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e-CFR
Data is current as of July 2, 2010

Title 7:
Agriculture

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PART 3015—UNIFORM FEDERAL ASSISTANCE REGULATIONS

Section Contents

Subpart
A—General
§ 3015.1   Purpose
and scope of this part.
§ 3015.2   Applicability.
§ 3015.3   Conflicting
policies and deviations.
§ 3015.4   Special
restrictive terms.

Subpart
B—Cash Depositories
§ 3015.10   Physical
segregation and eligibility.
§ 3015.11   Separate
bank accounts.
§ 3015.12   Moneys
advanced to recipients.
§ 3015.13   Minority
and women-owned banks.

Subpart
C—Bonding and Insurance
§ 3015.15   General.
§ 3015.16   Construction
and facility improvement.
§ 3015.17   Fidelity
bonds.
§ 3015.18   Source
of bonds.

Subpart
D—Record Retention and Access
Requirements
§ 3015.20   Applicability.
§ 3015.21   Retention
period.
§ 3015.22   Starting
date of retention period.
§ 3015.23   Microfilm.
§ 3015.24   Access
to records.
§ 3015.25   Restrictions
to public access.

Subpart
E—Waiver of “Single” State Agency
Requirements
§ 3015.30   Waiver
of “single” State agency requirements.

Subpart
F—Grant Related Income
§ 3015.40   Scope.
§ 3015.41   General
program income.
§ 3015.42   Proceeds
from sale of real property and from sale of equipment and supplies
acquired for use.
§ 3015.43   Royalties
and other income earned from a copyrighted work.
§ 3015.44   Royalties
or equivalent income earned from patents or from
inventions.
§ 3015.45   Other
program income.
§ 3015.46   Interest
earned on advances of grant funds.

Subpart
G—Cost-Sharing or Matching
§ 3015.50   Scope.
§ 3015.51   Acceptable
contributions and costs.
§ 3015.52   Qualifications
and exceptions.
§ 3015.53   Valuation
of donated services.
§ 3015.54   Valuation
of donated supplies and loaned equipment or space.
§ 3015.55   Valuation
of donated equipment, buildings, and land.
§ 3015.56   Appraisal
of real property.

Subpart
H—Standards for Financial Management
Systems
§ 3015.60   Scope.
§ 3015.61   Financial
management standards.

Subpart
I [Reserved]

Subpart
J—Financial Reporting Requirements
§ 3015.80   Scope
and applicability.
§ 3015.81   General.
§ 3015.82   Financial
status report.
§ 3015.83   Federal
cash transactions report.
§ 3015.84   Request
for advance or reimbursement.
§ 3015.85   Outlay
report and request for reimbursement for construction
programs.

Subpart
K—Monitoring and Reporting Program
Performance
§ 3015.90   Scope.
§ 3015.91   Monitoring
by recipients.
§ 3015.92   Performance
reports.
§ 3015.93   Significant
developments.
§ 3015.94   Site
visits.
§ 3015.95   Waivers,
extensions and enforcement actions.

Subpart
L—Payment Requirements
§ 3015.100   Scope.
§ 3015.101   General.
§ 3015.102   Payment
methods.
§ 3015.103   Withholding
payments.
§ 3015.104   Requesting
advances or reimbursements.
§ 3015.105   Payments
to subrecipients.

Subpart
M—Programmatic Changes and Budget
Revisions
§ 3015.110   Scope
and applicability.
§ 3015.111   Cost
principles.
§ 3015.112   Approval
procedures.
§ 3015.113   Programmatic
changes.
§ 3015.114   Budgets—general.
§ 3015.115   Budget
revisions.
§ 3015.116   Construction
and nonconstruction work under the same grant, subgrant, or cooperative
agreement.

Subpart
N—Grant and Subgrant Closeout, Suspension and
Termination
§ 3015.120   Closeout.
§ 3015.121   Amounts
payable to the Federal government.
§ 3015.122   Violation
of terms.
§ 3015.123   Suspension.
§ 3015.124   Termination.
§ 3015.125   Applicability
to subgrants.

Subparts
O–P [Reserved]

Subpart
Q—Application for Federal Assistance
§ 3015.150   Scope
and applicability.
§ 3015.151   Authorized
forms.
§ 3015.152   Preapplication
for Federal assistance.
§ 3015.153   Notice
of preapplication review action.
§ 3015.154   Application
for Federal assistance (nonconstruction programs).
§ 3015.155   Application
for Federal assistance (construction programs).
§ 3015.156   Application
for Federal assistance (short form).
§ 3015.157   Authorized
form for nongovernmental organizations.
§ 3015.158   Competition
in the awarding of discretionary grants and cooperative
agreements.

Subpart
R—Property
§ 3015.160   Scope
and applicability.
§ 3015.161   Additional
requirements.
§ 3015.162   Title
to real property, equipment and supplies.
§ 3015.163   Real
property.
§ 3015.164   Statutory
exemptions for equipment and supplies.
§ 3015.165   Rights
to require transfer of equipment.
§ 3015.166   Use
of equipment.
§ 3015.167   Replacement
of equipment.
§ 3015.168   Disposal
of equipment.
§ 3015.169   Equipment
management requirements.
§ 3015.170   Damage,
loss, or theft of equipment.
§ 3015.171   Unused
supplies.
§ 3015.172   Federal
share of real property, equipment, and supplies.
§ 3015.173   Using
or returning the Federal share.
§ 3015.174   Subrecipient's
share.
§ 3015.175   Intangible
personal property.

Subpart
S—Procurement
§ 3015.180   Scope
and applicability.
§ 3015.181   Standards
of conduct.
§ 3015.182   Open
and free competition.
§ 3015.183   Access
to contractor records.
§ 3015.184   Equal
employment opportunity.

Subpart
T—Cost Principles
§ 3015.190   Scope.
§ 3015.191   Governments.
§ 3015.192   Institutions
of higher education.
§ 3015.193   Other
non-profit organizations.
§ 3015.194   For-profit
organizations.
§ 3015.195   Subgrants
and cost-type contracts.
§ 3015.196   Costs
allowable with approval.

Subpart
U—Miscellaneous
§ 3015.200   Acknowledgement
of support on publications and audiovisuals.
§ 3015.201   Use
of consultants.
§ 3015.202   Limits
on total payments to the recipient.
§ 3015.203   [Reserved]
§ 3015.204   Federal
Register publications.
§ 3015.205   General
provisions for grants and cooperative agreements with institutions of
higher education, other nonprofit organizations, and
hospitals.

Subpart
V—Intergovernmental Review of Department of Agriculture Programs and
Activities
§ 3015.300   Purpose.
§ 3015.301   Definitions.
§ 3015.302   Applicability.
§ 3015.303   Secretary's
general responsibilities.
§ 3015.304   Federal
interagency coordination.
§ 3015.305   State
selection of programs and activities.
§ 3015.306   Communication
with State and local elected officials.
§ 3015.307   State
comments on proposed Federal financial assistance and direct Federal
development.
§ 3015.308   Processing
comments.
§ 3015.309   Accommodation
of intergovernmental concerns.
§ 3015.310   Interstate
situations.
§ 3015.311   Simplification,
consolidation, or substitution of State plans.
§ 3015.312   Waivers.
Appendix
A to Part 3015—Definitions
Appendix
B to Part 3015—OMB Circular A–128, “Audits of State and Local
Governments”

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

Source:   46 FR 55639, Nov. 10, 1981,
unless otherwise noted.

Subpart A—General

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§ 3015.1   Purpose and scope of this
part.

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(a)(1) This part specifies the set of principles for determining
allowable costs under USDA grants and cooperative agreements to State and
local governments, universities, non-profit and for-profit organizations
as set forth in OMB Circulars A–87, A–21, A–122, and 48 CFR 31.2,
respectively. This part also contains the general provisions that apply to
all grants and cooperative agreements made by USDA.

(2) Additionally, this part establishes intergovernmental review
provisions required by Executive Order 12372 for any programs listed in
theFederal Registeras covered, and policy on competition in
awarding discretionary grants and cooperative agreements.

(3) Rules for grants and cooperative agreements to State and local
governments are found in part 3016 of this chapter.

(4) Rules for grants and cooperative agreements to institutions of
higher education, hospitals, and other non-profit organizations are found
in part 3019 of this chapter.

(b) These rules supersede and take precedence over any individual USDA
agency regulations and directives dealing with the administration of
grants and cooperative agreements to the extent such regulations and
directives are inconsistent with this part, unless such inconsistency is
based on a statutory provision or an exception has been obtained from OMB.
(See §3015.3.) Definitions for the terms used in this part are set forth
in Appendix A. Definitions for the implementation of standard audit
requirements for State and local governments and Indian Tribal governments
are contained in Subpart I—Audits.

(c) The purpose of this part is to simplify, standardize, and improve
the administration of USDA grants and cooperative agreements.

(d) Responsibility for developing and interpreting the material for
this part and in keeping it up-to-date is delegated to the Office of the
Chief Financial Officer.

[46 FR 55639, Nov. 10, 1981, as amended at 62 FR 45949, Aug. 29, 1997;
65 FR 49479, Aug. 14, 2000]

§ 3015.2   Applicability.

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(a) Grants and cooperative agreements. This part applies to USDA
grants and cooperative agreements. For each substantive provision in this
part, either the words of the provision itself or other words in the same
subpart tell whether the provision applies to subgrants. Exemptions to
this part may be applicable to certain kinds of recipients. (See paragraph
(d) of this section.)

(b) Terminology applicable to this part. This part's substantive
rules are the same for grants and cooperative agreements. Many of the
rules are also the same for subgrants. Therefore, certain simplified
terminology is used in the text. Specifically in all portions of this
part:

(1) Each provision that applies to grants also applies to
cooperative agreements, even though the latter term does not appear
in the provisions.

(2) Each provision that applies to recipients of grants applies
to recipients of cooperative agreements, even though the latter
term does not appear in the provision.

(3) The term recipient refers equally to recipients of grants
and recipients of cooperative agreements.

(4) The term awarding agency refers equally to a USDA agency
that awards a grant and to one that awards a cooperative agreement.

(5) The term subgrant refers equally to certain awards under
grants and to the same kinds of awards under cooperative agreements.

(c) Public institutions of higher education and hospitals.
Grants, cooperative agreements and subgrants awarded to institutions
of higher education and hospitals operated by a government are subject
only to the provisions of this part that apply to non-governmental
organizations.

(d) Recipients to which this part does not automatically apply.
This part does not automatically apply to the kinds of recipients
listed below unless other conditions set forth in the grant, cooperative
agreement, subgrant, or specific subpart in this part make all or
specified portions apply:

(1) Foreign governments or organizations,

(2) International organizations, such as the United Nations,

(3) Agencies or instrumentalities of the Federal government,

(4) Individuals,

(5) State and local governments, and

(6) Institutions of higher education, hospitals and other non-profit
organizations.

(e) Collaborative arrangements. (1) Where permitted by the terms
of the award, a recipient may enter into collaborative arrangements with
other organizations to jointly carry out activities with grant or
cooperative agreement funds. In this kind of situation, the arrangement
between the recipient and each collaborating organization is subject to
the rules in this part that apply to subgrants awarded by the recipients.
(See the example shown in §3015.195.)

(2) This paragraph (e) does not apply to arrangements where the
organizations receive an award jointly. In this case, they are not a
recipient and subrecipient but, as the award notice states, joint
recipients.

[46 FR 55639, Nov. 10, 1981, as amended at 53 FR 8044, Mar. 11, 1988;
65 FR 49480, Aug. 14, 2000]

§ 3015.3   Conflicting policies and
deviations.

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(a) Statutory provisions. Federal statutes that apply to some
USDA grant programs may contain provisions that conflict with this part.
Those statutory provisions take precedence over this part.

(b) Nonstatutory provisions. USDA awarding agencies occasionally
develop grant provisions that are inconsistent with this part. USDA
attempts to keep these provisions to a minimum by internal procedures that
require these provisions to be justified to appropriate officials of USDA
and OMB. If the conflicting provisions are of long-term and general
applicability, O&F may require that the awarding agency (1) publish
the conflicting provision as a notice in theFederal
Registerand (2) give the public an opportunity to comment before
making the regulations final.

(c) Nonstatutory provisions-subgrants. If a provision of a
subgrant conflicts with this part, the recipient is considered as
violating the provisions of the grant, unless the subgrant provision is
authorized in writing, by the awarding agency.

(d) OMB exceptions. In some cases, OMB grants exceptions from
the requirements of the Circulars, when permissible under existing laws.
In those instances where a program receives an exception to a particular
provision of a Circular, the exception takes precedence over this
part.

§ 3015.4   Special restrictive terms.

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(a) Occasionally an awarding agency, or a recipient awarding a
subgrant, may find that a particular recipient:

(1) Is financially unstable,

(2) Has a history of poor performance, or

(3) Has a management system that does not meet the standards in this
part.

In these cases the awarding agency may impose special conditions that
are more restrictive than otherwise permitted by this part. If so, the
awarding agency must tell the recipient in writing why it is imposing the
special conditions and what corrective action is needed.

(b) At the time an awarding agency imposes a special grant condition
under paragraph (a) of this section, the awarding agency, through O&F,
shall notify OMB and other interested parties.

(c) At the time a recipient imposes a special restrictive subgrant
condition under paragraph (a) of this section, it must notify the awarding
agency, giving full particulars. The awarding agency, through O&F,
shall then notify OMB and other interested parties.

(d) A special restrictive grant or subgrant condition under paragraph
(a) of this section is considered consistent with this part.

Subpart B—Cash Depositories

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§ 3015.10   Physical segregation and
eligibility.

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Except as provided in §3015.11, awarding agencies shall not impose
grant or subgrant conditions which:

(a) Require the recipient to use a separate bank account for the
deposit of grant or subgrant funds, or

(b) Establish any eligibility requirements for banks or other financial
institutions in which recipients deposit grant or subgrant funds.

§ 3015.11   Separate bank accounts.

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A separate bank account shall be required when applicable letter of
credit agreements provide that funds will not be drawn until the
recipient's checks are presented to the bank for payment.

§ 3015.12   Moneys advanced to
recipients.

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Any moneys advanced to recipients which are subject to the control or
regulation of the United States or any of its officers, agents, or
employees (public moneys as defined in Treasury Circular 176, as amended),
must be deposited in a bank with Federal Deposit Insurance Corporation
(FDIC) insurance coverage and the balance exceeding the FDIC coverage must
be collaterally secured.

§ 3015.13   Minority and women-owned
banks.

top

Consistent with the national goal of expanding opportunities for
minority business enterprises, recipients, and subrecipients are
encouraged to use minority and women-owned banks. Upon request, awarding
agencies will furnish a listing of minority and women-owned banks to
recipients.

Subpart C—Bonding and Insurance

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§ 3015.15   General.

top

In administering grants, subgrants, and cooperative agreements,
recipients shall observe their regular requirements and practices with
respect to bonding and insurance. No additional bonding and insurance
requirements, including fidelity bonds, shall be imposed by the provisions
of the grant, subgrant, or cooperative agreement except as provided in
§§3015.16 through 3015.18.

§ 3015.16   Construction and facility
improvement.

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(a) Scope. This section covers requirements for bid guarantees,
performance bonds, and payment bonds when the recipients will contract or
subcontract for construction or facility improvement (including
alterations and renovations of real property) under a grant or
subgrant.

(b) Bids and contracts or subcontracts of $100,000 or less.
Unless otherwise required by law, the recipients shall follow its own
requirements and practices relating to bid guarantees, performance bonds,
and payment bonds.

(c) Bids and contracts or subcontracts exceeding $100,000.
Unless otherwise required by law, the recipient may follow its own
regular policy and requirements if the USDA awarding agency has decided
that the Federal government's interest will be adequately protected. If
this decision has not been made, the minimum requirements shall be as
follows:

(1) A bid guarantee from each bidder equivalent to 5 percent of the bid
price;

(2) A performance bond on the part of the contractor for 100 percent of
the contract price; and

(3) A payment bond on the part of the contractor for 100 percent of the
contract price.

§ 3015.17   Fidelity bonds.

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(a) If the recipient is not a unit of government, the awarding agency
may require the recipient to carry adequate fidelity bond coverage where
the absence of coverage for the grant-supported activity is considered as
created an unacceptable risk.

(b) If the subrecipient is not a unit of government, the awarding
agency or the recipient may require that the subrecipient carry adequate
fidelity bond coverage where the absence of coverage for the
subgrant-supported activity is considered as creating an unacceptable
risk.

§ 3015.18   Source of bonds.

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Any bonds required under §3015.16(c) (1) through (3) or §3015.17 shall
be obtained from companies holding certificates of authority as acceptable
sureties (31 CFR part 223). A list of these companies is published
annually by the Department of the Treasury in its Circular 570.

Subpart D—Record Retention and Access Requirements

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§ 3015.20   Applicability.

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(a) This subpart applies to all financial records, supporting
documents, statistical records and other records of recipients, which
are:

(1) Required to be maintained by the provisions of a USDA grant or
cooperative agreement, or

(2) Otherwise reasonably considered as pertinent to a USDA grant or
cooperative agreement.

(b) This subpart does not apply to the records of contractors and
subcontractors under grants, subgrants and cooperative agreements. For a
requirement to place a provision concerning these records in certain kinds
of contracts, see Subpart S of this part.

§ 3015.21   Retention period.

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(a) Except as provided in paragraphs (b) and (c) of this section,
records shall be kept for 3 years from the starting date specified in
§3015.22.

(b) If any litigation, claim, negotiation, audit or other action
involving the records has been started before the end of the 3-year
period, the records shall be kept until all issues are resolved, or until
the end of the regular 3-year period, whichever is later.

(c) In order to avoid dual recordkeeping, awarding agencies may make
special arrangements for recipients to keep any records which are
continuously needed for joint use. The awarding agency shall request a
recipient to transfer records to its custody when the awarding agency
decides that the records possess long-term retention value. When the
records are transferred to or maintained by the awarding agency the 3-year
retention requirement shall not apply to the recipient.

(d) Records for nonexpendable property acquired in whole or in part,
with Federal funds shall be retained for three years after its final
disposition.

§ 3015.22   Starting date of retention
period.

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(a) General. The retention period starts from the date of the
submission of the final expenditure report or, where USDA grant support is
continued or renewed at annual or other intervals, the 3-year retention
period for the records of each funding period starts on the day the
recipient submits to USDA its annual or final expenditure report for that
period. If an expenditure report has been waived, the 3-year retention
period starts on the day the report would have been due. Exceptions to
this paragraph are contained in paragraphs (b) through (d) of this
section.

(b) Equipment records. The 3-year retention period for the
equipment records required by Subpart R starts from the date of the
equipment's disposition, replacement, or transfer at the direction of the
awarding agency.

(c) Records for income transactions after grant or subgrant support.
(1) In cases where USDA requires that program income (as defined in
Appendix A) be applied to costs incurred after expiration or termination
of grant or subgrant support, the 3-year retention period for these cost
records starts from the end of the recipient's fiscal year in which the
costs are incurred.

