law of all persons
supplying labor and material in the execution of the work provided for in
the contract.

(i) Contract provisions. A grantee's and subgrantee's contracts
must contain provisions in paragraph (i) of this section. Federal agencies
are permitted to require changes, remedies, changed conditions, access and
records retention, suspension of work, and other clauses approved by the
Office of Federal Procurement Policy.

(1) Administrative, contractual, or legal remedies in instances where
contractors violate or breach contract terms, and provide for such
sanctions and penalties as may be appropriate. (Contracts more than the
simplified acquisition threshold)

(2) Termination for cause and for convenience by the grantee or
subgrantee including the manner by which it will be effected and the basis
for settlement. (All contracts in excess of $10,000)

(3) Compliance with Executive Order 11246 of September 24, 1965,
entitled “Equal Employment Opportunity,” as amended by Executive Order
11375 of October 13, 1967, and as supplemented in Department of Labor
regulations (41 CFR chapter 60). (All construction contracts awarded in
excess of $10,000 by grantees and their contractors or subgrantees)

(4) Compliance with the Copeland “Anti-Kickback” Act (18 U.S.C. 874) as
supplemented in Department of Labor regulations (29 CFR Part 3). (All
contracts and subgrants for construction or repair)

(5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a–7) as
supplemented by Department of Labor regulations (29 CFR Part 5).
(Construction contracts in excess of $2000 awarded by grantees and
subgrantees when required by Federal grant program legislation)

(6) Compliance with Sections 103 and 107 of the Contract Work Hours and
Safety Standards Act (40 U.S.C. 327–330) as supplemented by Department of
Labor regulations (29 CFR Part 5). (Construction contracts awarded by
grantees and subgrantees in excess of $2000, and in excess of $2500 for
other contracts which involve the employment of mechanics or laborers)

(7) Notice of awarding agency requirements and regulations pertaining
to reporting.

(8) Notice of awarding agency requirements and regulations pertaining
to patent rights with respect to any discovery or invention which arises
or is developed in the course of or under such contract.

(9) Awarding agency requirements and regulations pertaining to
copyrights and rights in data.

(10) Access by the grantee, the subgrantee, the Federal grantor agency,
the Comptroller General of the United States, or any of their duly
authorized representatives to any books, documents, papers, and records of
the contractor which are directly pertinent to that specific contract for
the purpose of making audit, examination, excerpts, and
transcriptions.

(11) Retention of all required records for three years after grantees
or subgrantees make final payments and all other pending matters are
closed.

(12) Compliance with all applicable standards, orders, or requirements
issued under section 306 of the Clean Air Act (42 U.S.C. 1857(h)), section
508 of the Clean Water Act (33 U.S.C. 1368), Executive Order 11738, and
Environmental Protection Agency regulations (40 CFR part 15). (Contracts,
subcontracts, and subgrants of amounts in excess of $100,000)

(13) Mandatory standards and policies relating to energy efficiency
which are contained in the state energy conservation plan issued in
compliance with the Energy Policy and Conservation Act (Pub. L. 94–163, 89
Stat. 871).

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 60 FR 19639, 19641,
Apr. 19, 1995]

§ 3016.37   Subgrants.

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(a) States. States shall follow state law and procedures when
awarding and administering subgrants (whether on a cost reimbursement or
fixed amount basis) of financial assistance to local and Indian tribal
governments. States shall:

(1) Ensure that every subgrant includes any clauses required by Federal
statute and executive orders and their implementing regulations;

(2) Ensure that subgrantees are aware of requirements imposed upon them
by Federal statute and regulation;

(3) Ensure that a provision for compliance with §3016.42 is placed in
every cost reimbursement subgrant; and

(4) Conform any advances of grant funds to subgrantees substantially to
the same standards of timing and amount that apply to cash advances by
Federal agencies.

(b) All other grantees. All other grantees shall follow the
provisions of this part which are applicable to awarding agencies when
awarding and administering subgrants (whether on a cost reimbursement or
fixed amount basis) of financial assistance to local and Indian tribal
governments. Grantees shall:

(1) Ensure that every subgrant includes a provision for compliance with
this part;

(2) Ensure that every subgrant includes any clauses required by Federal
statute and executive orders and their implementing regulations; and

(3) Ensure that subgrantees are aware of requirements imposed upon them
by Federal statutes and regulations.