(2) Where USDA requires the disposition of copyright royalties or other
program income earned after expiration or termination of grant or subgrant
support, the 3-year retention period for those income records starts from
the end of the recipient's fiscal year in which the income was earned.
(See Subpart F, §3015.44.)

(d) Indirect cost rate proposals, cost allocation plans, etc.
—(1) Applicability. This paragraph applies to the following
types of documents and their supporting records:

(i) Indirect cost rate computations or proposals;

(ii) Cost allocation plans; and

(iii) 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).

(2) If submitted for negotiation. If the Federal government
requires submission of the proposal; plan, or other computation for
negotiation of the rate chargeable for particular costs, then the 3-year
retention period for the plan, proposal or other computation and the
supporting records starts from the date of such submission.

(3) If not submitted for negotiation. If the Federal government
does not require submission of the proposal, plan, or other computation
for negotiation of the rate chargeable for particular costs, then the
3-year retention period for the proposal, plan, or other computation and
the supporting records starts from the end of the fiscal year covered by
such proposal, plan, or other computation.

§ 3015.23   Microfilm.

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Copies made by microfilming, photocopying, or similar methods may be
substituted for the original records.

§ 3015.24   Access to records.

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(a) Records of recipients. USDA and the Comptroller General of
the United States, or any of their authorized representatives, shall have
the right of access to any books, documents, papers, or other records of
the recipient which are pertinent in a specific USDA award in order to
make audit, examination, excerpts, and transcripts.

(b) Records of subrecipients. USDA and the Comptroller General
of the United States, and the recipient, or any of their authorized
representatives, shall have the right of access to any books, documents,
papers, or other records of the subrecipient which are pertinent to a
specific USDA grant or cooperative agreement, in order to make audit,
examination, excerpts, and transcripts.

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

§ 3015.25   Restrictions to public
access.

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Unless required by law, no awarding agency shall impose grant or
subgrant conditions which limit public access to records covered by this
subpart, except when the awarding agency determines that such records must
be kept confidential and would have been excepted from disclosure pursuant
to USDA's “Freedom of Information” regulations if the records had belonged
to USDA (7 CFR 1.1–1.16).

Subpart E—Waiver of “Single” State Agency Requirements

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§ 3015.30   Waiver of “single” State agency
requirements.

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Section 204 of the Intergovernmental Cooperation Act of 1968 authorizes
Federal agencies to waive “single” State agency requirements on request of
the Governor or other duly constituted State authorities.

(a) Approval authority. The awarding agency has approval
authority for waiver requests, and shall handle them as quickly as
feasible. Approval should be given whenever possible.

(b) Refusal procedures. When it is necessary to refuse a request
for waiver of the “single” State agency requirements under section 204,
the awarding agency shall, through O&F, advise OMB that the request
cannot be granted. Such advice should indicate the reasons for the denial
of the request. Notification, through O&F, to OMB shall occur prior to
informing the State of the refusal.

Subpart F—Grant Related Income

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§ 3015.40   Scope.

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This subpart contains policies and requirements related to program
income and interest and other investment income earned on advances of
grant funds. Appendix A defines the term “program income.” There are five
categories of program income covered in this subpart. Each is treated in a
separate section. The categories are:

(a) General program income;

(b) Proceeds from sale of real property and from sale of equipment and
supplies acquired for use;

(c) Royalties and other income earned from a copyrighted work;

(d) Royalties or equivalent income earned from patents or inventions;
and

(e) Income after the period of grant or subgrant support not otherwise
treated.

§ 3015.41   General program income.

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(a) Applicability. This section applies to “general program
income” as defined in Appendix A.

(b) Use. (1) General program income shall be retained by the
recipient and used in accordance with one or a combination of the
alternatives in paragraphs (c), (d), and (e) of this section, as follows:
The alternative in paragraph (c) may always be used by recipients and must
be used if neither of the other two alternatives is permitted by the
provisions of the grant award. The alternatives in paragraph (d) or (e) of
this section may be used only if expressly permitted by the provisions of
the grant award. In specifying alternatives that may be used, the
provisions of the grant award may distinguish between income earned by the
recipient and income earned by subrecipients and between the sources,
kinds, or amounts of income.

(2) The provisions of a subgrant award may restrict the use of general
program income earned by the subrecipient to only one or some of the
alternatives permitted by the provisions of the grant, but the alternative
in paragraph (c) of this section shall always be permitted.

(c) Deduction alternative. (1) Under this alternative, the
income is used for allowable costs of the project or program. If there is
a cost-sharing or matching requirement, costs supported by the income may
not count toward satisfying that requirement. Therefore, the maximum
percentage of Federal cost-sharing is applied to the net amount determined
by deducting the income from total allowable costs and third party in-kind
contributions. The income shall be used for current costs unless the
awarding agency authorizes the income to be used in a later period.

(2) To illustrate this alternative, assume a project in which the
recipient incurs $100,000 of allowable costs and receives no third party
in-kind contributions. If the recipient earns $10,000 in general program
income and this alternative applies, that $10,000 must be deducted from
the $100,000 before applying the maximum percentage of Federal
cost-sharing. If that percentage is 90 percent, the most that could be
paid to the recipient would therefore be $81,000 (90 percent times
$90,000).

(d) Cost-sharing or matching alternative. (1) Under this
alternative, the income is used for allowable costs of the project or
program but, in this case, the costs supported by the income may count
toward satisfying a cost-sharing or matching requirement. Therefore, the
maximum percentage of Federal cost-sharing is applied to total allowable
costs and third party in-kind contributions. The income shall be used for
current costs unless the awarding agency authorizes its use in a later
period.

(2) To illustrate this alternative, assume the same situation as in
paragraph (c)(2) of this section. Under this alternative, the 90 percent
maximum percentage of Federal cost-sharing would be applied to the full
$100,000, and $90,000 could therefore be paid to the recipient.

(e) Additional costs alternative. Under this alternative, the
income is used for costs which are in addition to the allowable costs of
the project or program but which nevertheless further the objectives of
the Federal statute under which the grant was made. Provided that the
costs supported by the income further the broad objectives of that
statute, they need not be of a kind that would be permissible as charges
to Federal funds. Examples of purposes for which the income may be used
are:

(1) Expanding the project or program.

(2) Continuing the project or program after grant or subgrant support
ends.

(3) Supporting other projects or programs that further the broad
objectives of the statute.

(4) Obtaining equipment or other assets needed for the project or
program or for other activities that further the statute's
objectives.

§ 3015.42   Proceeds from sale of real property
and from sale of equipment and supplies acquired for use.

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The following kinds of program income shall be governed by Subpart R of
this part:

(a) Proceeds from the sale of real property purchased or constructed
under a grant or subgrant.

(b) Proceeds from the sale of equipment and supplies created or
purchased under a grant or subgrant and intended primarily for use in the
grant or subgrant-supported project or program rather than for sale or
rental.

§ 3015.43   Royalties and other income earned from
a copyrighted work.

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(a) This section applies to royalties, license fees, and other income
earned by a recipient from a copyrighted work developed under the grant or
subgrant. Income of that kind is covered by this section whether a third
party or the recipient acts as the publisher, seller, exhibitor, or
performer of the copyrighted work. In some cases the recipient incurs
costs to earn the income but does not charge these costs to USDA grant
funds, to required cost-sharing or matching funds, or to other program
income. Costs of that kind may be deducted from the gross income in order
to determine how much must be treated as program income.

(b) The provisions of the grant award govern the disposition of income
subject to this section. If the provisions of the grant award do not treat
this kind of income, there are no USDA requirements governing its
disposition. A recipient is not prohibited from imposing requirements of
its own on the disposition of this kind of income which is earned by its
subrecipients provided those requirements are in addition to, and not
inconsistent with, any requirements imposed by the provisions of the grant
award.

§ 3015.44   Royalties or equivalent income earned
from patents or from inventions.

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Disposition of royalties or equivalent income earned on patents or
inventions arising out of activities assisted by a grant or subgrant shall
be governed by the provisions of the grant or subgrant agreement. If the
agreement does not provide for the disposition of the royalties or
equivalent income, the disposition shall be in accordance with the
recipient's own policies.

§ 3015.45   Other program income.

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(a) This section applies to program income not treated elsewhere in
this part which subsequently results from an activity supported by a grant
or subgrant but which does not accrue until after the period of grant or
subgrant support. An example is proceeds from the sale or rental of a
residual inventory of merchandise created or purchased by a
grant-supported workshop during the period of support.

(b) The provisions of the grant award govern the disposition of income
subject to this section. If the provisions do not treat this kind of
income, there are no USDA requirements governing its disposition. A
recipient may impose requirements of its own on the disposition of this
kind of income which is earned by its subrecipients provided those
requirements are in addition to and not inconsistent with any requirements
imposed by the provisions of the grant award.

§ 3015.46   Interest earned on advances of grant
funds.

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(a) Except when exempted by Federal statute (see paragraph (b) of this
section for the principal exemption), recipients shall remit to the
Federal government any interest or other investment income earned on
advances of USDA grant funds. This includes any interest or investment
income earned by subrecipients and cost-type contractors on advances to
them that result from advances of USDA grant funds to the recipient.
Unless the recipient receives other instructions from the responsible USDA
awarding agency, the recipient shall remit the amount due by check or
money order payable to the awarding agency. This requirement may not be
administratively waived.

(b) In accordance with the Intergovernmental Cooperation Act of 1968
(42 U.S.C. 4213), States, as defined in the Act, shall not be accountable
to the Federal government for interest or investment income earned by the
State itself, or by its subrecipents, where this income is attributable to
grants-in-aid, as defined in the Act.1

1 “State” is defined in the Act to include any agency or
instrumentality of a State, and the definition does not exclude a hospital
or institution of higher education which is such an agency or
instrumentality. “Grant-in-aid” is defined in the Act to exclude payments
under research and development contracts or grants which are awarded
directly and on similar terms to all qualifying organizations, whether
public or private. (42 U.S.C. 4201)

(c) Recipients are cautioned that they are subject to the provisions of
Subpart L for minimizing the time between the transfer of advances and
their disbursement. Those provisions apply even if there is no
accountability to the Federal government for interest or other investment
income earned on the advances.

Subpart G—Cost-Sharing or Matching

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§ 3015.50   Scope.

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This subpart contains rules reflecting Federal requirements for
cost-sharing or matching. These rules apply whether cost-sharing or
matching is required by Federal statute, awarding agency regulations, or
by other provisions established by the specific grant agreement.

§ 3015.51   Acceptable contributions and
costs.

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A cost-sharing or a matching requirement may be satisfied after
qualifications and exceptions are met in §3015.52 and by satisfying either
or both of the following:

(a) Allowable costs incurred by the recipient or by any subrecipient
under the grant or subgrant. This includes allowable costs supported by
non-Federal grants or by cash donations from non-Federal third parties.
Allowable costs shall be determined in accordance with the cost principles
set forth in Subpart T.

(b) The value of third party in-kind contributions applicable to the
same period when a cost-sharing or matching requirement applies.

§ 3015.52   Qualifications and
exceptions.

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(a) Costs supported by other Federal grants. (1) A cost-sharing
or a matching requirement shall not be met by costs supported by another
Federal grant, except as provided by Federal statute. This exception
however, does not apply to costs supported by general program income
earned from a contract awarded under another Federal grant.

(2) For the purpose of this part, funds provided under General or
Countercyclical Revenue Sharing Programs (31 U.S.C. 1221 et seq.
and 42 U.S.C. 6721 et seq. ) are not considered Federal grants.
Therefore, allowable costs supported by these funds may be used to satisfy
a cost-sharing or a matching requirement.

(b) Costs or contributions applied towards other Federal
cost-sharing requirements. Recipient costs or the value of third party
in-kind contributions shall not count towards satisfying a cost-sharing or
matching requirement of a USDA grant if they are or will be counted
towards satisfying a cost-sharing or matching requirement of another
Federal grant, a Federal procurement contract, or any other award of
Federal funds.

(c) Costs financed by general program income. Costs financed by
general program income as defined in Appendix A shall not count towards
satisfying a cost-sharing or matching requirement of a USDA grant
supporting the activity unless the provisions of the grant award expressly
permit the income to be used for cost-sharing or matching purposes. (This
is the alternative for use of general program income described in
§3015.41).

(d) Services or property financed by income earned by contractors.
Contractors under a grant or subgrant 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
award expressly permit this kind of income to be used to meet the
requirement.

(e) Records. In order to count cost and third party in-kind
contributions towards satisfying a cost-sharing or a matching requirement,
there must be verification and accurate documentation from the records of
recipients or cost-type contractors. These records shall show how the
value placed on third party in-kind contributions was decided. Special
standards and procedures for calculating these contributions are discussed
in paragraph (f) of this section. Volunteer services, to the extent
possible, shall be supported by the same pay procedures and rates employed
by the organization when paying for similar work performed by its
personnel.

(f) Special standards for third party in-kind contributions —(1)
Contributions to recipients or cost-type contractors. A third party
in-kind contribution to a recipient or cost-type contractor may count
towards satisfying a cost-sharing or matching requirement only where, if
the recipient or cost-type contractor were to pay for it, the payment
would be an allowable cost.

(2) Contributions to fixed-price contractors. A third party
in-kind contribution to a fixed-price contractor may count towards
satisfying a cost-sharing or matching requirement only if it results
in:

(i) An increase in the services or property provided under the contract
(without additional cost to the recipient or subrecipient), or

(ii) A cost savings to the recipient or subrecipient.

§ 3015.53   Valuation of donated
services.

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(a) Volunteer services. Unpaid services provided to a recipient
by an individual shall be valued at rates consistent with the rates
normally paid for similar work in the recipient organization. If there is
no similar work in the recipient organization, the rate of pay for
volunteer services should be consistent with those regular rates paid for
similar work in the same labor market. In either case, a reasonable amount
for fringe benefits may be included in the valuation.

(b) Employees of other organizations. When an employer, other
than a recipient or cost-type contractor, furnishes the services of an
employee without cost to perform the employee's normal line of work, the
services shall be valued at the employee's regular rate of pay, exclusive
of the employer's fringe benefits and overhead cost. If the services are
in a different line of work, paragraph (a) of this section shall
apply.

§ 3015.54   Valuation of donated supplies and
loaned equipment or space.

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(a) If a third party donates supplies, the contributions shall not
exceed the cost of the supplies to the donor or the market value of the
supplies, at the time of the donation, whichever is less.

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

§ 3015.55   Valuation of donated equipment,
buildings, and land.

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When a third party donates equipment, buildings or land, and the title
is given to the recipient, the treatment of this donated property shall
depend upon the purpose of the grant or subgrant as follows:

(a) Awards for capital expenditures. If the purpose of the grant
or subgrant is to assist the recipient in acquiring property, such as
equipment, buildings, and land, then the market value of that property at
the time of donation may be counted as cost-sharing or matching.

(b) Other awards. If the nature of the grant or subgrant is not
for the purpose of acquiring property, the following rules shall
apply:

(1) If approval is obtained from the awarding agency, the market value
at the time of donation of the 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 provisions of the USDA grant should require
that the approval be obtained from the awarding agency as well as the
recipient. 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.

(2) If approval is not obtained under paragraph (b)(1) of this section,
no amount shall be counted for donated land. Instead, only depreciation or
use allowances may be counted for donated equipment and buildings and
treated as costs incurred by the recipient. They are computed and
allocated (usually as indirect costs) in accordance with the cost
principles specified in Subpart T of this part. They will thus be handled
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.

§ 3015.56   Appraisal of real property.

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In some cases, 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 awarding agency must require that the market
value or fair rental rate be set by an independent appraiser (or by a
representative of the U.S. General Services Administration, if available)
and that the value or rate be certified by a responsible official of the
party to which the property or its use is donated. This requirement must
also be imposed by the recipient on subgrants.

Subpart H—Standards for Financial Management Systems

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§ 3015.60   Scope.

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This subpart contains standards for financial management systems of
recipients. No additional financial management standards or requirements
shall be imposed by awarding agencies. Awarding agencies will, however,
provide recipients with suggestions and assistance on establishing or
improving financial management systems when such assistance is needed or
requested.

§ 3015.61   Financial management
standards.

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The following standards shall be met by recipients and subrecipients in
managing their financial management system.

(a) Financial reporting. Complete, accurate, and current
disclosure of the financial results of each USDA sponsored project or
program shall be made in accordance with the financial reporting
requirements set forth in the grant or subgrant. When a USDA awarding
agency requires reporting on an accrual basis, the recipient shall not be
required to establish an accrual accounting system, but shall develop such
accrual data for its reports on the basis of an analysis of the
documentation on hand.

(b) Accounting records. The source and application of funds
shall be readily identified by the continuous maintenance of updated
records. Records, as such, shall contain information pertaining to grant
or subgrant awards, authorizations, obligations, unobligated balances,
assets, outlays, and income. When the recipient is a governmental entity,
the records shall also contain liabilities.

(c) Internal control. Effective control over and accountability
for all USDA grant or subgrant funds, real and personal property assets
shall be maintained. Recipients shall adequately safeguard all such
property and shall ensure that it is used solely for authorized purposes.
In cases where projects are not 100 percent Federally funded, recipients
must have effective internal controls to assure that expenditures financed
with Federal funds are properly chargeable to the grant supported
project.

(d) Budgetary control. The actual and budgeted amounts for each
grant or subgrant shall be compared. If appropriate, or required by the
awarding agency, financial information shall be related to performance and
unit cost data. When unit cost data is required, estimates based on
available documentation may be accepted whenever possible.

(e) Advance payments. There shall be specific procedures
established to minimize the time elapsing between the advance of Federal
grant or subgrant funds and their subsequent disbursement by the
recipient. When advances are made by a letter of credit method, the
recipients shall make drawdowns as close as possible to the time of making
the disbursements. This same procedure shall be followed by recipients who
advance cash to subrecipients to ensure that timely fiscal transactions
and reporting requirements are conducted.

(f) Allowable costs. Established procedures shall be used for
determining the reasonableness, allowability, and allocability of costs in
accordance with the cost principles prescribed by Subpart T of this part
and the provisions of the grant award.

(g) Source documentation. Accounting records shall be supported
by source documentation. These documentations include, but are not limited
to, cancelled checks, paid bills, payrolls, contract and subgrant award
documents.

(h) Audit resolution. A systematic method shall be employed by
each recipient to assure timely and appropriate resolution of audit
findings and recommendations.

Subpart I [Reserved]

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Subpart J—Financial Reporting Requirements

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§ 3015.80   Scope and applicability.

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(a) This subpart prescribes requirements and forms for recipients to
report financial information to USDA and to request grant payments when a
letter of credit is not used.

(b) This subpart need not be applied by recipients in dealing with
their subrecipients. Recipients are encouraged not to impose on
subrecipients more burdensome requirements than USDA imposes on
them.

§ 3015.81   General.

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(a) Except as provided in paragraphs (d) and (e) of this section,
recipients shall use only the forms specified in §§3015.82 through
3015.85, and such other forms as may be authorized by OMB for:

(1) Submitting grant financial reports to awarding agencies, or

(2) Requesting grant payments when letters of credit or automatic
prescheduled Treasury check advances are not used.