(c) Exceptions. By their own terms, certain provisions of this
part do not apply to the award and administration of subgrants:

(1) Section 3016.10;

(2) Section 3016.11;

(3) The letter-of-credit procedures specified in Treasury Regulations
at 31 CFR part 205, cited in §3016.21; and

(4) Section 3016.50.

Reports, Records, Retention, and Enforcement

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§ 3016.40   Monitoring and reporting program
performance.

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(a) Monitoring by grantees. Grantees are responsible for
managing the day-to-day operations of grant and subgrant supported
activities. Grantees must monitor grant and subgrant supported activities
to assure compliance with applicable Federal requirements and that
performance goals are being achieved. Grantee monitoring must cover each
program, function or activity.

(b) Nonconstruction performance reports. The Federal agency may,
if it decides that performance information available from subsequent
applications contains sufficient information to meet its programmatic
needs, require the grantee to submit a performance report only upon
expiration or termination of grant support. Unless waived by the Federal
agency this report will be due on the same date as the final Financial
Status Report.

(1) Grantees shall submit annual performance reports unless the
awarding agency requires quarterly or semi-annual reports. However,
performance reports will not be required more frequently than quarterly.
Annual reports shall be due 90 days after the grant year, quarterly or
semi-annual reports shall be due 30 days after the reporting period. The
final performance report will be due 90 days after the expiration or
termination of grant support. If a justified request is submitted by a
grantee, the Federal agency may extend the due date for any performance
report. Additionally, requirements for unnecessary performance reports may
be waived by the Federal agency.

(2) Performance reports will contain, for each grant, brief information
on the following:

(i) A comparison of actual accomplishments to the objectives
established for the period. Where the output of the project can be
quantified, a computation of the cost per unit of output may be required
if that information will be useful.

(ii) The reasons for slippage if established objectives were not
met.

(iii) Additional pertinent information including, when appropriate,
analysis and explanation of cost overruns or high unit costs.

(3) Grantees will not be required to submit more than the original and
two copies of performance reports.

(4) Grantees will adhere to the standards in this section in
prescribing performance reporting requirements for subgrantees.

(c) Construction performance reports. For the most part, on-site
technical inspections and certified percentage-of-completion data are
relied on heavily by Federal agencies to monitor progress under
construction grants and subgrants. The Federal agency will require
additional formal performance reports only when considered necessary, and
never more frequently than quarterly.

(d) Significant developments. Events may occur between the
scheduled performance reporting dates which have significant impact upon
the grant or subgrant supported activity. In such cases, the grantee must
inform the Federal agency as soon as the following types of conditions
become known:

(1) Problems, delays, or adverse conditions which will materially
impair the ability to meet the objective of the award. This disclosure
must include a statement of the action taken, or contemplated, and any
assistance needed to resolve the situation.

(2) Favorable developments which enable meeting time schedules and
objectives sooner or at less cost than anticipated or producing more
beneficial results than originally planned.

(e) Federal agencies may make site visits as warranted by program
needs.

(f) Waivers, extensions. (1) Federal agencies may waive any
performance report required by this part if not needed.

(2) The grantee may waive any performance report from a subgrantee when
not needed. The grantee may extend the due date for any performance report
from a subgrantee if the grantee will still be able to meet its
performance reporting obligations to the Federal agency.

§ 3016.41   Financial reporting.

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(a) General. (1) Except as provided in paragraphs (a) (2) and
(5) of this section, grantees will use only the forms specified in
paragraphs (a) through (e) of this section, and such supplementary or
other forms as may from time to time be authorized by OMB, for:

(i) Submitting financial reports to Federal agencies, or

(ii) Requesting advances or reimbursements when letters of credit are
not used.

(2) Grantees need not apply the forms prescribed in this section in
dealing with their subgrantees. However, grantees shall not impose more
burdensome requirements on subgrantees.