(b) Recipients shall follow all applicable standard instructions issued
by OMB for use in connection with the forms specified in §§3015.82 through
3015.85. Awarding agencies may not issue substantive supplementary
instructions that are inconsistent with this subpart or impose additional
requirements on recipients without the approval of O&F and OMB.
However, awarding agencies may shade out or instruct the recipient to
disregard any line item that the awarding agency finds unnecessary for its
decision-making purposes.

(c) Recipients shall not be required to submit more than one original
and two copies of the forms required under this subpart.

(d) Awarding agencies may provide computer outputs to recipients to
expedite or contribute to the accuracy of reporting. Awarding agencies may
accept the required information from recipients in machine readable form
or computer printouts instead of prescribed formats.

(e) When an awarding agency determines that a recipient's accounting
system does not meet the standards for financial management systems
contained in Subpart H of this part, it may require more frequent
financial reports or more detail (or both) upon written notice to the
recipient (without regard to §3015.4) until such time as the standards are
met.

(f) Awarding agencies may waive any report required by this subpart, if
not needed.

(g) Awarding agencies may extend the due date for any financial report
upon receiving a justified request from the recipient. The recipient
should not wait until the due date if an extension is to be requested, but
should submit the request as soon as the need becomes known. Failure by a
recipient to submit a report by its due date may result in severe
enforcement actions by USDA. These may include withholding of further
grant payments, suspension or termination of the grant, etc. Therefore
recipients are urged to submit reports on time.

§ 3015.82   Financial status report.

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(a) Form. Recipients shall use Standard Form 269, Financial
Status Report, to report the status of funds for all nonconstruction
projects or programs.

(b) Accounting basis. Unless specified in the provisions of the
grant or subgrant each recipient shall report program outlays and program
income on the same accounting basis, i.e. , cash or accrual, which
it uses in its accounting system.

(c) Frequency. The awarding agency may prescribe the frequency
of the report for each project or program. However, the report shall not
be required more frequently than quarterly except as provided in §§3015.4,
3015.81(e), or by statute. If the awarding agency does not specify the
frequency of the report, it shall be submitted annually. Upon expiration
or termination of the grant or cooperative agreement, if a period of time
remains not covered by a periodic report ( i.e. , a quarterly,
semi-annual or annual report), a final report shall be required.

(d) Due date. When reports are required on a quarterly or
semiannual basis, they shall be due 30 days after the reporting period.
When required on an annual basis, they shall be due 90 days after the end
of the grant or agreement period. In addition, final reports as defined in
§3015.82(c) shall be due 90 days after the expiration or termination of
grant or agreement support, except in those instances where an extension
has been granted.

(e) Final reports. (1) Final reports ( i.e. , the last
report submitted) must not show any unpaid obligations.

(2) If the recipient will still have unpaid obligations when the final
report is due, the recipient shall submit a provisional final report
(showing the unpaid obligations) by the due date, and a true final report
when all obligations have been paid. When submitting a provisional final
report, the recipient shall tell the awarding agency when it expects to
submit a true final report.

(3) As provided in §3015.81(f), awarding agencies may waive provisional
final reports.

§ 3015.83   Federal cash transactions
report.

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(a) Form. (1) For grants or cooperative agreements paid by
letters of credit (or Treasury check advances) through any USDA payment
office, the recipient shall submit to USDA a Standard Form 272, Federal
Cash Transactions Report, and, when necessary, its continuation sheet,
SF–272a. Recipients under the Regional Disbursing Office (RDO) system
shall not be required to submit a SF–272. For these recipients, awarding
agencies shall use information contained in the Request for Payment to
monitor recipient cash balances and to get disbursement information.

(2) The SF–272 will be used by USDA to monitor cash advanced to
recipients and to obtain disbursement or outlay information from
recipients for each grant or cooperative agreement. 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 identical information is submitted.

(b) Forecasts of Federal cash requirements. Awarding agencies
may require that forecasts of Federal cash requirements be provided in the
“Remarks” section of the report.

(c) Cash in hands of subrecipients or contractors. When
considered necessary and feasible by the responsible USDA awarding agency,
recipients may be required to:

(1) Show in the “Remarks” section of the report the amount of cash
advances exceeding three days needs in the hands of their subrecipients or
contractors, and

(2) Provide short narrative explanations or actions taken by the
recipient to reduce such excess balances.

(d) Frequency and due date. Recipients shall submit the report
no later than 15 working days following the end of each quarter. However,
the USDA payment office may require recipients receiving advances of one
million dollars or more per year to submit a report within 15 working days
following the end of each month. Awarding agencies may waive the
requirement for submission of the SF–272 when monthly advances do not
exceed $10,000 per recipient, provided that such advances are monitored
through other forms contained in this subpart, or if, in the awarding
agency's opinion, the recipient's accounting controls are adequate to
minimize excessive Federal advances.

§ 3015.84   Request for advance or
reimbursement.

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(a) Advance payments. Recipients of nonconstruction grants or
cooperative agreements shall request Treasury check advance payments on
Standard Form 270, Request for Advance or Reimbursement. This form is not
used for letter of credit drawdowns or predetermined automatic advance
payments.

(b) Reimbursements. Recipients of nonconstruction grants or
cooperative agreements shall request reimbursement on Standard Form 270,
Request for Advance or Reimbursement (for reimbursement request under
construction grants or cooperative agreements, see §3015.85).

(c) The frequency for submitting payment requests on SF–270 is treated
in §3015.104.

§ 3015.85   Outlay report and request for
reimbursement for construction programs.

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(a) Construction grants paid by reimbursement method. (1)
Requests for reimbursement under construction grants shall be submitted on
Standard Form 271, Outlay Report and Request for Reimbursement for
Construction Programs. Awarding agencies may, however, prescribe the
Request for Advance or Reimbursement form specified in §3015.84 instead of
this form.

(2) The frequency for submitting reimbursement requests is treated in
§3015.104.

(b) Construction grants paid by letter of credit or Treasury check
advance. (1) When a construction grant or a cooperative agreement is
paid by letter of credit or Treasury check advances, the recipient shall
report its outlays to the awarding agency using Standard Form 271, Outlay
Report and Request for Reimbursement for Construction Programs. The
awarding agency will provide any necessary special instructions. However,
frequency and due date shall be governed by §3015.82 (c) and (d).

(2) When a construction grant or cooperative agreement is paid by
Treasury check advances based on periodic requests from the recipient, the
advances shall be requested on the form specified in §3015.84.

(3) The awarding agency may substitute the Financial Status Report
specified in §3015.82 for the Outlay Report and Request for
Reimbursement.

(c) Accounting basis. The accounting basis for the Outlay Report
and Request for Reimbursement for Construction Programs shall be governed
by §3015.82(b).

Subpart K—Monitoring and Reporting Program Performance

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§ 3015.90   Scope.

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This subpart establishes procedures for monitoring and reporting
program performance of recipients. These procedures place responsibility
on recipients to manage the day-to-day operations of their grant and
subgrant supported activities.

§ 3015.91   Monitoring by recipients.

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Recipients shall monitor the performance of grant and
subgrant-supported activities to assure that performance goals are being
achieved. Recipient monitoring shall cover each program, function, or
activity.

§ 3015.92   Performance reports.

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(a) Nonconstruction. The awarding agency shall, if it decides
that performance information available from subsequent applications
contains sufficient information to meet its programmatic needs, require
the recipient to submit a performance report only upon expiration or
termination of grant support. Unless waived by the awarding agency this
report will be due on the same date as the final Financial Status Report
(as provided in §3015.82 (d) and (e)).

(1) Recipients shall submit annual peformance reports unless the
awarding agency requires quarterly or semi-annual reports or unless
covered under paragraph (a) of this section. 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 shall
be due 90 days after the expiration or termination of grant support. If a
justified request is submitted by a recipient, the awarding agency may
extend the due date for any performance report. Additionally, requirements
for unnecessary performance reports may be waived by the awarding
agency.

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

(i) A comparison of actual accomplishments to the goals established for
the period. Where the output of the project can be readily expressed in
numbers, 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 goals were not met.

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

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

(4) Recipients shall adhere to the standards in paragraph (a) of this
section in prescribing performance reporting requirements for
subrecipients.

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

§ 3015.93   Significant developments.

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Events may occur between the scheduled performance reporting dates
which have significant impact upon the grant or subgrant supported
activity. In such cases, the recipient shall inform the awarding agency as
soon as the following types of conditions become known:

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

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

§ 3015.94   Site visits.

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The awarding agency shall make site visits as frequently as practicable
to:

(a) Review program accomplishments and manage control systems.

(b) Provide such technical assistance as may be required.

§ 3015.95   Waivers, extensions and enforcement
actions.

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(a) Reports from recipients. USDA may waive any performance
report required by this subpart if not needed.

(b) Reports from subrecipients. The recipient may waive any
performance report from a subrecipient when not needed. The recipient may
extend the due date for any performance report from a subrecipient if the
recipient will still be able to meet its performance reporting obligations
to the USDA awarding agency.

Subpart L—Payment Requirements

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§ 3015.100   Scope.

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This subpart prescribes the basic standards and methods under which a
USDA awarding agency will make grant payments to recipients, and
recipients will make subgrant payments to their subrecipients.

§ 3015.101   General.

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Methods and procedures for making payments to recipients shall minimize
the time elapsing between the transfer of funds and the recipient's
disbursements.

§ 3015.102   Payment methods.

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(a) Non-construction. (1) Letters of credit will be used to pay
USDA recipients when all the following conditions exist:

(i) There is or will be a continuing relationship between the recipient
and the USDA awarding agency for at least a 12 month period and the total
amount of advances to be received within that period from the awarding
agency is $120,000 or more per year.

(ii) The recipient has established or demonstrated to the USDA awarding
agency the willingness and ability to establish procedures that will
minimize the time elapsing between the transfer of funds from the Treasury
and their disbursement by the recipient.

(iii) The recipient's financial management system meets the standards
for fund control and accountability prescribed in Subpart H of this
part.

(2) Advances by Treasury check will be used, in accordance with
Treasury Circular No. 1075, when the recipient does not meet the
requirements in paragraph (a)(1)(i) of this section but does meet the
requirements in paragraphs (a)(1) (ii) and (iii) of this section.

(3) Reimbursement by Treasury check shall be the preferred method when
the recipient does not meet the requirements specified in either paragraph
(a)(1)(ii) or paragraph (a)(1)(iii) of this section. This method may also
be used when USDA financial assistance makes up only a minor portion of
the program and where the major portion of the program is accomplished
through private financing or Federal loans.

(b) Construction. (1) Reimbursement by Treasury check shall be
the preferred method when the recipient does not meet the requirements
specified in §3015.102(a)(1) (ii) or (iii), and may be used for any USDA
construction grant unless USDA has entered into an agreement with the
recipient to use a letter of credit for all USDA grants, including
construction grants.

(2) When the reimbursement by Treasury check method is not used,
§3015.102(a) (1) and (2) shall apply to the construction grants.
Implementing procedures under §3015.102(a) (1) and (2) will be the same
for construction grants as for nonconstruction grants awarded to the same
recipient, insofar as possible.

(3) USDA awarding agencies will not use the percentage-of-completion
method to pay its construction grants. The recipient may use that method
to pay its construction contractor, but if it does, USDA payments to the
recipient will nevertheless be based on the recipient's actual rate of
disbursements.

§ 3015.103   Withholding payments.

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(a) Unless otherwise required by Federal statute, payments for proper
charges incurred by recipients will not be withheld at any time during the
grant period unless (1) the recipient has failed to comply with the
program objectives, grant award conditions, or Federal reporting
requirements, or (2) the recipient is indebted to the United States and
collection of the indebtedness will not impair accomplishment of the
objectives of any grant program sponsored by the United States, or (3) the
grant is suspended pursuant to Subpart N of this part.

(b) Payments withheld for failure of a recipient to comply with
reporting requirements, but without suspension of the grant, will be
released to the recipient upon subsequent compliance. When a grant is
suspended, payment adjustments will be made in accordance with Subpart N
of this part. When a debt is to be collected, USDA awarding agencies may
withhold payments or require appropriate accounting adjustments to
recorded cash balances for which the recipient is accountable to the
Federal government, in order to liquidate the indebtedness.

§ 3015.104   Requesting advances or
reimbursements.

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(a) Advances. If advance payments are by Treasury check and are
not prescheduled, the recipient shall submit its payment requests at least
monthly. Less frequent requests are not permitted for they result in
advances covering excessive periods of time. Recipient requests for
advances shall not be made in excess of the Federal share of reasonable
estimates of outlays for the month covered. These estimates shall be made
on a cash basis, even if the recipient uses an accrual accounting
system.

(b) Reimbursements. If payments are made through reimbursement
or by Treasury check:

(1) Requests for reimbursements may be submitted monthly or more
frequently if authorized to do so by the awarding agency. Ordinarily,
payment will be made within 30 days after receipt of a proper request for
reimbursement.

(2) The recipient shall not request reimbursement for the Federal share
of amounts withheld from contractors to ensure satisfactory completion of
work until after it makes those payments.

(c) Forms. The forms for requesting advances or reimbursements
are identified in Subpart J of this part.

§ 3015.105   Payments to subrecipients.

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Recipients shall observe the requirements of this subpart in making (or
withholding) payments to subrecipients, with the following exceptions:

(a) Advance payment by Treasury check may be used instead of letter of
credit;

(b) The forms specified in Subpart J of this part for requesting
advances and reimbursements are not required to be used by subrecipients;
and

(c) The reimbursement by check method may be used to pay any
construction subgrant.

Subpart M—Programmatic Changes and Budget Revisions

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§ 3015.110   Scope and applicability.

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(a) Scope. This subpart deals with prior approval requirements
for post-award programmatic changes and budget revisions by
recipients.

(b) Exemption of mandatory or formula grants. Sections 3015.113
through 3015.115 do not apply to programmatic changes or budget revisions
made by recipients under State plans or other grants which the awarding
agency is required by law to award if the applicant meets all applicable
requirements for entitlement.

(c) Exemption of certain subgrants. Sections 3015.113 through
3015.115 do not apply to subgrants from States to their local governments
under a mandatory or formula grant, if the local government is not
required to apply for the subgrant on a project basis. Generally, such
exempt subgrants will occur under a State plan which provides for local
administration of a State-wide program under State supervision.

§ 3015.111   Cost principles.

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(a) The cost principles prescribed by subpart T of this part require
prior approval of certain types of costs. Except when waived, those prior
approval requirements apply to all grants and subgrants, whether or not
§§3015.113 through 3015.115 apply.

(b) Procedures for prior approvals required by the cost principles are
in §3015.196. Procedures for prior approvals required by this subpart are
in §3015.112.

§ 3015.112   Approval procedures.

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(a) For grants or cooperative agreements. When requesting a
prior approval required by this subpart, recipients shall address their
requests to the responsible official of the awarding agency. Approvals
shall not be valid unless they are in writing and signed by either the
responsible officer, the head of the awarding agency, or the head of the
awarding agency's regional office.

(b) For subgrants. Recipients shall be responsible for reviewing
requests from their subrecipients for the approvals required by this
subpart and for giving or denying the approval. A recipient shall not
approve any action which is inconsistent with the purpose or terms of the
Federal grant or cooperative agreement. If an action by a subrecipient
will result in a change in the overall grant project or budget requiring
approval from the awarding agency, the recipient shall obtain that
approval before giving its approval to the subrecipient. Approvals shall
not be valid unless they are in writing and signed by an authorized
official of the recipient organization.

(c) Timing. Within 30 days from the date of receipt of a request
for approval, the approval authority shall review the request and notify
the recipient of its decision. If the request for approval is still under
consideration at the end of 30 days, the approval authority shall inform
the recipient in writing as to when to expect the decision.

§ 3015.113   Programmatic changes.

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(a) Scope. This section contains requirements for prior approval
of departures, other than budget revisions, from approved project plans.
In addition to the requirements in this section, awarding agencies may
require prior approval for other kinds of programmatic changes to an
approved cooperative agreement, grant, or subgrant project.

(b) Changes to project scope or objectives. The recipient shall
obtain prior approval for any change to the scope or objectives of the
approved project. (For construction projects, any material change in
approved space utilization or functional layout shall be considered a
change in scope).

(c) Changes in key people. This section applies to grants,
subgrants, and cooperative agreements for research. This section does not
apply to other types of grants, subgrants, or cooperative agreements
unless other terms of the award make it apply. The recipient shall obtain
prior approval:

(1) To continue the project during any continuous period of more than
three months without the active direction of an approved project director
or principal investigator;

(2) For its selection of a replacement for the project director of
principal investigator;

(3) For its selection of a replacement for any other persons named and
expressly designated as key project people in the grant, subgrant, or
cooperative agreement award document; or

(4) To permit the project director or principal investigator (or anyone
covered by paragraph (c)(3) of this section) to devote substantially less
effort to the project than was anticipated when the award was made.

(d) Transferring work and providing financial assistance to others.
Recipients shall obtain prior approval for transferring to another
party the actual performance of the substantive programmatic work, and for
providing any form of financial assistance to another party.

(e) Audiovisual activities. (1) Except to the extent explicitly
included in the project plan approved at the time of award, using grant
support for any of the following requires prior approval:

(i) Producing an audiovisual.

(ii) Buying ownership of any of the rights in the work embodied in the
audiovisual. (This does not apply to merely buying a license in any of the
rights. For the remainder of this section, buying ownership of the rights
is referred to simply as buying or purchasing an audiovisual).

(iii) Presenting or distributing to the general public an audiovisual
that was produced or bought with grant support.

(2) Prior approval is not required for:

(i) Any audiovisual activity under a subgrant.

(ii) Any audiovisual whose direct production or purchase cost to the
recipient is $5,000 or less.

(iii) The production or purchase of an audiovisual as a research
instrument or for documenting experimentation or findings, if the
audiovisual is not intended for presentation or distribution to the
general public.

(3) Following are examples of presentation or distribution of an
audiovisual to the general public.

(i) Broadcast on commercial, cable, or educational television, or
radio.

(ii) Showing in commercial motion picture theaters.

(iii) Showing in public places such as airports, waiting rooms, bus or
railroad depots, and vacation resorts.

(iv) Showing to civic associations, schools (except when used as a
teaching tool in a classroom setting), clubs, fraternal organizations, or
similar lay groups.

§ 3015.114   Budgets—general.

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(a) Research and non-research project budgets. For research and
non-research projects which involve cost-sharing or matching, approved
budgets shall ordinarily consist of a single set of figures covering total
project cost (the sum of the awarding agency's share and the recipient's
share). However, the awarding agency may specify that the recipient's
share not be included in the approved budget. In no case, however, shall
the approved budget be in the form of a separate set of figures for each
share.

(b) Subdivision by programmatic segments. Some grants,
subgrants, and cooperative agreements contain two or more programmatic
segments (such as discrete programs, projects, functions, or types of
activities). In these cases, the awarding agency may require that the
approved budget be subdivided to show the anticipated cost of each
programmatic segment.

§ 3015.115   Budget revisions.