(3) Grantees shall follow all applicable standard and supplemental
Federal agency instructions approved by OMB to the extent required under
the Paperwork Reduction Act of 1980 for use in connection with forms
specified in paragraphs (b) through (e) of this section. Federal agencies
may issue substantive supplementary instructions only with the approval of
OMB. Federal agencies may shade out or instruct the grantee to disregard
any line item that the Federal agency finds unnecessary for its
decisionmaking purposes.

(4) Grantees will not be required to submit more than the original and
two copies of forms required under this part.

(5) Federal agencies may provide computer outputs to grantees to
expedite or contribute to the accuracy of reporting. Federal agencies may
accept the required information from grantees in machine usable format or
computer printouts instead of prescribed forms.

(6) Federal agencies may waive any report required by this section if
not needed.

(7) Federal agencies may extend the due date of any financial report
upon receiving a justified request from a grantee.

(b) Financial Status Report —(1) Form. Grantees will use
Standard Form 269 or 269A, Financial Status Report, to report the status
of funds for all nonconstruction grants and for construction grants when
required in accordance with paragraph §3016.41(e)(2)(iii) of this
section.

(2) Accounting basis. Each grantee will report program outlays
and program income on a cash or accrual basis as prescribed by the
awarding agency. If the Federal agency requires accrual information and
the grantee's accounting records are not normally kept on the accural
basis, the grantee shall not be required to convert its accounting system
but shall develop such accrual information through and analysis of the
documentation on hand.

(3) Frequency. The Federal agency may prescribe the frequency of
the report for each project or program. However, the report will not be
required more frequently than quarterly. If the Federal agency does not
specify the frequency of the report, it will be submitted annually. A
final report will be required upon expiration or termination of grant
support.

(4) Due date. When reports are required on a quarterly or
semiannual basis, they will be due 30 days after the reporting period.
When required on an annual basis, they will be due 90 days after the grant
year. Final reports will be due 90 days after the expiration or
termination of grant support.

(c) Federal Cash Transactions Report —(1) Form. (i) For
grants paid by letter or credit, Treasury check advances or electronic
transfer of funds, the grantee will submit the Standard Form 272, Federal
Cash Transactions Report, and when necessary, its continuation sheet,
Standard Form 272a, unless the terms of the award exempt the grantee from
this requirement.

(ii) These reports will be used by the Federal agency to monitor cash
advanced to grantees and to obtain disbursement or outlay information for
each grant from grantees. The format of the report may be adapted as
appropriate when reporting is to be accomplished with the assistance of
automatic data processing equipment provided that the information to be
submitted is not changed in substance.

(2) Forecasts of Federal cash requirements. Forecasts of Federal
cash requirements may be required in the “Remarks” section of the
report.

(3) Cash in hands of subgrantees. When considered necessary and
feasible by the Federal agency, grantees may be required to report the
amount of cash advances in excess of three days' needs in the hands of
their subgrantees or contractors and to provide short narrative
explanations of actions taken by the grantee to reduce the excess
balances.

(4) Frequency and due date. Grantees must submit the report no
later than 15 working days following the end of each quarter. However,
where an advance either by letter of credit or electronic transfer of
funds is authorized at an annualized rate of one million dollars or more,
the Federal agency may require the report to be submitted within 15
working days following the end of each month.

(d) Request for advance or reimbursement —(1) Advance
payments. Requests for Treasury check advance payments will be
submitted on Standard Form 270, Request for Advance or Reimbursement.
(This form will not be used for drawdowns under a letter of credit,
electronic funds transfer or when Treasury check advance payments are made
to the grantee automatically on a predetermined basis.)

(2) Reimbursements. Requests for reimbursement under
nonconstruction grants will also be submitted on Standard Form 270. (For
reimbursement requests under construction grants, see paragraph (e)(1) of
this section.)

(3) The frequency for submitting payment requests is treated in
§3016.41(b)(3).

(e) Outlay report and request for reimbursement for construction
programs. (1) Grants that support construction activities paid by
reimbursement method.

(i) Requests for reimbursement under construction grants will be
submitted on Standard Form 271, Outlay Report and Request for
Reimbursement for Construction Programs. Federal agencies may, however,
prescribe the Request for Advance or Reimbursement form, specified in
§3016.41(d), instead of this form.

(ii) The frequency for submitting reimbursement requests is treated in
§3016.41(b)(3).