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(a) Nonconstruction projects. (1) Except as provided in
paragraph (a)(2) of this section, the recipient of a grant, subgrant, or
cooperative agreement having an approved budget shall obtain prior
approval for any budget revision which will:

(i) Involve transfer of amounts budgeted for indirect costs to absorb
increases in direct costs, or

(ii) Involve transfer of amounts previously budgeted for training
allowances (direct payments to trainees), or

(iii) Result in a need for the award of additional funds, e.g., an
increase in the base upon which indirect costs are calculated which will
increase allocable indirect costs and result in a claim for a
supplementary award.

(2) Any or all of the prior approval requirements in paragraph (a) of
this section may be waived by the awarding agency.

(3) Except as provided in §3015.116 other budget changes under
nonconstruction grants do not require approval.

(b) Construction projects. Unless provided otherwise by the
terms of the grant, subgrant, or cooperative agreement, revisions to
construction project budgets do not require approval.

§ 3015.116   Construction and nonconstruction work
under the same grant, subgrant, or cooperative agreement.

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When a grant, subgrant, or cooperative agreement provides support for
both construction and nonconstruction work, the awarding agency may
require prior approval for any fund or budget transfers between the two
types of work.

Subpart N—Grant and Subgrant Closeout, Suspension and
Termination

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§ 3015.120   Closeout.

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(a) Each grant or subgrant shall be closed out as soon as possible
after expiration or notice of termination.

(b) The following shall apply when closing out USDA grants:

(1) Upon request from the recipient, any allowable reimbursable cost
not covered by previous payments shall be promptly paid by USDA.

(2) Any unobligated balance of cash advanced to the recipient shall be
immediately refunded to the awarding agency or managed in accordance with
USDA instructions.

(3) Within a maximum period of 90 days following the date of expiration
or termination of a grant, all financial performance and related reports
required by the terms of the agreement shall be submitted to the awarding
agency by the recipient. USDA reserves the option of extending the due
date for any report and may waive any report that it considers to be
unnecessary.

(4) The provisions formally expressed and agreed to within the grant
arrangement shall dictate the settlement of any upward or downward
adjustments of the Federal share of costs.

(c)(1) A grant closeout shall not affect the retention period for, or
Federal rights of access to, grant records. (See Subpart D of this
part).

(2) The closeout of a grant does not affect the recipient's
responsibilities regarding property under Subpart R of this part or with
respect to any program income the recipient is still accountable for under
Subpart F of this part.

(3) Final audits (See Attachment L, Circular A–102 and Attachment K of
Circular A–110) are not a required part of the grant or subgrant closeout
procedures. Normally, a final audit should not be needed unless there are
problems with a grant or subgrant that require audit attention. If a USDA
agency considers a final audit to be necessary, it shall contact the OIG
Region within which the recipient or subrecipient is located and inform
OIG of the situation. OIG shall be responsible for assuring that necessary
final audits are performed and for any necessary coodination with other
Federal cognizant audit agencies, recipients or State and local auditors.
Audits performed in accordance with Subpart I may serve as final audits
providing such audits meet the needs of the requesting agency.

(4) If a grant is closed out without audit, the awarding agency
reserves the right to disallow and recover an appropriate amount after
fully considering any recommended disallowances resulting from an audit
which may be conducted later.

§ 3015.121   Amounts payable to the Federal
government.

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The following outstanding sums for each grant shall be considered as a
debt or debts owed by the recipient to the Federal government. They shall,
if not paid upon demand, be subject to recovery by the awarding agency
from the recipient or its successor or assignees by set off or other
action provided by law:

(a) Any grant funds paid to the recipient by the Federal government
which exceed the amount the recipient is finally determined to be entitled
to under the provisions of the grant award;

(b) Any interest or other investment income earned on advances of grant
funds which is due the Federal government;

(c) Any royalties or other special classes of program income which,
under the provisions of the grant award, are required to be returned to
the Federal government;

(d) Any amount the Federal government is entitled to under Subpart R of
this part; and

(e) Under the provisions of the grant award, any other amounts finally
determined to be due to the Federal government.

§ 3015.122   Violation of terms.

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(a) Whenever it is determined that the recipient has materially failed
to comply with the provisons of the grant award, the awarding agency may
suspend or terminate, in accordance with §§3015.123 and 3015.124, any
grant in whole, or in part, at any time before the date of completion, or
take such other remedies as may be legally available and appropriate.

(b) A grant may be suspended or terminated in the current period for
failure to submit a report still due from a prior period. This action is
applicable when a project or program is supported over two or more funding
periods.

§ 3015.123   Suspension.

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(a) When a recipient has materially failed to comply with the
provisions prescribed in the grant agreement, the awarding agency may,
after reasonable notice to the recipient, suspend the grant in whole or in
part. A suspension notice shall be issued by the awarding agency stating
the reasons for the suspension, any corrective action required of the
recipient, and the effective date. Suspension may go into effect
immediately if the awarding agency deems it necessary to protect its
interest and if a delayed effective date would be unreasonable considering
the awarding agency's responsibilities to protect the Federal government's
interest. Suspension shall remain in effect until the recipient has taken
corrective action satisfactory to the awarding agency, or given evidence
that such corrective action will be taken, or until the awarding agency
terminates the grant.

(b) Unless specifically authorized by the awarding agency in the notice
of suspension or subsequently expressed in an amendment to it, new
obligations incurred by the recipient during the suspension period shall
not be allowed. Necessary and otherwise allowable costs which the
recipient could not reasonably avoid during the suspension period will be
allowed, if they result from obligations properly incurred by the
recipient before the effective date of the suspension and not in
anticipation of suspension or termination. If the awarding agency
approves, third party in-kind contributions applicable to the suspension
period may be allowed in satisfaction of cost-sharing or matching
requirements.

(c) During the suspension period, appropriate adjustments to payments
under the suspended grant will be made by not giving credit to the
recipient for disbursements made in payment of unauthorized obligations
incurred during the suspension period or by withholding subsequent
payments.

§ 3015.124   Termination.

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(a) Termination for cause. The awarding agency may terminate any
grant or other agreement in whole, or in part, at any time before the date
of expiration, whenever it is determined that the recipient has materially
failed to comply with the conditions of the agreement. The awarding agency
shall promptly notify the recipient in writing of the determination and
reasons for the termination, together with the effective date.

(b) Termination by mutual agreement. Except as provided in
paragraph (a) of this section, grants may be terminated in whole, or in
part, only as follows:

(1) When the awarding agency and recipient agree upon the termination
conditions, including the effective date and, in the case of partial
termination, the portion to be terminated.

(2) By written notification by the recipient to the awarding agency
setting forth the reasons for termination, the effective date, and in the
case of partial termination, the portion to be terminated. In the case of
a partial termination, if the awarding agency decides that the remaining
portion of the grant will not accomplish the purposes for which the grant
was made, the awarding agency may terminate the award in its entirety
under either paragraph (a) or paragraph (b)(1) of this section.

(c) Termination settlements. Upon termination of a grant, the
recipient shall not incur any new obligations for the terminated portion
of the agreement after the effective date, and shall cancel as many
outstanding obligations as possible. The awarding agency, however, shall
allow full credit to the recipient for the Federal share of the
non-cancellable obligations properly incurred by the recipient prior to
termination.

§ 3015.125   Applicability to
subgrants.

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Recipient subgrants shall be subjected to the same standards regarding
closeout, suspension, and termination of subgrants as prescribed in this
subpart for awarding agencies.

Subparts O–P [Reserved]

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Subpart Q—Application for Federal Assistance

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§ 3015.150   Scope and applicability.

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(a) This subpart prescribes forms and instructions to be used by
governmental organizations (except hospitals, non-profit organizations,
and institutions of higher education operated by a government) in applying
to USDA for discretionary grants. This subpart is not applicable, however,
to mandatory or formula grants or programs which do not require applicants
to apply to USDA for funds on a project basis.

(b) This subpart permits awarding agencies to prescribe the form of
applications by nongovernmental organizations (including hospitals,
non-profit organizations and institutions of higher education operated by
a government), but prescribes the use of a standard facesheet for certain
of these applications.

(c) This subpart applies only to applications for grants or cooperative
agreements and is not required to be applied by recipients in dealing with
applicants for subgrants. However, recipients are encouraged not to adopt
more detailed or burdensome application requirements for subgrants.

(d) This subpart also prescribes standards for competition to be used
by USDA agencies in awarding discretionary cooperative agreements and
grants. (This subpart is not applicable to cooperative agreements awarded
pursuant to the provisions of sections 1472(b) and 1473C of the National
Agricultural Research, Extension and Teaching Policy Act of 1977, as
amended.)

[46 FR 55639, Nov. 10, 1981, as amended at 51 FR 17172, May 9,
1986]

§ 3015.151   Authorized forms.

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(a) Sections 3015.152 through 3015.156 specify the forms that
governmental organizations shall use to apply to USDA for a discretionary
grant.

(b) Governments need not submit more than the original and two copies
of application forms. When less will suffice, the awarding agency shall
notify potential applicants.

(c) When a government agency amends a previously submitted application
or applies for additional funding (such as a continuation or supplemental
award) only the facesheet and any other affected pages are required to be
submitted. Previously submitted pages whose information is still current
may be resubmitted, but are not required to be resubmitted.

§ 3015.152   Preapplication for Federal
assistance.

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(a) When a government submits a preapplication, it shall use the
Preapplication for Federal Assistance form prescribed by Circular A–102.
The purposes of these preapplications shall be to:

(1) Establish communication between the potential applicant and the
awarding agency;

(2) Determine the potential applicant's eligibility;

(3) Identify projects which have little or no chance for Federal
funding before applicants incur significant costs for preparing an
application.

(b) Preapplication is always required if the potential applicant is a
government and the proposed project (1) is for construction, land
acquisition, or land development, and (2) would require more than $100,000
of Federal funding. If these conditions are not present, potential
applicants need not submit preapplications unless required to do so by the
awarding agency. Any government may submit a preapplication even when not
required.

§ 3015.153   Notice of preapplication review
action.

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Awarding agencies shall inform governmental applicants of the results
of their review of preapplications by using the Notice of Preapplication
Review Action form prescribed by Circular A–102. If the review cannot be
completed within 45 days, the awarding agency shall inform the applicant,
in writing, when it will complete the review.

§ 3015.154   Application for Federal assistance
(nonconstruction programs).

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Governments shall use the Application for Federal Assistance
(Nonconstruction Programs) form prescribed by OMB Circular A–102 in
applying for discretionary grants unless a form specified in §3015.155 or
§3015.156 is to be used.

§ 3015.155   Application for Federal assistance
(construction programs).

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Governments shall use the Application for Federal Assistance (for
Construction Programs) form prescribed by Circular A–102 in applying for
any grant whose purpose is solely or primarily construction, land
acquisition, or land development.

§ 3015.156   Application for Federal assistance
(short form).

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Governments shall use the Application for Federal Assistance (Short
Form) form prescribed by Circular A–102 in applying for any
single-purpose, one-time grant of less than $10,000 not requiring Circular
A–95 clearinghouse review, an environmental impact statement, or the
relocation of persons, businesses, or farms. Awarding agencies may, at
their discretion, authorize or require this form for applications for
larger amounts.

§ 3015.157   Authorized form for nongovernmental
organizations.

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Nongovernmental organizations shall use application forms prescribed by
the awarding agency. The facesheet of these applications shall be Standard
Form 424.

§ 3015.158   Competition in the awarding of
discretionary grants and cooperative agreements.

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(a) Standards for competition. Except as provided in paragraph
(d) of this section, awarding agencies shall enter into discretionary
grants and cooperative agreements only after competition. An awarding
agency's competitive award process shall adhere to the following
standards:

(1) Potential applicants must be invited to submit proposals through
publications such as theFederal Register,professional trade
journals, agency or program handbooks, the Catalog of Federal Domestic
Assistance, or any other appropriate means of solicitation. In so doing,
awarding agencies should consider the broadest dissemination of project
solicitations in order to reach the highest number of potential
applicants.

(2) Proposals are to be evaluated objectively by independent reviewers
in accordance with written criteria set forth by the awarding agency.
Reviewers should make written comments, as appropriate, on each
application. Independent reviewers may be from the private sector, another
agency, or within the awarding agency, as long as they do not include
anyone who has approval authority for the applications being reviewed or
anyone who might appear to have a conflict of interest in the role of
reviewer of applications. A conflict of interest might arise when the
reviewer or the reviewer's immediate family members have been associated
with the applicant or applicant organization within the past two years as
an owner, partner, officer, director, employee, or consultant; has any
financial interest in the applicant or applicant organization; or is
negotiating for, or has any arrangement, concerning prospective
employment.

(3) An unsolicited application, which is not unique and innovative,
shall be competed under the project solicitation it comes closest to
fitting. Awarding agency officials will determine the solicitation under
which the application is to be evaluated. When the awarding agency
official decides that the unsolicited application does not fall under a
recent, current, or planned solicitation, a noncompetitive award may be
made, if appropriate to do so under the criteria of this section.
Otherwise, the application should be returned to the applicant.

(b) Project solicitations. A project solicitation by the
awarding agency shall include or reference the following, as
appropriate:

(1) A description of the eligible activities which the awarding agency
proposes to support and the program priorities;

(2) Eligible applicants;

(3) The dates and amounts of funds expected to be available for
awards;

(4) Evaluation criteria and weights, if appropriate, assigned to
each;

(5) Methods for evaluating and ranking applications;

(6) Name and address where proposals should be mailed and submission
deadline(s);

(7) Any required forms and how to obtain them;

(8) Applicable cost principles and administrative requirements;

(9) Type of funding instrument intended to be used (grant or
cooperative agreement); and

(10) The Catalog of Federal Domestic Assistance number and
title.

(c) Approval of applications. The final decision to award is at
the discretion of the awarding/approving official in each agency. The
awarding/approving official shall consider the ranking, comments, and
recommendations from the independent review group, and any other pertinent
information before deciding which applications to approve and their order
of approval. Any appeals by applicants regarding the award decision shall
be handled by the awarding agency using existing agency appeal procedures
or good administrative practice and sound business judgment.

(d) Exceptions. The awarding/approving official may make a
determination in writing that competition is not deemed appropriate for a
particular transaction. Such determination shall be limited to
transactions where it can be adequately justified that a noncompetitive
award is in the best interest of the Government and necessary to the
accomplishment of the goals of the program. Reasons for considering
noncompetitive awards may include, but are not necessarily limited to, the
following:

(1) Nonmonetary awards of property or services;

(2) Awards of less than $75,000;

(3) Awards to fund continuing work already started under a previous
award;

(4) Awards which cannot be delayed due to an emergency or a substantial
danger to health or safety;

(5) Awards when it is impracticable to secure competition; or

(6) Awards to fund unique and innovative unsolicited applications.

[51 FR 17172, May 9, 1986]

Subpart R—Property

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§ 3015.160   Scope and applicability.

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(a) Except as explained in paragraphs (c), (d), and (e) of this
section, this subpart applies to real property, equipment (including ADP)
and supplies whose acquisition is supported by a grant.

(b) Also contained in this subpart are standards covering inventions,
patents, and copyrights arising out of activities supported by a
grant.

(c) This subpart does not apply to:

(1) Property for which only depreciation or use allowances are
charged;

(2) Property donated entirely as a third party in-kind contribution;
or

(3) Equipment or supplies acquired primarily for sale or rental, rather
than for use.

(d) This subpart applies to equipment or supplies acquired by a
contractor under a grant or subgrant only if, by terms of the contract,
title vests in the recipient or subrecipient.

(e) For research grants that are subject to an institutional
cost-sharing agreement, real property, equipment, and supplies shall be
subject to this subpart only if at least some part of the acquisition cost
is supported as a direct cost by Federal grant funds.

§ 3015.161   Additional requirements.

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Provided they observe the requirements of this subpart, recipients may
follow their own property management policies and procedures. Unless
specifically required by Federal statutes or Executive Orders, awarding
agencies may not impose on recipients property requirements (including
property reporting requirements) not authorized by this subpart.

§ 3015.162   Title to real property, equipment and
supplies.

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Subject to the obligations and conditions specified in this subpart,
title to real property, equipment, and supplies acquired under a grant or
subgrant shall vest, upon acquisition, in the recipient or subrecipient,
respectively. In certain cases, money due the Federal government upon
disposition of real property may be authorized to be used for allowable
costs rather than paid to USDA. (See §3015.173.)

§ 3015.163   Real property.

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Except as stated otherwise by Federal statutes, real property
applicable to this subpart shall be subject to the following requirements,
in addition to any other requirements imposed by the provisions of the
grant award:

(a) Use. The property shall be used for the originally
authorized purpose as long as needed for that purpose. When no longer so
needed, the awarding agency may approve the use of the property for other
purposes. These uses shall be limited to:

(1) Projects or programs supported by other Federal grants or
assistance agreements.

(2) Activities not supported by other Federal grants or assistance
agreements but having purposes consistent with those of the legislation
under which the original grant was made.

(b) Transfer of title. In accordance with paragraph (a) of this
section, approval may be requested from the awarding agency to transfer
title to an eligible third party for continued use for authorized
purposes. If approval is permissible under Federal statutes, and is given,
the terms of the transfer shall provide that the transferee shall assume
all the rights and obligations of the transferor set forth in this subpart
or in other terms of the grant or subgrant.

(c) Disposition. When the real property is no longer to be used
as provided in paragraphs (a) and (b) of this section, the disposition
instructions of the awarding agency shall be followed. Those instructions
will provide for one of the following alternatives:

(1) The property shall be sold and the Federal government shall have a
right to an amount computed by multiplying the Federal share of the
property times the proceeds from sale (after deducting actual and
reasonable selling and fix-up expenses, if any, from the sales proceeds).
Proper sales procedures shall be followed which provide for competition to
the extent practicable and result in the highest possible return.

(2) The recipient shall have the option either of selling the property
in accordance with paragraph (c)(1) of this section or of retaining title.
If title is retained, the Federal government shall have a right to an
amount computed by multiplying the market value of the property by the
Federal share of the property.

(3) The recipient shall transfer the title to either the Federal
government or an eligible non-Federal party named by the awarding agency.
The recipient shall be entitled to be paid an amount computed by
multiplying the market value of the property by the non-Federal share of
the property. In cases where the property belonged to a subrecipient, see
§3015.172 for the subrecipient's share.

§ 3015.164   Statutory exemptions for equipment
and supplies.

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(a) In certain circumstances some Federal statutes permit title to
equipment or supplies acquired with grant funds to vest in the recipient
without further obligation to the Federal government or on such terms and
conditions set forth in the grant award, as deemed appropriate. The
Federal Grant and Cooperative Agreement Act of 1977, Pub. L. 95–224, is an
example of such a statute. It provides this authority for equipment and
supplies purchased with the funds of grants (and Federal contracts and
cooperative agreements) for the conduct of basic or applied scientific
research at non-profit institutions of higher education or at non-profit
organizations whose primary purpose is the conduct of scientific
research.

(b) If equipment is subject to a statute of the kind described in
paragraph (a) of this section, it shall be exempt from the requirements in
the remaining sections of this subpart. However, when an equipment item
has a unit acquisition cost of $1,000 or more, it shall be subject to
§3015.165 concerning rights to require transfer, and, while subject to
such a right, to the rules on replacement in §3015.167.