(2) Grants that support construction activities paid by letter of
credit, electronic funds transfer or Treasury check advance.

(i) When a construction grant is paid by letter of credit, electronic
funds transfer or Treasury check advances, the grantee will report its
outlays to the Federal agency using Standard Form 271, Outlay Report and
Request for Reimbursement for Construction Programs. The Federal agency
will provide any necessary special instruction. However, frequency and due
date shall be governed by §3016.41(b) (3) and (4).

(ii) When a construction grant is paid by Treasury check advances based
on periodic requests from the grantee, the advances will be requested on
the form specified in §3016.41(d).

(iii) The Federal agency may substitute the Financial Status Report
specified in §3016.41(b) for the Outlay Report and Request for
Reimbursement for Construction Programs.

(3) Accounting basis. The accounting basis for the Outlay Report
and Request for Reimbursement for Construction Programs shall be governed
by §3016.41(b)(2).

§ 3016.42   Retention and access requirements for
records.

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(a) Applicability. (1) This section applies to all financial and
programmatic records, supporting documents, statistical records, and other
records of grantees or subgrantees which are:

(i) Required to be maintained by the terms of this part, program
regulations or the grant agreement, or

(ii) Otherwise reasonably considered as pertinent to program
regulations or the grant agreement.

(2) This section does not apply to records maintained by contractors or
subcontractors. For a requirement to place a provision concerning records
in certain kinds of contracts, see §3016.36(i)(10).

(b) Length of retention period. (1) Except as otherwise
provided, records must be retained for three years from the starting date
specified in paragraph (c) of this section.

(2) If any litigation, claim, negotiation, audit or other action
involving the records has been started before the expiration of the 3-year
period, the records must be retained until completion of the action and
resolution of all issues which arise from it, or until the end of the
regular 3-year period, whichever is later.

(3) To avoid duplicate recordkeeping, awarding agencies may make
special arrangements with grantees and subgrantees to retain any records
which are continuously needed for joint use. The awarding agency will
request transfer of records to its custody when it determines that the
records possess long-term retention value. When the records are
transferred to or maintained by the Federal agency, the 3-year retention
requirement is not applicable to the grantee or subgrantee.

(c) Starting date of retention period —(1) General. When
grant support is continued or renewed at annual or other intervals, the
retention period for the records of each funding period starts on the day
the grantee or subgrantee submits to the awarding agency its single or
last expenditure report for that period. However, if grant support is
continued or renewed quarterly, the retention period for each year's
records starts on the day the grantee submits its expenditure report for
the last quarter of the Federal fiscal year. In all other cases, the
retention period starts on the day the grantee submits its final
expenditure report. If an expenditure report has been waived, the
retention period starts on the day the report would have been due.

(2) Real property and equipment records. The retention period
for real property and equipment records starts from the date of the
disposition or replacement or transfer at the direction of the awarding
agency.

(3) Records for income transactions after grant or subgrant support.
In some cases grantees must report income after the period of grant
support. Where there is such a requirement, the retention period for the
records pertaining to the earning of the income starts from the end of the
grantee's fiscal year in which the income is earned.

(4) Indirect cost rate proposals, cost allocations plans, etc.
This paragraph applies to the following types of documents, and their
supporting records: indirect cost rate computations or proposals, cost
allocation plans, and any similar accounting computations of the rate at
which a particular group of costs is chargeable (such as computer usage
chargeback rates or composite fringe benefit rates).

(i) If submitted for negotiation. If the proposal, plan, or
other computation is required to be submitted to the Federal Government
(or to the grantee) to form the basis for negotiation of the rate, then
the 3-year retention period for its supporting records starts from the
date of such submission.

(ii) If not submitted for negotiation. If the proposal, plan, or
other computation is not required to be submitted to the Federal
Government (or to the grantee) for negotiation purposes, then the 3-year
retention period for the proposal plan, or computation and its supporting
records starts from end of the fiscal year (or other accounting period)
covered by the proposal, plan, or other computation.

(d) Substitution of microfilm. Copies made by microfilming,
photocopying, or similar methods may be substituted for the original
records.