(c) If supplies are subject to a statute of the kind described in
paragraph (a) of this section, they shall be exempt from all provisions of
the remainder of this subpart which would otherwise apply.

§ 3015.165   Rights to require transfer of
equipment.

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(a) USDA right. The awarding agency shall have the right to
require the transfer of equipment (including title) for items of equipment
having a unit cost of $1,000 or more to the Federal government or to an
eligible non-Federal party named by the awarding agency. Normally, USDA
agencies will only exercise this right if the project or program for which
the equipment was acquired is transferred from one recipient to another.
The following conditions shall govern this right:

(1) The property shall be appropriately identified in the grant
award.

(2) In order for the awarding agency to exercise the right, disposition
instructions must be issued no later than 120 days after the end of USDA
grant support for the project or program for which the equipment was
acquired. Furthermore:

(i) If the equipment is eligible for the exemptions in §3015.164 and
ceases to be needed for the project or program for which it was acquired
while the project or program is still being performed by the recipient,
the disposition instructions must have been received by the recipient
while the equipment was still needed for that project or program.

(ii) If the equipment is not eligible for those exemptions, disposition
instructions must have been received by the recipient before other
permissible disposition of the equipment took place in accordance with
§3015.168.

(3) If the right is exercised, the recipient shall be entitled to be
paid any reasonable, resulting shipping or storage costs incurred, plus an
amount computed by multiplying the market value of the equipment by the
non-Federal share of the equipment.

(b) Right of parties awarding subgrants. A recipient may reserve
for itself, when awarding a subgrant, rights similar to those found in
paragraph (a) of this section which covers items of equipment having a
unit acquisition cost of $1,000 or more which are acquired under that
subgrant. Without the approval of the awarding agency, the right may be
exercised only if the project or program for which the equipment was
acquired is transferred to another subrecipient and only for the purpose
of transferring the equipment to the new subrecipient for continued use in
the project or program.

(c) Equipment lists. If at any time an awarding agency is
considering exercising its right to require transfer of equipment, it may
require the recipient to furnish it with a list of all items of equipment
that are subject to the right. As such, the awarding agency will decide
which items, if any, should be transferred.

§ 3015.166   Use of equipment.

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(a) Basic rule. Whenever the equipment is not transferred under
the provisions set forth in §3015.165, it shall be used by the recipient
in the project or program for which it was acquired as long as needed,
whether or not the project or program continues to be supported by Federal
funds. When the equipment is no longer needed for the original project or
program the recipient shall use the equipment, if needed, in other
projects or programs currently or previously funded by the Federal
government, in the following order of priority:

(1) Projects or programs currently or previously funded by the same
USDA awarding agency.

(2) Projects or programs currently or previously funded by any USDA
awarding agency.

(3) Projects or programs currently or previously funded by other
Federal agencies.

(b) Shared use. When equipment is used less than full time in
the original project or program, the recipient shall make it available for
use in other projects or programs currently or previously funded by the
Federal government. Provided, such other use will not interfere with the
work on the original project or program. First preference for such use,
however, shall be given to other projects or programs funded by the same
USDA awarding agency.

(c) Use by other recipients. When the recipient can no longer
use the equipment as required by paragraph (a) of this section, it may
voluntarily make the equipment available for use on projects or programs
currently or previously funded by the Federal government which the
recipient is supporting through subgrants or through non-Federal grants. A
subrecipient may also voluntarily make the equipment available for use in
projects or programs currently or previously funded by the Federal
government which are being conducted or supported by the recipient.

(d) Other uses. Unless the awarding agency provides otherwise,
while equipment is being used as described in the preceding paragraphs of
this section, it may also be used part-time for other purposes. The use as
described in the previous paragraphs, however, shall be given priority
over other uses.

§ 3015.167   Replacement of equipment.

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(a) If needed, equipment may be exchanged for replacement equipment.
Replacement of equipment may be done either through trade-in or through
sale and application of the proceeds to the acquisition cost of
replacement equipment. In either case, the transaction must be one which a
prudent person would make in like circumstances.

(b) If an additional outlay to acquire the replacement equipment is
charged as a direct cost to either Federal funds or required cost-sharing
or matching under a Federal award, the replacement equipment shall be
subject to whatever property requirements or exemptions are applicable to
that award. If the award is a grant from USDA, the full acquisition cost
of the replacement equipment shall determine which provisions of this
subpart apply.

(c) For any replacement not covered by paragraph (b) of this section,
the provisions of this subpart applicable to the equipment replaced shall
carry over to the replacement equipment. None of the provisions of this
subpart shall carry over if (1) the Federal share of the equipment
replaced was 10 percent or less or (2) the product of that share times the
amount received for trade-in or sale is $100 or less.

§ 3015.168   Disposal of equipment.

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When original or replacement equipment is no longer to be used in
projects or programs currently or previously sponsored by the Federal
government, disposal of the equipment shall be made as follows:

(a) Equipment with a unit acquisition cost of less than $1,000 may be
sold, retained or otherwise disposed of with no further obligation to the
Federal government.

(b) All other equipment may be retained or sold. The Federal government
shall have a right to an amount calculated by multiplying the current
market value or proceeds from sale by the Federal share of the equipment
(see §3015.172). If part of the Federal share of the equipment came from
an award under which the exemptions in §3015.164 were applicable, the
amount due shall be reduced pro rata. In any case, if the equipment is
sold, $100 or 10 percent of the total sales proceeds, whichever is
greater, may be deducted and retained from the amount otherwise due for
selling and handling expenses. If the recipient's project or program for
which or under which the equipment was acquired is still receiving grant
support from the same Federal program and if the awarding agency approves,
the net amount due may be used for allowable costs of that project or
program. Otherwise, the net amount must be returned to the awarding agency
by check or money order.

§ 3015.169   Equipment management
requirements.

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Recipient procedures for managing equipment shall, as a minimum, meet
the following requirements (including replacement equipment) until such
actions as transfer, replacement or disposal takes place:

(a) Property records shall be maintained accurately. (Subpart D of this
part contains retention and access requirements for these records.) The
records shall include for each item of equipment the following:

(1) A description of the equipment including manufacturer's serial
numbers.

(2) An identification number, such as the manufacturer's serial
number.

(3) Identification of the grant under which the recipient acquired the
equipment.

(4) The information needed to calculate the Federal share of the
equipment (see §3015.172).

(5) Acquisition date and unit acquisition cost.

(6) Location, use and condition of the equipment and the date the
information was reported.

(7) All pertinent information on the ultimate transfer, replacement, or
disposal of the equipment.

(b) Every two years, at a minimum, a physical inventory shall be
conducted and the results reconciled with the property records to verify
the existence, current utilization, and continued need for the equipment.
Any discrepancies between quantities determined by the physical inspection
and those shown in the accounting records shall be investigated to
determine the causes of the differences.

(c) In order to insure adequate safeguards to prevent loss, damage or
theft of equipment, a control system shall be used. Any loss, damage or
theft of equipment shall be investigated and fully documented. The
awarding agency may require a report of the circumstances involving the
loss, damage, or theft of equipment.

(d) In order to keep the equipment in good condition, adequate
maintenance procedures shall be implemented.

(e) Where equipment is to be sold and the Federal government is to have
a right to part or all of the proceeds, selling procedures shall be
established which will provide for competition to the extent practicable
and result in the highest possible return.

§ 3015.170   Damage, loss, or theft of
equipment.

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(a) Applicability. This section applies to equipment with a unit
acquisition cost of $1,000 or more that, before disposal (see §3015.168),
is damaged beyond repair, lost, or stolen.

(b) Recipient at fault —(1) Applicability. This paragraph
applies if:

(i) At the time of the damage, loss, or theft, the recipient does not
have a control system in effect as required by §3015.169, and

(ii) The damage, loss, or theft is not due to an act of God.

(2) Equipment replaced. If the equipment is replaced, the
replacement is governed by §3015.167. When that happens, the market value
of the original equipment at the time it was damaged, lost, or stolen is
used instead of the amount received for trade-in or sale.

(3) Equipment not replaced. If the equipment is not replaced,
the Federal government has a right to an amount calculated by multiplying
the Federal share in the equipment by its market value at the time of
damage, loss, or theft. The amount is reduced pro rata if part of the
Federal share of the equipment comes from an award under which the
exemption in §3015.164 applied.

(4) Other remedies. The provisions in this paragraph (b) are in
addition to other remedies available to the awarding agency if a recipient
acquires equipment with grant support but fails to establish the control
system required by §3015.169.

(c) Recipient not at fault —(1) Applicability. This
paragraph applies if:

(i) At the time of the damage, loss, or theft, the recipient does have
a control system in effect as required by §3015.169(c) or

(ii) The damage, loss, or theft is due to an act of God.

(2) Recipient not compensated. If the recipient is not
compensated for the damage, loss, or theft, through insurance or some
other means, there is no obligation to USDA for the equipment.

(3) Recipient compensated. If the recipient is compensated for
the damage, loss, or theft and replaces the equipment, §3015.167 applies
to the replacement equipment. If the recipient is compensated but does not
replace the equipment, §3015.168 applies as though the recipient had sold
the equipment. (All of §3015.168 applies including the rule permitting the
amount due the Federal government to be reduced by 10 percent of the
proceeds or $100, whichever is greater.) The amount received for trade-in
or sale is considered the lesser of (i) the amount of compensation or (ii)
the market value of the equipment at the time it was damaged, lost, or
stolen.

(d) Waivers. The awarding agency may waive in whole or in part
any provision of this section.

§ 3015.171   Unused supplies.

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(a) If unused supplies exceeding $1,000 in total aggregate market value
are left over upon termination or expiration of the grant or subgrant for
which they were acquired and the supplies are not needed for any project
or program currently or previously funded by the Federal government, the
grant shall be credited by an amount computed by multiplying the Federal
share of the supplies times the current market value or, if the supplies
are sold, the proceeds from sale. If the supplies are sold, 10 percent of
the proceeds may be deducted and retained from the credit, for selling and
handling expenses.

(b) For possible exemptions from this section, see §3015.164.

§ 3015.172   Federal share of real property,
equipment, and supplies.

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This subpart contains principles necessary to determine the Federal (or
non-Federal) share of real property, equipment or supplies.

(a) General. (1) Except as explained in the following paragraphs
of this section, the Federal share of the property shall be the same
percentage as the Federal share of the acquiring party's total cost under
the grant during the grant or subgrant year (or other funding period) to
which the acquisition cost of the property was charged. For this purpose,
“costs under the grant” means allowable costs which are either supported
by the grant or counted toward satisfying a cost-sharing or matching
requirement of the grant.

(2) If the property is acquired by a subrecipient, the Federal share of
the subrecipient's costs under the grant and hence of the property shall
be calculated by multiplying the Federal share of the recipient's costs by
the latter's share of the subrecipient's costs. (For example, if the
Federal share of the recipient's costs is 50 percent and the subgrant
bears only 50 percent of a subrecipient's costs, then the Federal share of
that subrecipient's costs (and of the property acquired by that
subrecipient) is 25 percent.)

(3) The provisions of some grant awards set different maximum
percentages of Federal financial participation for different categories of
costs. In these cases, for the purposes of this section, the costs in each
category are considered as costs under a separate grant. If two categories
have the same maximum percentage of Federal participation and costs in one
category are permitted to count toward satisfying a cost-sharing or
matching requirement of the other, they are a single category for the
purposes of this rule. Also, all categories with a 100 percent rate are
considered a single category for the purposes of this rule.

(b) Property acquired only partly under a grant. (1) Sometimes
only a part of the acquisition cost of an item of property is supported as
a direct cost by the grant or counted as a direct cost towards a
cost-sharing or matching requirement. Occasionally, the amount paid for
the property is only a part of its value. The remainder is donated as an
in-kind contribution by the party that provided the property.

(2) To determine the Federal share of such property, first calculate
the Federal share of the acquiring party's total costs under the grant as
explained in paragraph (a) of this section. Next multiply that share by
the percentage of the property's acquisition cost (or its market value, if
the item was partly donated) which was supported as a direct cost by the
grant or counted as a direct cost towards a cost-sharing or matching
requirement.

(c) Replacement equipment. To calculate the Federal share of
replacement equipment the following procedures shall be followed:

(1) Step 1: Determine the Federal share (percentage) of the
equipment replaced.

(2) Step 2: Determine the percentage of the replacement
equipment's costs that was covered by the amount received for trade-in or
the sale proceeds from the equipment replaced.

(3) Step 3: Multiply the step 1 percentage by the step 2
percentage.

(4) Step 4: If an additional outlay for the replacement
equipment was charged as a direct cost either to USDA grant funds or to
required cost-sharing or matching funds, calculate the Federal share
attributable to that additional outlay as explained in paragraph (b)(2) of
this section. Add that additional percentage to the step 3
percentage.

§ 3015.173   Using or returning the Federal
share.

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(a) This section applies when, under §3015.163, 3015.168 or 3015.170,
the Federal government has a right to an amount of money upon disposal or
loss, theft, or damage of property.

(b) If the recipient's project or program for which the property was
acquired is still receiving grant support from the same Federal program,
the awarding agency may authorize use of the net money due for allowable
costs of that project or program.

(c) Otherwise, the net amount must be returned to the awarding agency
by check or money order.

§ 3015.174   Subrecipient's share.

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Where this subpart requires a sharing of the market value or sale
proceeds of property acquired under a subgrant, the non-Federal share
shall be proportionally divided between the recipient and the
subrecipient. The subrecipient shall be entitled to the amount it would
have received or retained if the award to it had been made directly by the
Federal government. The remainder of the non-Federal share shall belong to
the recipient.

§ 3015.175   Intangible personal
property.

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(a) Inventions and Patents. (1) If the recipient is a small
business or nonprofit organization (including universities and other
institutions of higher education), the allocation of rights in inventions
produced under a grant or cooperative agreement shall be determined in
accordance with the provisions of sections 200 through 206 of Pub. L.
96–517 (35 U.S.C. 200–206) and OMB Circular A–124.

(2) For all other recipients, the allocation of rights in inventions
shall be determined in accordance with the “Government Patent Policy”
(President's Memorandum for Heads of Executive Departments and Agencies,
February 18, 1983) and OMB Circular A–124.

(b) Copyrights —(1) Applicability. This section applies
to the copyright in any original work of authorship prepared with grant
support. Additionally, if ownership of a copyright or of any of the
exclusive rights comprising a copyright are purchased with grant support,
this section applies to the purchased copyright or rights.

(2) Basic rules. (i) USDA reserves a royalty-free, nonexclusive,
and irrevocable license to exercise, and to authorize others to exercise,
the rights for Federal Government purposes. Subject to this license, the
owner is free to exercise, preserve, or transfer all its rights. The
recipient shall ensure that no agreement is entered into for transferring
the rights which would conflict with the nonexclusive license of USDA.

(ii) One way that USDA may exercise its nonexclusive license is to
authorize exercise of the rights in another project or activity that
receives or has received grant support from the Federal Government.

(iii) A recipient awarding a subgrant is allowed to impose subgrant
terms reserving a nonexclusive license for itself, similar to the one
reserved by this section for USDA, with respect to any copyright or rights
subject to this section that arise under the subgrant.

[48 FR 35875, Aug. 8, 1983]

Subpart S—Procurement

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§ 3015.180   Scope and applicability.

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(a) This subpart contains information for complying with Attachment 0,
“Procurement Standards”, of OMB Circulars A–102 and A–110. Circular A–102
covers grant and cooperative agreement programs with State and local
governments and Indian Tribal governments. Circular A–110 covers grant and
cooperative agreement programs with institutions of higher education,
hospitals, and other nonprofit organizations. Copies of both Circulars may
be obtained from O&F.

(b) This subpart applies to recipient procurements (by purchase,
rental, or barter) of supplies, equipment, and services (including
construction).

(c) This subpart applies only to procurements that are supported in
whole or in part by a grant or cooperative agreement.

(d) This subpart does not apply to procurements of land, existing land
improvements or structures, or any other existing real property.

(e) The Attachment 0 of Circulars A–102 and A–110 apply to procurements
under subgrants as well as grants.

§ 3015.181   Standards of conduct.

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(a) Recipients shall maintain a written code or standards of conduct
governing the performance of their officers, employees or agents engaged
in awarding and administering contracts supported by Federal funds:

(1) No employee, officer or agent shall participate in the selection,
award, or administration of contracts using Federal funds where to his
knowledge, such employee, officer or agent or his immediate family,
partners or organizations has a financial interest in, is negotiating
with, or has any arrangements concerning prospective employment with the
proposed contractor.

(2) The recipient's officers, employees or agents shall neither solicit
nor accept gratuities, favors, or anything of monetary value from
contractors or proposed contractors.

(3) Provisions shall be made for disciplinary actions against the
recipient's officers, employees, or agents or by contractors or their
agents violating the standards of conduct.

(b) Awarding agencies may review the written standards of conduct to
determine if they meet the minimum standards of Attachment 0 of OMB
Circulars A–110 and A–102. Recipients will be notified of deficiencies and
make corrective action.

§ 3015.182   Open and free competition.

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All procurement transactions, regardless of whether by sealed bids or
by negotiation and without regard to dollar value shall be conducted in a
manner that provides maximum open and free competition.

§ 3015.183   Access to contractor
records.

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The Attachment 0 requires recipients to include in specified kinds of
contracts a provision for access to the contractor's records by the
recipient and the Federal government. The following applies to the
provision:

(a) The provision must require the contractor to place the same
provision in any subcontract which would have to have the provision were
it awarded by the recipient.

(b) The provision must require retention of records for three years
after final payment is made under the contract or subcontract and all
pending matters are closed. The provision must also require that, if any
audit, litigation, or other action involving the records is started before
the end of the three year period, the records must be retained until all
issues arising out of the action are resolved or until the end of the
three year period, whichever is later.

(c) In contracts and subcontracts under a subgrant, the provision must
require that access to the records be provided to the recipient as well as
the subrecipient and the Federal government.

§ 3015.184   Equal employment
opportunity.

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(a) The Attachment 0 requires recipients to include in contracts in
excess of $10,000 a provision requiring compliance with Executive Order
11246, concerning equal employment opportunity as amended by Executive
Order 11375, and as supplemented in Department of Labor regulations (41
CFR Chapter 60).

(b) If construction is to be assisted by a grant or subgrant, the
Executive Order and the Department of Labor supplementing regulations
apply, unless an exemption is granted by or under those regulations.
Recipients shall observe all applicable requirements of the Order and
regulations and include in their nonexempt construction contracts the
specific clauses prescribed by 41 CFR 60–1.4(b) and, if applicable, 41 CFR
60–4.3.

Subpart T—Cost Principles

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§ 3015.190   Scope.

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This subpart makes the allowable costs incurred by the recipient the
maximum amount of money a recipient is entitled to receive from USDA. In
addition, this subpart identifies the principles to be used in determining
allowable costs. These cost principles shall apply to transactions and
activities conducted under grants, subgrants, cooperative agreements,
cost-type contracts and cost-type subcontracts under grants.

(a) Allowable costs. Grant funds may be used only for allowable
costs of the activities for which the grant was awarded. This means that
the total amount of money that the recipient is entitled to receive from
USDA may not exceed the allowable costs incurred by the recipient for
those activities.

(b) The following rules apply in computing maximum allowable costs:

(1) Third party in-kind contributions. Because they are not
allowable costs of the party that receives them, the value of third party
in-kind contributions received may not be included in determining maximum
allowable costs. However, as provided in Subpart G of this part, third
party in-kind contributions may count towards satisfying a cost-sharing or
matching requirement of the Federal grant.

(2) Costs supported by another grant. Allowable costs incurred
by the recipient and supported by another Federal grant (or by a
non-Federal grant) awarded to the recipient may not be included in
determining maximum allowable costs. The basic intent of this rule is to
prevent double compensation. It does not, however, prevent proration of
costs that are allowable under two or more awards.

(3) Costs used to match another Federal grant. A cost that the
recipient uses to meet a cost-sharing or matching requirement of one
Federal grant may not count towards determining maximum allowable costs
under another Federal grant, unless specifically authorized by a Federal
statute.

(4) Costs supported by general program income. A grant may not
pay for a cost which is supported by general program income earned by the
recipient or by a subrecipient under the grant. Therefore, these costs may
not be included in determining maximum allowable costs.

(5) Use of money due Federal government. In accordance with
§3015.173, an awarding agency, under certain circumstances, may authorize
a recipient to use certain money due the Federal government for allowable
costs of the project or programs, instead of returning the money to the
Federal Government. Costs supported by the money may not be included as
part of the maximum allowable costs charged to USDA.

(6) Subgrant and contract costs. The recipient's allowable costs
include allowable outlays, if any, to its subrecipients and contractors.
If the recipient pays a subrecipient more than the allowable costs
incurred by the subrecipient, the excess is not an allowable cost of the
recipient and may not be included as part of the maximum allowable costs
charged to USDA. However, for cost-type contracts a reasonable fee or
profit paid by the recipient to the contractor, in addition to the
contractor's allowable costs, may be included in this maximum unless
prohibited by the provisions of the grant award.

§ 3015.191   Governments.

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(a) OMB Circular No. A–87, and any subsequent amendments to this
Circular published in theFederal Registerby OMB, shall be
used in determining the allowable costs of activities conducted by
governments.

(b) Additional amendments to the Circular, unless otherwise prescribed
by OMB, shall go into effect at the start of a government's first fiscal
year following the amendment's publication in theFederal
Register.

§ 3015.192   Institutions of higher
education.

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(a) OMB Circular No. A–21, including any amendments to the Circular
published in theFederal Registerby OMB, shall be used in
determining the allowable costs of activities conducted by institutions of
higher education (other than for-profit institutions).

(b) Additional amendments to the Circular, unless otherwise prescribed
by OMB, shall go into effect at the start of an institution's first fiscal
year following the amendment's publication in theFederal
Register.

§ 3015.193   Other non-profit
organizations.

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(a) OMB Circular No. A–122, including any subsequent amendments to the
Circulars published in theFederal Registerby OMB, shall be
used in determining the allowable costs of activities conducted by
nonprofit organizations under grants, cooperative agreements, cost
reimbursement contracts, and other contracts in which costs are used in
pricing, administration, or settlement. It does not apply to colleges or
universities which are covered by Circular A–21; State, local and
federally recognized Indian Tribal governments which are covered by
Circular A–87, or hospitals.

(b) Future amendments to the Circular, unless otherwise prescribed by
OMB, shall go into effect at the time the initial award is made to the
recipient.

§ 3015.194   For-profit organizations.

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The principles to be used when determining the allowable costs of
activities conducted by for-profit organizations are contained in the
Federal Acquisition Regulation at 48 CFR Subpart 31.2. Exception:
Independent research and development costs including any indirect costs
allocable to them are unallowable. Independent research and development
are defined in the Federal Acquisition Regulation at 48 CFR 31.205–18.

[60 FR 44124, Aug. 24, 1995]

§ 3015.195   Subgrants and cost-type
contracts.

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USDA cost principles applicable to a cost-type contractor or a
subrecipient will not necessarily be the same as those applicable to the
recipient. For example, where a State government awards a subrecipient or
cost-type contract to an institution of higher education, OMB Circular
A–21 would apply to the costs incurred by the institution of higher
education even though OMB Circular A–87 would apply to the costs incurred
by the State.

§ 3015.196   Costs allowable with
approval.

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Each set of cost principles specifically identifies certain costs that,
in order to be allowable, must be approved by the awarding agency. Other
costs do not require approval. The following procedures govern approval of
these costs:

(a) When costs are allocated in accordance with a government-wide cost
allocation plan or when treated as indirect costs, acceptance of the costs
as part of the indirect cost rate or cost allocation plan shall constitute
approval.

(b)(1) All direct costs must be approved in advance by the awarding
agency.

(2) When costs are specified in the budget, approval of the budget
shall constitute approval of the cost.

(3) Specific prior approval in writing from the awarding agency is
required if the costs are not specified in the budget, or if there is no
approved budget. For this purpose the prior approval procedures of Subpart
M shall be followed, except that, for formula or mandatory grants, the
awarding agency's written approval may be signed by any authorized
official of the awarding agency.

(c) The awarding agency may waive or conditionally waive the
requirement for its approval of the costs. A waiver, as such, shall be
applicable only to the requirement for approval. If it is determined, by
audit or otherwise, that the costs do not meet other requirements or tests
for allowability specified by the applicable cost principles, such as
reasonableness and necessity, the costs may be disallowed.

(d) In the case of subgrants and cost-type contracts, no approval shall
be given which is inconsistent with the purpose or the provisions of the
Federal grant.

Subpart U—Miscellaneous

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§ 3015.200   Acknowledgement of support on
publications and audiovisuals.

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(a) Definitions. Appendix A defines “audiovisual,” “production
of an audiovisual,” and “publication.”

(b) Publications. Recipients shall have an acknowledgement of
awarding agency support placed on any publications written or published
with grant support and, if feasible, on any publication reporting the
results of, or describing, a grant-supported activity.

(c) Audiovisuals. Recipients shall have an acknowledgement of
awarding agency support placed on any audiovisual which is produced with
grant support and which has a direct production cost to the recipient of
over $5,000. Unless the other provisions of the grant award make it apply,
this requirement does not apply to:

(1) Audiovisuals produced under mandatory or formula grants or under
subgrants.

(2) Audiovisuals produced as research instruments or for documenting
experimentation or findings and not intended for presentation or
distribution to the general public.

(d) Waivers. Awarding agencies may waive any requirement of this
section.

§ 3015.201   Use of consultants.

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(a) Definition. Appendix A defines “consultant.”

(b) Applicability. This section applies only to the use of
consultants whose fees are supported by a grant, subgrant, or cost-type
contract.

(c) Basic policy —(1) Prior approval. Awarding agencies
shall not require prior approval for the use of consultants.

(2) Exceptions. (i) In unusual cases, using a consultant may
constitute a transfer of substantive programmatic work, which requires
prior approval under discretionary grants.

(ii) Consulting fees paid by an organization to its own employees
require prior approval.

(d) Use of an organization's own employees —(1) Faculty
members of education institutions. Charges representing extra
compensation (above base salary) paid by an educational institution to a
salaried member of its faculty for consulting work are allowable only in
unusual cases, and only if both of the following conditions exist:

(i) The consultation is across departmental lines or involves a
separate or remote operation; and

(ii) The work performed by the consultant is in addition to his or her
regular departmental load.

(2) All other cases. In all other cases, consulting fees paid in
addition to salary by recipients or cost-type contractors to people who
are also their employees may be supported by a grant, subgrant, or
cost-type contract only in unusual cases, and only if all of the following
three conditions exist:

(i) The policies of the recipient or contractor permit such consulting
fee payments to its own employees regardless of whether Federal grant
funds are involved;

(ii) The work involved is clearly outside the scope of the person's
salaried employment; and

(iii) It would be inappropriate or not feasible to compensate for the
additional work by paying additional salary to the employee.

(3) Requirement for approval. Consulting fees paid under this
section must have a specific prior approval in writing from the Head of
the recipient or contractor or from his or her designated representative.
If the recipient or contractor is a government, the approval may be given
by the Head (or a designated representative of the Head) of the government
agency which is primarily responsible for administering or carrying out
the project or program. If the designated representative is personally
involved in the project or program under consideration, the approval may
be given only by the Head. If the Head is personally involved in the
project or program under consideration, prior approval from the awarding
agency is required. Such prior approval must include a determination that
the applicable requirements in paragraph (d) (1) or (2) of this section
are present.

(e) Documentation standards. (1) Charges for consulting payments
must be supported in the records of the recipient or cost-type contractor
by an invoice from the consultant and a copy of the written report (if a
report is appropriate) or other documented evidence of the work performed
from the consultant.

(2) If any of the following information is not shown on the invoice
and/or report from the consultant, the information must be shown in a
memorandum or other document prepared by the recipient or contractor for
its files, or noted in handwriting on the consultant's invoice by the
recipient or contractor. The memorandum, other document, or handwritten
notation must be signed by an official of the recipient or contractor and
show:

(i) The name of the consultant;

(ii) The nature of the services provided (such as statistical analysis
of data, participation on project advisory committee, or specified medical
services to eligible beneficiaries);

(iii) The relevance of the services to the project or program, if not
apparent from the nature of the services; and

(iv) Whichever of the following is applicable:

(A) (If the fee was based on a rate per day or hours worked) the rate
and the dates and/or hours worked;

(B) (If the fee was based on a rate per unit of service provided, such
as the number of patients examined by a physician) the rate, the number of
units of service provided, and the beginning and ending dates of the
overall period of service; or

(C) (If the fee was determined on some other basis) the basis for
determining the fee and the beginning and ending dates of the period in
which services were provided.

§ 3015.202   Limits on total payments to the
recipient.

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(a) This section summarizes the four most widely applicable limits on
the total amount of money the recipient is entitled to receive from USDA
as a result of a grant. It is permissible for the terms of a grant to
provide one or more additional limits.

(b) For each grant, the lowest of the applicable limits is the one that
governs the final settlement upon expiration or termination of the
grant.

(c) The following two limits apply to every grant:

(1) The amount of Federal funds authorized.

(2) The Federal share of the allowable costs incurred by the
recipient.

(d) Grants that require a specified percentage of cost-sharing or
matching are subject to the limit described in Subpart G.

(e) For each budget period of an incrementally funded discretionary
grant, the Federal share of that period's approved budget is a
limit.

§ 3015.203   [Reserved]

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§ 3015.204   Federal Register
publications.

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(a) Program regulations. Most grant programs have
program-specific regulations, which are published in theFederal
Registerand codified in the Code of Federal Regulations. In some cases
the program-specific regulations are promulgated in the form of agency
directives or manuals which may be obtained from the awarding agency.

(b) Program announcements. For each program, the awarding agency
may publish in theFederal Registerone or more program
announcements. Program announcements invite applications for one or more
stated program objectives. They include at least the following
information:

(1) An estimate of how much money will be available for competing
awards, and the expected size of the awards, broken down by subprogram or
priority area when appropriate;

(2) Who is eligible;

(3) How to obtain application kits;

(4) Where to submit applications; and

(5) The deadline for submitting applications.

(c) Cooperative agreements. If any or all of the awards are
likely to be cooperative agreements rather than grants, the program
announcement so states. In that case, if feasible, the program
announcement also describes the anticipated substantial Federal
involvement in performance. (This paragraph does not prevent the award of
cooperative agreements under a program announcement that mentioned only
grants. Nor does it prevent the award of grants under a program
announcement that mentioned only cooperative agreements.)

(d) Evaluation criteria. The awarding agency publishes its
criteria for evaluating grant applications either in the program
regulations or the program announcement. If the criteria are not all equal
in importance, their relative weights are also published. The criteria
cover at least the following factors (except where the nature of the
eligible projects makes one or more of these factors irrelevant):

(1) How well qualified the project's personnel will be;

(2) The adequacy of the applicant's facilities and resources;

(3) The adequacy of the project plan or methodology;

(4) The cost-effectiveness of the project; and

(5) How closely the project objectives fit the objectives for which
applications were invited.

(e) Funding priorities. If the awarding agency will give
priority to one or more particular kinds of projects, the priority (and
how it will be applied in deciding which applications to fund) is
described in the program announcement.

(f) Competing continuations vs. “new” projects. If the awarding
agency will give a preference to competing continuation applications over
applications for projects not already receiving support under the program,
or vice versa, the preference is described in the program
announcement.

(g) Programs with few potential applicants. In some programs the
number of potential applicants is relatively small. (For example, in some
programs only the States are eligible.) In these situations the awarding
agency may send a copy of the program announcement directly to every
potential applicant instead of publishing it in theFederal
Register.

(h) Register—Other information which is available. In addition
to the items specified above, each awarding Agency makes available to the
public the following information and materials for each program:

(1) A copy of, or reference to, the authorizing statutes for the
program;

(2) All guidelines of general applicability for administration of the
program;

(3) A description of the procedures the awarding agency will use for
evaluating applications; and

(4) Any other information that the awarding agency believes will be
helpful.

(i) Consulting with applicants. Each awarding agency publishes
as much information as practicable to reduce the need for consultation by
applicants. If the awarding agency does provide consultation, its staff
members try to give consistent interpretations and fair treatment to all
requestors.

§ 3015.205   General provisions for grants and
cooperative agreements with institutions of higher education, other
nonprofit organizations, and hospitals.

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(a) Scope. This section sets forth general provisions which
apply, in whole or in part, to grants and cooperative agreements awarded
by USDA to institutions of higher education, other nonprofit
organizations, and hospitals. (General provisions applicable to grants and
cooperative agreements with State and local governments are set forth in
the Office of Management and Budget (OMB) Circular A–102, Attachment M and
are made a condition of each grant or cooperative agreement awarded to
such recipients). Any statutory provisions that apply to the particular
agreement at hand, that are not included herein, shall be made a part of
the award document. All administrative requirements contained in subparts
A through U of 7 CFR part 3015 shall apply, as appropriate.

(b) Assurances and compliance. It shall be a condition of every
USDA grant or cooperative agreement awarded to institutions of higher
education, other nonprofit organizations and hospitals that the recipient
assure and certify compliance with the following general requirements to
the extent applicable:

(1) It will comply with the following provisions regarding the rights
and welfare of human subjects:

(i) The recipient organization is responsible for safeguarding the
rights and welfare of any human subjects involved in research,
development, and related activities supported by this agreement. The
recipient organization may conduct research involving human subjects only
as described in the proposal and as approved by the recipient
organization's cognizant Institutional Review Board. Prior to conducting
such research, the recipient organization shall obtain and document a
legally sufficient informed consent from each human subject involved. No
such informed consent shall include any exculpatory language through which
the subject is made to waiver, or to appear to waiver, any of his or her
legal rights, including any release of the recipient organization or its
agents from liability for negligence.

(ii) The recipient organization agrees to comply with U.S. Department
of Health and Human Services' regulations regarding human subjects,
appearing in 45 CFR part 46 (as amended).

(iii) It will comply with USDA policy which is to assure that the risks
do not outweigh either potential benefits to the subjects or the expected
value of the knowledge sought.

(iv) Selection of subjects or groups of subjects shall be made without
regard to sex, race, color, religion, or national origin unless these
characteristics are factors to be studied.

(2) It will comply with the Animal Welfare Act, as amended, 7 U.S.C.
2131, et seq., and the regulations promulgated thereunder by the
Secretary of Agriculture (9 CFR, Subchapter A) pertaining to the care,
handling, and treatment of warm-blooded animals held or used for research,
teaching, or other activities supported by Federal funds. Recipient
organizations may request registration of facilities and a current listing
of licensed dealers from the Regional Office of the Animal and Plant
Health Inspection Service (APHIS), USDA, for the Region in which their
facility is located. The location of the appropriate APHIS Regional
Office, as well as information concerning this requirement, may be
obtained by contacting the Senior Staff Officer, Animal Care Staff,
USDA/APHIS, Federal Center Building, Hyattsville, Maryland 20782.

(3) It will assume primary responsibility for implementing proper
conduct or recombinant DNA research and it will comply with the national
Institute of Health Guidelines for Recombinant DNA Research, as
revised.

(4) It will comply with Section 5 of the International Air
Transportation Fair Competitive Practices Act of 1974, 49 U.S.C. 1517,
which requires:

(i) Any air transportation to, from, between, or within a country,
other than the U.S., of persons or property, the expense of which will be
assisted by USDA funding, to be performed on a U.S.-flag carrier if
service provided by such carrier is “available.”

(ii) For the purposes of this requirement:

(A) Passenger or freight service by a certificated air carrier is
considered “available” even though:

( 1 ) Comparable or a different kind of service by a
noncertificated air carrier costs less; or

( 2 ) Service by a noncertificated air carrier can be paid for
in excess foreign currency; or

( 3 ) Service by a noncertificated air carrier is preferred by
the recipient organization contractor or traveler needing air
transportation.

(B) Passenger service by a certificated air carrier is considered to be
“unavailable”:

( 1 ) When the traveler, while enroute, has to wait six hours or
more for an available U.S. carrier; or

( 2 ) When any flight by a U.S. carrier interrupted by a stop
anticipated to be six hours or more for refueling, reloading repairs,
etc., and no other flight by a U.S. carrier is available during the
six-hour period; or

( 3 ) When the flight by a U.S. carrier takes 12 or more hours
longer than a foreign carrier.

(5) It possesses legal authority to enter into the agreement; that a
resolution, motion or similar action has been duly adopted or passed as an
official act of its governing body, authorizing the acceptance of the
agreement including all understandings and assurances contained therein
and directing and authorizing the person identified as the official
representative of the recipient organization to act in connection with the
agreement and to provide such additional information as may be
required.

(6) It will comply with Title VI of the Civil Rights Act of 1964, 42
U.S.C. 2000d, and in accordance with Title VI of that Act, no person in
the United States shall, on the ground of race, color, or national origin,
be excluded from participation in, be denied the benefits of, or be
otherwise subjected to discrimination under any program or activity for
which the recipient receives Federal financial assistance and will
immediately take any measures necessary to effectuate this agreement.

(7) It will establish safeguards to prohibit employees from using their
positions for a purpose that is or gives the appearance of being motivated
by a desire for private gain for themselves or others, particularly those
with whom they have family, business, or other ties.

(8) It will give USDA, the awarding agency or the Comptroller General,
through any authorized representative, access to and the right to examine
all records, books, papers or documents related to the award.

(9) It will comply with all requirements imposed by the awarding agency
concerning special requirements of law, program requirements, and other
administrative requirements.

(10) It will insure that the facilities under its ownership, lease or
supervision which shall be utilized in the accomplishment of the project
are not listed on the Environmental Protection Agency's (EPA) list of
violating facilities and that it will notify the awarding agency of the
receipt of any communication from the Director of the EPA, Office of
Federal Activities, indicating that a facility to be utilized in the
project is under consideration for listing by the EPA.