(e) Access to records —(1) Records of grantees and
subgrantees. The awarding agency and the Comptroller General of the
United States, or any of their authorized representatives, shall have the
right of access to any pertinent books, documents, papers, or other
records of grantees and subgrantees which are pertinent to the grant, in
order to make audits, examinations, excerpts, and transcripts.

(2) Expiration of right of access. The rights of access in this
section must not be limited to the required retention period but shall
last as long as the records are retained.

(f) Restrictions on public access. The Federal Freedom of
Information Act (5 U.S.C. 552) does not apply to records Unless required
by Federal, State, or local law, grantees and subgrantees are not required
to permit public access to their records.

§ 3016.43   Enforcement.

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(a) Remedies for noncompliance. If a grantee or subgrantee
materially fails to comply with any term of an award, whether stated in a
Federal statute or regulation, an assurance, in a State plan or
application, a notice of award, or elsewhere, the awarding agency may take
one or more of the following actions, as appropriate in the
circumstances:

(1) Temporarily withhold cash payments pending correction of the
deficiency by the grantee or subgrantee or more severe enforcement action
by the awarding agency,

(2) Disallow (that is, deny both use of funds and matching credit for)
all or part of the cost of the activity or action not in compliance,

(3) Wholly or partly suspend or terminate the current award for the
grantee's or subgrantee's program,

(4) Withhold further awards for the program, or

(5) Take other remedies that may be legally available.

(b) Hearings, appeals. In taking an enforcement action, the
awarding agency will provide the grantee or subgrantee an opportunity for
such hearing, appeal, or other administrative proceeding to which the
grantee or subgrantee is entitled under any statute or regulation
applicable to the action involved.

(c) Effects of suspension and termination. Costs of grantee or
subgrantee resulting from obligations incurred by the grantee or
subgrantee during a suspension or after termination of an award are not
allowable unless the awarding agency expressly authorizes them in the
notice of suspension or termination or subsequently. Other grantee or
subgrantee costs during suspension or after termination which are
necessary and not reasonably avoidable are allowable if:

(1) The costs result from obligations which were properly incurred by
the grantee or subgrantee before the effective date of suspension or
termination, are not in anticipation of it, and, in the case of a
termination, are noncancellable, and,

(2) The costs would be allowable if the award were not suspended or
expired normally at the end of the funding period in which the termination
takes effect.

(d) Relationship to Debarment and Suspension. The enforcement
remedies identified in this section, including suspension and termination,
do not preclude grantee or subgrantee from being subject to “Debarment and
Suspension” under E.O. 12549 (see §3016.35).

§ 3016.44   Termination for
convenience.

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Except as provided in §3016.43 awards may be terminated in whole or in
part only as follows:

(a) By the awarding agency with the consent of the grantee or
subgrantee in which case the two parties shall agree upon the termination
conditions, including the effective date and in the case of partial
termination, the portion to be terminated, or

(b) By the grantee or subgrantee upon written notification to the
awarding agency, setting forth the reasons for such termination, the
effective date, and in the case of partial termination, the portion to be
terminated. However, if, in the case of a partial termination, the
awarding agency determines that the remaining portion of the award will
not accomplish the purposes for which the award was made, the awarding
agency may terminate the award in its entirety under either §3016.43 or
paragraph (a) of this section.

Subpart D—After-the-Grant Requirements

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§ 3016.50   Closeout.

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(a) General. The Federal agency will close out the award when it
determines that all applicable administrative actions and all required
work of the grant has been completed.

(b) Reports. Within 90 days after the expiration or termination
of the grant, the grantee must submit all financial, performance, and
other reports required as a condition of the grant. Upon request by the
grantee, Federal agencies may extend this timeframe. These may include but
are not limited to:

(1) Final performance or progress report.

(2) Financial Status Report (SF 269) or Outlay Report and Request for
Reimbursement for Construction Programs (SF–271) (as applicable.)

(3) Final request for payment (SF–270) (if applicable).

(4) Invention disclosure (if applicable).

(5) Federally-owned property report:

In accordance with §3016.32(f), a grantee must submit an inventory of
all federally owned property (as distinct from property acquired with
grant funds) for which it is accountable and request disposition
instructions from the Federal agency of property no longer needed.

(c) Cost adjustment. The Federal agency will, within 90 days
after receipt of reports in paragraph (b) of this section, make upward or
downward adjustments to the allowable costs.

(d) Cash adjustments. (1) The Federal agency will make prompt
payment to the grantee for allowable reimbursable costs.

(2) The grantee must immediately refund to the Federal agency any
balance of unobligated (unencumbered) cash advanced that is not authorized
to be retained for use on other grants.

§ 3016.51   Later disallowances and
adjustments.

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The closeout of a grant does not affect:

(a) The Federal agency's right to disallow costs and recover funds on
the basis of a later audit or other review;

(b) The grantee's obligation to return any funds due as a result of
later refunds, corrections, or other transactions;

(c) Records retention as required in §3016.42;

(d) Property management requirements in §§3016.31 and 3016.32; and

(e) Audit requirements in §3016.26.

§ 3016.52   Collection of amounts due.

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(a) Any funds paid to a grantee in excess of the amount to which the
grantee is finally determined to be entitled under the terms of the award
constitute a debt to the Federal Government. If not paid within a
reasonable period after demand, the Federal agency may reduce the debt
by:

(1) Making an adminstrative offset against other requests for
reimbursements,

(2) Withholding advance payments otherwise due to the grantee, or

(3) Other action permitted by law.

(b) Except where otherwise provided by statutes or regulations, the
Federal agency will charge interest on an overdue debt in accordance with
the Federal Claims Collection Standards (4 CFR Ch. II). The date from
which interest is computed is not extended by litigation or the filing of
any form of appeal.

Subpart E—Entitlement

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Source:   65 FR 49480, Aug. 14, 2000,
unless otherwise noted.

§ 3016.60   Special procurement
provisions.

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(a) Notwithstanding §§3016.36(a) and 3016.37(a), States conducting
procurements under grants or subgrants under the USDA entitlement programs
specified in §3016.4(b) may elect to follow either the State laws,
policies, and procedures as authorized by §§3016.36(a) and 3016.37(a), or
the procurement standards for other governmental grantees and all
governmental subgrantees in accordance with §3016.36(b) through (i).
Regardless of the option selected, States shall ensure that paragraphs (b)
and (c) of this section are followed

(b) When conducting a procurement under the USDA entitlement programs
specified in §3016.4(b) of this part, a grantee or subgrantee may enter
into a contract with a party that has provided specification information
to the grantee or subgrantee for the grantee's or subgrantee's use in
developing contract specifications for conducting such a procurement. In
order to ensure objective contractor performance and eliminate unfair
competitive advantage, however, a person that develops or drafts
specifications, requirements, statements of work, invitations for bids,
requests for proposals, contract terms and conditions or other documents
for use by a grantee or subgrantee in conducting a procurement under the
USDA entitlement programs specified in §3016.4(b) shall be excluded from
competing for such procurements. Such persons are ineligible for contract
awards resulting from such procurements regardless of the procurement
method used. However, prospective contractors may provide grantees or
subgrantees with specification information related to a procurement and
still compete for the procurement if the grantee or subgrantee, and not
the prospective contractor, develops or drafts the specifications,
requirements, statements of work, invitations for bid, and/or requests for
proposals used to conduct the procurement.

(c) Procurements under USDA entitlement programs specified in
§3016.4(b) shall be conducted in a manner that prohibits the use of
statutorily or administratively imposed in-State or local geographic
preferences except as provided for in §3016.36(c)(2).

§ 3016.61   Financial reporting.

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The financial reporting provisions found in §3016.41 do not apply to
any of the USDA entitlement programs listed in §3016.4(b) except the Food
Distribution Program on Indian Reservations. The financial reporting
requirements for these entitlement programs are found in the following
program regulations:

(a) For the National School Lunch Program, 7 CFR part 210;

(b) For the Special Milk Program for Children, 7 CFR part 215;

(c) For the School Breakfast Program, 7 CFR part 220;

(d) For the Summer Food Service Program for Children, 7 CFR part
225;

(e) For the Child and Adult Care Food Program, 7 CFR part 226;

(f) For State Administrative Expense Funds under section 7 of the Child
Nutrition Act of 1966, 7 CFR part 235; and

(g) For State Administrative Expenses under section 16 of the Food
Stamp Act of 1977, 7 CFR part 277.

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