(11) It will comply with the flood insurance purchase requirements of
the National Flood Insurance Act of 1968, as amended, and the Flood
Disaster Protection Act of 1973, 42 U.S.C. 4001–4127. Section 102(a)
requires, on and after March 2, 1975, the purchase of flood insurance in
communities where such insurance is available as a condition for
construction or acquisition purposes for use in any area that has been
identified by the Secretary of the Department of Housing and Urban
Development as an area having special flood hazards.

(12) It will assist the awarding agency in its compliance with Section
106 of the National Historic Preservation Act of 1966, 16 U.S.C. 470,
Executive Order 11593, and the Archaeological and Historic Preservation
Act of 1974, 16 U.S.C. 496a–1, et. seq., by (i) consulting with the
State Historic Preservation Officer on the conduct of investigations, as
necessary, to identify properties listed in or eligible for inclusion in
the National Register of Historic Places that are subject to adverse
effects (see 36 CFR 800.8) by the activity, and notifying the awarding
agency of the existence of any such properties, and by (ii) complying with
all requirements established by the awarding agency to avoid or mitigate
adverse effects upon such properties.

(13) It will comply with Title IX of the Education Amendments of 1972,
20 U.S.C. 1681, et. seq., which prohibits discrimination on the
basis of sex in Federally assisted education programs.

(14) It will comply with Section 504 of the Rehabilitation Act of 1973,
as amended, 29 U.S.C. 794. Section 504 provides that no otherwise
qualified handicapped individual shall solely by reason of his handicap,
be excluded from the participation in, be denied the benefits of, or be
subjected to discrimination under any program or activity receiving
Federal financial assistance.

(15) It will comply with the Age Discrimination Act of 1975, 42 U.S.C.
6101–6107, which prohibits unreasonable discrimination based on age, in
programs or activities receiving Federal financial assistance.

(16) It is in compliance with the Clean Air Act of 1970, 42 U.S.C. 7401
et seq., which requires federally assisted activities to be in
conformance with State (Clean Air) Implementation Plan.

(17) It will establish safeguards to ensure that USDA funds are
properly spent. In particular, except nonprofit organizations which are
subject to the lobbying provisions of paragraph B.21. of OMB Circular
A–122, it will assure that funds are not used for partisan or political
activity purposes.

(c) USDA awarding agencies shall obtain the required assurances and
certifications by including the following clause in each grant or
cooperative agreement awarded to institutions of higher education, other
nonprofit organizations and hospitals:

As a condition of this grant or cooperative agreement, the recipient
assures and certifies that it is in compliance with and will comply in the
course of the agreement with all applicable laws, regulations, Executive
Orders and other generally applicable requirements, including those set
out in 7 CFR 3015.205(b), which hereby are incorporated in this agreement
by reference, and such other statutory provisions as are specifically set
forth herein.

[48 FR 27222, June 14, 1983, as amended at 49 FR 38534, Oct. 1,
1984]

Subpart V—Intergovernmental Review of Department of Agriculture
Programs and Activities

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Authority:   E. O. 12372, July 14, 1982
(47 FR 30959), as amended Apr. 8, 1983 (48 FR 15887): Sec. 401 of the
Intergovernmental Cooperation Act of 1968, as amended (31 U.S.C. 6506);
sec. 204 of the Demonstration Cities and Metropolitan Development Act of
1966, as amended (42 U.S.C. 3334).

Source:   48 FR 29112, June 24, 1983,
unless otherwise noted.

§ 3015.300   Purpose.

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(a) The regulations in this part implement Executive Order 12372,
“Intergovernmental Review of Federal Programs”, issued July 14, 1982, and
amended on April 8, 1983. These regulations also implement applicable
provisions of section 401 of the Intergovernmental Cooperation Act of 1968
and section 204 of the Demonstration Cities and Metropolitan Development
Act of 1966.

(b) These regulations are intended to foster an intergovernmental
partnership and a strengthened Federalism by relying on State processes
and on State, arewide, regional and local coordination for review of
proposed Federal financial assistance and direct Federal development.

(c) The regulations are intended to aid the internal management of the
Department, and are not intended to create any right or benefit
enforceable at law by a party against the Department or its
officers.

§ 3015.301   Definitions.

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Department means the U.S. Department of Agriculture.

Order means Executive Order 12372, issued July 14, 1982, and
amended April 8, 1983, and titled Intergovernmental Review of Federal
Programs.

Secretary means the Secretary of the U.S. Department of
Agriculture or an official or employee of the Department acting for the
Secretary under a delegation of authority.

State means any of the 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana
Islands, Guam, American Samoa, the U.S. Virgin Island, or the Trust
Territory of the Pacific Islands.

§ 3015.302   Applicability.

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The Secretary publishes in theFederal Registera list of
the Department's programs and activities that are subject to these
regulations and identifies which of these are subject to the requirements
of section 204 of the Demonstration Cities and Metropolitan Development
Act.

§ 3015.303   Secretary's general
responsibilities.

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(a) The Secretary provides opportunities for consultation by elected
officials of those State and local governments that would provide the
non-Federal funds for, or that would be directly affected by, proposed
Federal financial assistance from, or direct Federal development by, the
Department.

(b) If a State adopts a process under the Order to review and
coordinate proposed Federal financial assistance and direct Federal
development, the Secretary, to the extent permitted by law:

(1) Uses the State process to determine official views of State and
local elected officials;

(2) Communicates with State and local elected officials as early in a
program planning cycle as is reasonably feasible to explain specific plans
and actions;

(3) Makes efforts to accommodate State and local elected officials'
concerns with proposed Federal financial assistance and direct Federal
development that are communicated through the State process;

(4) Allows the States to simplify and consolidate existing Federally
required State plan submissions;

(5) Where State planning and budgeting systems are sufficient and where
permitted by law, encourages the substitution of State plans for Federally
required State plans;

(6) Seeks the coordination of views of affected State and local elected
officials in one State with those of another State when proposed Federal
financial assistance or direct Federal development has an impact on
interstate metropolitan urban centers or other interstate areas; and

(7) Supports State and local governments by discouraging the
reauthorization or creation of any planning organization which is
Federally-funded, which has a limited purpose, and which is not adequately
representative of, or accountable to, State or local elected
officials.

§ 3015.304   Federal interagency
coordination.

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The Secretary, to the extent practicable, consults with and seeks
advice from all other substantially affected Federal departments and
agencies in an effort to assure full coordination between such agencies
and the Department regarding programs and activities covered under these
regulations.

§ 3015.305   State selection of programs and
activities.

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(a) A State may select any program or activity published in theFederal Registerin accordance with §3015.302 of this subpart
for intergovernmental review under these regulations. Each State, before
selecting programs and activities, shall consult with local elected
officials.

(b) Each State that adopts a process shall notify the secretary of the
Department's programs and activities selected for that process.

(c) A State may notify the Secretary of changes in its selections at
any time. For each change, the State shall submit to the Secretary an
assurance that the State has consulted with elected local officials
regarding the change. The Department may establish deadlines by which
States are required to inform the Secretary of changes in their program
selections.

(d) The Secretary uses a State's process as soon as feasible, depending
on individual programs and activities, after the Secretary is notified of
its selections.

§ 3015.306   Communication with State and local
elected officials.

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(a) The Secretary provides notice to directly affected State, areawide,
regional, and local entities in a State of proposed Federal financial
asssistance or direct Federal development if:

(1) The State has not adopted a process under the Order; or

(2) The assistance or development involves a program or an activity
that is not covered under the State process.

(b) This notice may be made by publication in theFederal
Registeror other appropriate means, which the Department in its
discretion deems appropriate.

(c) In order to facilitate communication with State and local officials
the Secretary has established an office within the Department to receive
all communications pertinent to this Order. All communications should be
sent to the Office of Finance and Management, Room 143–W, Administration
Building, Washington, DC 20250, Attention: E.O. 12372.

§ 3015.307   State comments on proposed Federal
financial assistance and direct Federal development.

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(a) Except in unusual circumstances, the Secretary gives State
processes or directly affected State, areawide, regional, and local
officials and entities:

(1) At least 30 days from the date established by the Secretary to
comment on proposed Federal financial assistance in the form of
noncompeting continuation awards; and

(2) At least 60 days from the date established by the Secretary to
comment on proposed direct Federal development or Federal financial
assistance other than noncompeting continuation awards.

(b) This section also applies to comments in cases in which the review,
coordination and communication with the Department have been
delegated.

(c) Applicants for programs and activities subject to section 204 of
the Demonstration Cities and Metropolitan Development Act shall allow
areawide agencies a 60-day opportunity for review and comment.

§ 3015.308   Processing comments.

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(a) The Secretary follows the procedures in §3015.309 if:

(1) A State office or official is designated to act as a single point
of contact between a State process and all Federal agencies; and

(2) That office or official transmits a State process recommendation
for a program selected under §3015.305.

(b)(1) The single point of contact is not obligated to transmit
comments form State, areawide, regional or local officials and entities
where there is no State process recommendation.

(2) If a State process recommendation is transmitted by a single point
of contact, all comments from State, areawide, regional, and local
officials and entities that differ from it must also be transmitted.

(c) If a State has not established a process, or is unable to submit a
State process recommendation, State, areawide, regional and local
officials and entities may submit comments either to the applicant or to
the Department.

(d) If a program or activity is not selected by a State process, State,
areawide, regional and local officials and entities may submit comments
either to the applicant or to the Department. In addition, if a State
process recommendation for a non-selected program or activity is
transmitted to the Department by the single point of contact, the
Secretary follows the procedures of §3015.309 of this subpart.

(e) The Secretary considers comments which do not constitute a State
process recommendation submitted under these regulations and for which the
Secretary is not required to apply the procedures of §3015.309 of this
subpart, when such comments are provided by a single point of contact by
the applicant, or directly to the Department by a commenting party.

§ 3015.309   Accommodation of intergovernmental
concerns.

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(a) If a State process provides a State process recommendation to the
Department through its single point of contact, the Secretary either—

(1) Accepts the recommendations;

(2) Reaches a mutually agreeable solution with the State process;
or

(3) Provides the single point of contact with a written explanation of
the decision, as the Secretary in his or her discretion deems appropriate.
The Secretary may also supplement the written explanation by also
providing the explanation to the single point of contact by telephone,
other telecommunication, or other means.

(b) In any explanation under paragraph (a)(3) of this section, the
Secretary informs the single point of contact that:

(1) The Department will not implement its decision for at least ten
days after the single point of contact receives the explanation; or

(2) The Secretary has reviewed the decision and determined that,
because of unusual circumstances, the waiting period of at least ten days
is not feasible.

(c) For purposes of computing the waiting period under paragraph (b)(1)
of this section, a single point of contact is presumed to have received
written notification five days after the date of mailing of such
notification.

§ 3015.310   Interstate situations.

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(a) The Secretary is responsible for:

(1) Identifying proposed Federal financial assistance and direct
Federal development that have an impact on interstate areas;

(2) Notifying appropriate officials in States which have adopted a
process and which selected the Department's program or activity;

(3) Making efforts to identify and notify the affected State, areawide,
regional, and local officials and entities in those States that have not
adopted a process under the Order or do not select the Department's
program or activity; and

(4) Responding, pursuant to §3015.309 of this subpart, if the Secretary
receives a recommendation from a designated areawide agency transmitted by
a single point of contact, in cases in which the review, coordination, and
communication with the Department have been delegated.

(b) The Secretary uses the procedures in §3015.309 if a State process
provides a State process recommendation to the Department through a single
point of contact.

§ 3015.311   Simplification, consolidation, or
substitution of State plans.

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(a) As used in this section:

(1) Simplify means that a State may develop its own format,
choose its own submission date, and select the planning period for a State
plan.

(2) Consolidate means that a State may meet statutory and
regulatory requirements by combining two or more plans into one document
and that the State can select the format, submission date, the planning
period for the consolidated plan.

(3) Substitute means that a State may use a plan or other
document that it has developed for its own purposes to meet Federal
requirements.

(b) If not inconsistent with law, a State may decide to try to
simplify, consolidate, or substitute Federally required State plans
without prior approval by the Secretary.

(c) The Secretary reviews each State plan a State has simplified,
consolidated or substituted and accepts the plan only if its contents meet
Federal requirements.

§ 3015.312   Waivers.

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In an emergency, the Secretary may waive any provision of these
regulations.

Appendix A to Part 3015—Definitions

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Section I   “Grant” and “Cooperative Agreement”

(a) “Grant” unless qualified by “non-Federal” means an award by the
Federal government of money, property instead of money, services, or
anything of value, to the State or other recipient, with the following
characteristics:

(1) The principal purpose of the award is to accomplish a public
purpose of support or stimulation authorized by Federal statute, rather
than acquisition, by purchase, lease, or barter, of property or services
for the direct benefit or use of the Federal government; and

(2) At the time the award is made, no substantial involvement is
anticipated between the executive agency, acting for the Federal
government, and the State or local government or other recipient during
performance of the contemplated activity.

(b) “Cooperative agreement” has the same meaning as “grant,” except
that, at the time a cooperative agreement is awarded, substantial
involvement is anticipated between the executive agency, acting for the
Federal government, and the State or local government or other recipient
during performance of the contemplated activity.

(c) “Grants” and “cooperative agreements” do not include technical
assistance, which provides services instead of money; revenue sharing;
loans; loan guarantees; capital contributions to loan funds; interest
subsidies; insurance; or direct appropriations. (See the definition of
“Non-Federal grant” in Section II of this appendix.)

Section II   Other Definitions.

“Acquisition” of property includes purchase, construction, or
fabrication of property. It does not include rental of property or
alterations and renovations of real property.

“Acquisition cost” of an item of purchased equipment means the net
invoice price of the equipment. It includes the cost of modifications,
attachments, accessories, or auxiliary apparatus necessary to make the
equipment useable 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 in or excluded from the
unit acquisition cost in accordance with the regular accounting practices
of the organization purchasing the equipment.

If an item of equipment is acquired by trading in another item and
paying an additional amount, “acquisition cost” means the amount received
for trade-in plus the additional outlay. (See the definition of “amount
received for trade-in.”)

For purposes of the rules on equipment and supplies, “acquisition cost”
of a copy of a work of authorship (such as a book, print of a motion
picture, or tape of a television program) refers to the cost of
fabricating or purchasing the individual copy, considered as a material
object. It does not include the cost of developing, or acquiring rights
to, the work embodied in the copy.

“Advance by Treasury check” is a payment made by a Treasury check to a
recipient of a grant or cooperative agreement, before payments are made by
the recipient of the grant or cooperative agreement. Advances by Treasury
check are based on either a periodic request from the recipient or a
predetermined payment schedule.

“Amount received for trade-in” of an item of equipment traded in for
replacement equipment means the amount that would have been paid for the
replacement equipment without a trade-in, minus the amount paid with the
trade-in. The term refers to the actual difference, not necessarily the
trade-in value, shown on an invoice. For example, suppose that a recipient
can buy a new machine for $5,000 in cash. The recipient actually buys this
machine by trading in a used machine and paying $3,000 in cash. In this
case, the amount received for trade-in would be $2,000 ($5,000 minus
$3,000) regardless of the trade-in allowance shown on the invoice.

“Approved budget” means a budget (including any revised budget) which
has been approved in writing by the awarding agency. (See the definition
of “budget.”)

“Audiovisual” means a product containing visual imagery or sound or
both. Examples of audiovisuals are motion pictures, live or prerecorded
radio or television programs, slide shows, filmstrips, audio recordings,
and multimedia presentations.

“Awarding agency” means (1) for grants and cooperative agreements, the
USDA agency making the award, and (2) for subgrants, the recipient.

“Bid guarantee” means a firm commitment such as a bid bond, certified
check, or other negotiable instrument, accompanying a bid as assurance
that the bidder will, if its bid is accepted, execute the required
contractual documents within the time specified.

“Budget” means the recipient's financial expenditure plan approved by
the awarding agency to carry out the purposes of the Federally-supported
project. The budget is comprised of both the Federal share and any
non-Federal share of such plan and any subsequent authorized rebudgeting
of funds.

For those programs that do not involve Federal approval of the
non-Federal share of costs, such as research grants, the term “budget”
means the financial expenditure plan approved by the awarding agency
including any subsequent authorized rebudgeting of funds, for the use of
Federal funds only. Any expenditures charged to an approved budget
consisting of Federal and non-Federal shares are deemed to be supported by
the grant in the same proportion as the percentage of Federal/non-Federal
participation in the overall budget.

“Budget period” means the period specified in the grant or cooperative
agreement during which Federal funds awarded are authorized to be
expended, obligated, or firmly committed by the recipient for the purposes
specified in the agreement.

“Closeout” of a grant or cooperative agreement means the process by
which an awarding agency determines that all applicable administrative
actions and all required work of the grant or cooperative agreement have
been completed by the recipient and the awarding agency.

“Consultant” means a person who gives advice or services for a fee, but
not as an employee. The term includes guest speakers when not acting as
employees of the party that engages them. Note that in unusual cases it is
possible for a person to be both an employee and a consultant at the same
time. (See §3015.201.)

“Contract” means a procurement contract awarded under a grant,
cooperative agreement, or subgrant; and “subcontract” means a procurement
subcontract under such a contract. Procurement contracts and subcontracts
are ones which place the parties in a buyer-seller relationship,
regardless of the label used by the parties to describe the relationship
(e.g., purchase-of-service agreement). The terms “contract” and
“subcontract” do not include any agreements between organizational
components of the same legal entity, even if one of the components
provides property or services to or for the other. (See definitions of
“subgrant,” “cost-type contract,” and “fixed price contract.”)

“Cost-sharing” and “matching” each mean the value of third party
in-kind contributions plus that portion of the allowable costs of
recipients not supported by the Federal Government. (The terms
“cost-sharing” and “matching,” in this part, are synonymous.)

“Cost-type contract” means a contract or subcontract in which the
contractor or subcontractor is paid on the basis of the costs it incurs.
The term includes cost-plus-fixed-fee contracts and subcontracts.
(However, the term does not include any subcontracts under a “fixed-price
contract.”)

“Discretionary” grants and cooperative agreements are ones which a
Federal statute authorizes but does not require USDA to award.

“Equipment” means an article of tangible personal property that has a
useful life of more than two years and acquisition cost of $500 or more.
Any recipient may use its own definition of equipment if its definition
would at least include all items of equipment as defined here.

“Expenditure report” means (1) for nonconstruction awards, the
“Financial Status Report” (or other equivalent report); (2) for
construction awards, the “Outlay Report and Request for Reimbursement for
Construction Programs” (or other equivalent report).

“Federal funds authorized” means the total amount of Federal funds
obligated by the Federal Government for use by the recipient. This amount
is a limit on the total amount of money that the recipient is entitled to
receive from the Federal Government as a result of the award. In addition
to this limit, there are other limits. Refer to §3015.202 for a summary of
these.

“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 or her through the Bureau of Indian
Affairs.

“Fidelity bond” means a bond indemnifying the recipient against losses
resulting from the fraud or lack of integrity, honesty or fidelity of one
or more employees, officers or other persons holding a position of
trust.

“Fixed-price contract” means any contract except a cost-type contract.
The term includes firm-fixed price contracts. It also includes contracts
under which the contractor is paid at a fixed rate per unit of service or
unit of labor time. (See the definitions of “contract” and “cost-type
contract.”)

“General program income” means all program income except the special
categories treated in §§3015.43 through 3015.46. The term “general program
income” is limited to amounts that accrue to a recipient of grant or
cooperative agreement during the period of Federally assisted support, or
to a subrecipient during the period of sub-award support.

“Local government” means a local unit of government including
specifically, a county, municipality, city, town, township, local public
authority, school district, special district, intra-state district,
council of governments (whether or not incorporated as a nonprofit
corporation under State law), sponsor or sponsoring local organization of
a watershed project (as defined in 7 CFR 620.2, 40 FR 12472, March 19,
1974), any other regional or interstate government entity, or any agency
or instrumentality of a local government.

“Mandatory” or “formula” grants and cooperative agreements are ones
which a Federal statute requires USDA to award if the applicant meets
specified conditions.

“Non-Federal grant” means an award of financial assistance in the form
of money which includes no Federal funds, and for which the recipient must
account to the donor on an actual cost basis. The term does not include
any award that would be excluded from the definitions of “grant” and
“cooperative agreement” if it were made by the Federal government.

“Obligations” means the amounts of orders placed, contracts and
subgrants awarded, services received, and similar transactions during a
given period, which will require payment during the same or future
period.

“O&F” means the Office of Operations and Finance, which is an
organizational component in USDA reporting to the Assistant Secretary for
Administration.

“OMB” means the Office of Management and Budget in the Executive Office
of the President.

“Outlays” means charges made to the grant project or program. Outlays
may be reported on a cash or accrual basis.

“Payment bond” means a bond executed in connection with a contract, to
assure payment as required by law of all persons supplying labor and
materials in the execution of the work provided in the contract.

“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, instead of the recipient's rate of
disbursements.

“Performance bond” means a bond executed in connection with a contract
to secure fulfillment of all the contractor's obligations under the
contract.

“Personal property” means property of any kind except real property. It
may be tangible—having physical existence, or intangible—having no
physical existence, such as patents, inventions, and copyrights.

“Production of an audiovisual” means any of the steps that lead to a
finished audiovisual, including design, layout, script-writing, filming,
editing, fabrication, sound recording, or taping. The term does not
include the placing of captions for the hearing impaired on films or
videotapes not originally produced for use with the hearing impaired.

“Program income” means gross income earned by a recipient from
activities supported by a grant or cooperative agreement. (See definition
of “supported by a grant or cooperative agreement.”) It includes but is
not limited to income in the form of fees for services performed during
the life of the grant, cooperative agreement, or subgrant, proceeds from
sale of tangible personal or real property, usage or rental fees, and
patent or copyright royalties. If income meets this definition, it shall
be considered program income regardless of the method used to calculate
the amount paid to the recipient whether, for example, by a
cost-reimbursement method or fixed price arrangement. Nor will the
income's classification as program income be affected by the fact that the
recipient earns it from a procurement contract awarded to the recipient
(1) by the Federal government or (2) by another recipient acting under
another Federal grant, cooperative agreement, or subgrant.

The following are not considered program income:

(1) “Revenues” raised by a government recipient under its governing
powers, such as taxes, special assessments, levies, and fines. (However,
the receipt and expenditure of these revenues shall be recorded as a part
of the transactions of the Federally-assisted project or program when the
revenues are specifically earmarked for the project in accordance with the
terms of the grant, cooperative agreement, or subgrant.)

(2) Tuition and related fees received by an institution of higher
education for a regularly offered course taught by an employee performing
under a grant, cooperative agreement, or subgrant.

(3) Income earned by contractors or subcontractors.

(4) Internal reimbursements or transfers of funds between
organizational components of the same legal entity (e.g., between agencies
of the same government).

(5) Third party in-kind contributions.

(6) Gifts or financial assistance from another source, such as (i) a
non-Federal grant, (ii) another Federal grant, and (iii) charitable
contributions (whether or not for a restricted purpose), and

(7) Interest or other investment income earned from investing advances
of Federal cash. (This kind of income is treated in §3015.46.)

“Project period” means the total time for which the recipient's project
or program is approved for support including any extensions. Project
periods may consist of one or more budget periods.

“Publication” means a published book, periodical, pamphlet, brochure,
flier, or similar item. It does not include any audiovisuals.

“Real property” means land, land improvements, structures, and things
attached to them so as to become a part of them. Movable machinery and
other kinds of equipment are not real property. If a question comes up
about whether certain property should be classified as real property, the
law of the State or foreign country in which the property is located
governs.

“Recipient” means a State or local government, Federally recognized
Indian Tribe, university, non-profit, for profit, or other organization
that is a recipient of grants or cooperative agreements from a USDA
agency.

“Replacement equipment” means property acquired to take the place of
other equipment. To qualify as replacement equipment, it must serve the
same function as the equipment replaced and must be of the same nature or
character, although not necessarily the same model, grade, or quality.

“State” means any of the several States of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, any territory,
possession, or trust territory of the United States, or any agency or
instrumentality of a State. The term does not include local
governments.

“Subgrant” means an award of money, or property instead of money,
which:

(1) Is made under a grant or cooperative agreement by the recipient of
the grant or cooperative agreement; and

(2) Is made principally to accomplish a purpose of support of
stimulation rather than to establish a buyer-seller relationship between
the two parties.

Any award which meets that definition is a subgrant even if the parties
to the award use some other label such as “grant,” “agreement,”
“cooperative agreement,” “contract,” “allotment,” or “delegation
agreement.” Also, if the award meets that definition, it is a subgrant
whether or not the awarding agency is expected to be substantially
involved in its performance. However, the term “subgrant” does not include
any type of assistance which is excluded from the definitions of “grant”
and “cooperative agreement” by Section I(c) of this Appendix.

“Supplies” means all tangible personal property other than
equipment.

“Supported by a grant or cooperative agreement,” as applied to a cost
or an activity, means that the cost or the cost of the activity is
entirely or partly (1) treated as a direct cost under a grant, cooperative
agreement, subgrant, or cost-type contract, and (2) either supported by
Federal funds or counted towards a Federal cost-sharing or matching
requirement.

“Suspension” of an award means temporary withdrawal of the recipient's
authority to obligate the funds awarded pending corrective action by the
recipient or a decision to terminate the award.

“Termination” of an award means permanent withdrawal of the recipient's
authority to obligate previously awarded funds before that authority would
otherwise expire. It also means the voluntary relinquishment of that
authority by the recipient.

“Termination” does not include:

(a) Withdrawal of the unobligated balance upon expiration of award;

(b) Refusal by the awarding agency to extend an award or to award
additional funds (such as refusal to make a competing or noncompeting
continuation, renewal, extension, or supplemental award);

(c) Annulment, i.e. , voiding of an award upon determination
that the award was obtained fraudulently or was otherwise illegal or
invalid from inception;

(d) Withdrawal of surplus Federal funds from a discretionary grant or
any analogous withdrawal of funds by a recipient from a subrecipient;
or

(e) Withdrawal from a mandatory or formula grant of surplus Federal
funds authorized which the recipient will not obligate during the fiscal
year, or any analogous withdrawal of funds by a recipient from a
subrecipient.

“Terms” of a grant, cooperative agreement, subgrant, or contract means
all rights and duties created by the award, whether stated in statute,
this part or other regulations, the award document itself, or any other
document.

“Third party” means, with respect to a grant or cooperative agreement,
any entity except (1) the Federal government, (2) the recipient of the
cooperative agreement, and (3) subrecipients under that grant or
cooperative agreement. Note that contractors of recipients are third
parties under this definition, although subrecipients are not.

“Third party in-kind contributions” means property or services
benefiting the federally assisted project or program which are contributed
by third parties without charge. Note that the term does not include any
costs incurred by the recipient or subrecipient.

“Unliquidated obligations,” means, for financial reports prepared on a
cash basis, the amount of obligations incurred by the recipient that has
not been paid. For reports prepared on an accrued expenditure basis, they
are the amount of obligations incurred by the recipient for which an
outlay has not been recorded.

“Unobligated balance” is the portion of Federal funds authorized which
has not been obligated by the recipient. It is calculated by subtracting
the Federal share of the recipient's cumulative obligations from the
cumulative Federal funds authorized.

Appendix B to Part 3015—OMB Circular A–128, “Audits of State and Local
Governments”

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Executive Office of the President

Office of Management and Budget

Circular No. A–128

April 12, 1984

To the Heads of Executive Departments and Establishments.

Subject: Audits of State and Local Governments.

1. Purpose. This Circular is issued pursuant to the Single Audit
Act of 1984, Pub. L. 98–502. It establishes audit requirements for State
and local governments that receive Federal aid, and defines Federal
responsibilities for implementing and monitoring those requirements.

2. Supersession. The Circular supersedes Attachment P, “Audit
Requirements,” of Circular A–102, “Uniform requirements for grants to
State and local governments.”

3. Background. The Single Audit Act builds upon earlier efforts
to improve audits of Federal aid programs. The Act requires State or local
governments that receive $100,000 or more a year in Federal funds to have
an audit made for that year. Section 7505 of the Act requires the Director
of the Office of Management and Budget to prescribe policies, procedures
and guidelines to implement the Act. It specifies that the Director shall
designate “cognizant” Federal agencies, determine criteria for making
appropriate charges to Federal programs for the cost of audits, and
provide procedures to assure that small firms or firms owned and
controlled by disadvantaged individuals have the opportunity to
participate in contracts for single audits.

4. Policy. The Single Audit Act requires the following:

a. State or local governments that receive $100,000 or more a year in
Federal financial assistance shall have an audit made in accordance with
this Circular.

b. State or local governments that receive between $25,000 and $100,000
a year shall have an audit made in accordance with this Circular, or in
accordance with Federal laws and regulations governing the programs they
participate in.

c. State or local governments that receive less than $25,000 a year
shall be exempt from compliance with the Act and other Federal audit
requirements. These State and local governments shall be governed by audit
requirements prescribed by State or local law or regulation.

d. Nothing in this paragraph exempts State or local governments from
maintaining records of Federal financial assistance or from providing
access to such records to Federal agencies, as provided for in Federal law
or in Circular A–102, “Uniform requirements for grants to State or local
governments.”

5. Definitions. For the purposes of this Circular the following
definitions from the Single Audit Act apply:

a. Cognizant agency means the Federal agency assigned by the
Office of Management and Budget to carry out the responsibilities
described in paragraph 11 of this Circular.

b. Federal financial assistance means assistance provided by a
Federal agency in the form of grants, contracts, cooperative agreements,
loans, loan guarantees, property, interest subsidies, insurance, or direct
appropriations, but does not include direct Federal cash assistance to
individuals. It includes awards received directly from Federal agencies,
or indirectly through other units of State and local governments.

c. Federal agency has the same meaning as the term ‘agency’ in
section 551(1) of Title 5, United States Code.

d. Generally accepted accounting principles has the meaning
specified in the generally accepted government auditing standards.

e. Generally accepted government auditing standards means the
Standards For Audit of Government Organizations, Programs, Activities,
and Functions, developed by the Comptroller General, dated February
27, 1981.

f. Independent auditor means:

(1) A State or local government auditor who meets the independence
standards specified in generally accepted government auditing standards;
or

(2) A public accountant who meets such independence standards.

g. Internal controls means the plan of organization and methods
and procedures adopted by management to ensure that:

(1) Resource use is consistent with laws, regulations, and
policies;

(2) Resources are safeguarded against waste, loss, and misuse; and

(3) Reliable data are obtained, maintained, and fairly disclosed in
reports.

h. Indian tribe means any Indian tribe, band, nations, or other
organized group or community, including any Alaskan Native village or
regional or village corporations (as defined in, or established under, the
Alaskan Native Claims Settlement Act) that is recognized by the United
States as eligible for the special programs and services provided by the
United States to Indians because of their status as Indians.

i. Local government means any unit of local government within a
State, including a county, a borough, municipalitity, city, town,
township, parish, local public authority, special district, school
district, intrastate district, council of governments, and any other
instrumentality of local government.

j. Major Federal Assistance Program, as defined by Pub. L
98–502, is described in the Attachment to this Circular.

k. Public accountants means those individuals who meet the
qualification standards included in generally accepted government auditing
standards for personnel performing government audits.

l. State means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam
American Samoa, the Commonwealth of the Northern Mariana Islands, and the
Trust Territory of the Pacific Islands, any instrumentality thereof, and
any multi-State, regional, or interstate entity that has governmental
functions and any Indian tribe.

m. Subrecipient means any person or government department,
agency, or establishment that receives Federal financial assistance to
carry out a program through a State or local government, but does not
include an individual that is a beneficiary of such a program. A
subrecipient may also be a direct recipient of Federal financial
assistance.

6. Scope of audit. The Single Audit Act provides that:

a. The audit shall be made by an independent auditor in accordance with
generally accepted government auditing standards covering financial and
compliance audits.

b. The audit shall cover the entire operations of a State or local
government or, at the option of that government, it may cover departments,
agencies or establishments that received, expended, or otherwise
administered Federal financial assistance during the year. However, if a
State or local government receives $25,000 or more in General Revenue
Sharing Funds in a fiscal year, it shall have an audit of its entire
operations. A series of audits of individual departments, agencies, and
establishments for the same fiscal year may be considered a single
audit.

c. Public hospitals and public colleges and universities may be
excluded from State and local audits and the requirements of this
Circular. However, if such entities are excluded, audits of these entities
shall be made in accordance with statutory requirements and the provisions
of Circular A–110, Uniform requirements for grants to universities,
hospitals, and other nonprofit organizations.

d. The auditor shall determine whether:

(1) The financial statements of the government, department, agency or
establishment present fairly its financial position and the results of its
financial operations in accordance with generally accepted accounting
principles;

(2) The organization has internal accounting and other control systems
to provide reasonable assurance that it is managing Federal financial
assistance programs in compliance with applicable laws and regulations;
and

(3) The organization has complied with laws and regulations that may
have material effect on its financial statements and on each major Federal
assistance program.

7. Frequency of audit. Audits shall be made annually unless the
State or local government has, by January 1, 1987, a constitutional or
statutory requirement for less frequent audits. For those governments, the
cognizant agency shall permit biennial audits, covering both years, if the
government so requests. It shall also honor requests for biennial audits
by governments that have an administrative policy calling for audits less
frequent than annual, but only for fiscal years beginning before January
1, 1987.

8. Internal control and compliance reviews. The Single Audit Act
requires that the independent auditor determine and report on whether the
organization has internal control systems to provide reasonable assurance
that it is managing Federal assistance programs in compliance with
applicable laws and regulations.

a. Internal control review. In order to provide this assurance
the auditor must make a study and evaluation of internal control systems
used in administering Federal assistance programs. The study and
evaluation must be made whether or not the auditor intends to place
reliance on such systems. As part of this review, the auditor shall:

(1) Test whether these internal control systems are functioning in
accordance with prescribed procedures.

(2) Examine the recipient's system for monitoring subrecipients and
obtaining and acting on subrecipient audit reports.

b. Compliance review. The law also requires the auditor to
determine whether the organization has complied with laws and regulations
that may have a material effect on each major Federal assistance
program.

(1) In order to determine which major programs are to be tested for
compliance, State and local governments shall identify in their accounts
all Federal funds received and expended and the programs under which they
were received. This shall include funds received directly from Federal
agencies and through other State and local governments.

(2) The review must include the selection and testing of a
representative number of charges from each major Federal assistance
program. The selection and testing of transactions shall be based on the
auditor's professional judgment considering such factors as the amount of
expenditures for the program and the individual awards; the newness of the
program or changes in its conditions; prior experience with the program,
particularly as revealed in audits and other evaluations (e.g.,
inspections, program reviews); the extent to which the program is carried
out through subrecipients; the extent to which the program contracts for
goods or services; the level to which the program is already subject to
program reviews of other forms of independent oversight; the adequacy of
the controls for ensuring compliance; the expectation of adherence or lack
of adherence to the applicable laws and regulations; and the potential
impact of adverse findings.

(a) In making the test of transactions, the auditor shall determine
whether:

—The amounts reported as expenditures were for allowable services,
and

—The records show that those who received services or benefits were
eligible to receive them.

(b) In addition to transaction testing, the auditor shall determine
whether:

—Matching requirements, levels of effort and earmarking limitations
were met,

—Federal financial reports and claims for advances and reimbursements
contain information that is supported by the books and records from which
the basic financial statements have been prepared, and

—Amounts claimed or used for matching were determined in accordance
with OMB Circular A–87, “Cost principles for State and local governments,”
and Attachment F of Circular A–102, “Uniform requirements for grants to
State and local governments.”

(c) The principal compliance requirements of the largest Federal aid
programs may be ascertained by referring to the Compliance Supplement
for Single Audits of State and Local Governments, issued by OMB and
available from the Government Printing Office. For those programs not
covered in the Compliance Supplement, the auditor may ascertain compliance
requirements by researching the statutes, regulations, and agreements
governing individual programs.

(3) Transactions related to other Federal assistance programs that are
selected in connection with examinations of financial statements and
evaluations of internal controls shall be tested for compliance with
Federal laws and regulations that apply to such transactions.

9. Subrecipients. State or local governments that receive
Federal financial assistance and provide $25,000 or more of it in a fiscal
year to a subrecipient shall:

a. Determine whether State or local subrecipients have met the audit
requirements of this Circular and whether subrecipients covered by
Circular A–110, “Uniform requirements for grants to universities,
hospitals, and other nonprofit organizations,” have met that
requirement;

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

c. Ensure that appropriate corrective action is taken within six months
after receipt of the audit report in instances of noncompliance with
Federal laws and regulations;

d. Consider whether subrecipient audits necessitate adjustment of the
recipient's own records; and

e. Require each subrecipient to permit independent auditors to have
access to the records and financial statements as necessary to comply with
this Circular.

10. Relation to other audit requirements. The Single Audit Act
provides that an audit made in accordance with this Circular shall be in
lieu of any financial or financial compliance audit required under
individual Federal assistance programs. To the extent that a single audit
provides Federal agencies with information and assurances they need to
carry out their overall responsibilities, they shall rely upon and use
such information. However, a Federal agency shall make any additional
audits which are necessary to carry out its responsibilities under Federal
law and regulation. Any additional Federal audit effort shall be planned
and carried out in such a way as to avoid duplication.

a. The provisions of this Circular do not limit the authority of
Federal agencies to make, or contract for audits and evaluations of
Federal financial assistance programs, nor do they limit the authority of
any Federal agency Inspector General or other Federal audit official.

b. The provisions of this Circular do not authorize any State or local
government or subrecipient thereof to constrain Federal agencies, in any
manner, from carrying out additional audits.

c. A Federal agency that makes or contracts for audits in addition to
the audits made by recipients pursuant to this Circular shall, consistent
with other applicable laws and regulations, arrange for funding the cost
of such additional audits. Such additional audits include economy and
efficiency audits, program results audits, and program evaluations.

11. Cognizant agency responsibilities. The Single Audit Act
provides for cognizant Federal agencies to oversee the implementation of
this Circular.

a. The Office of Management and Budget will assign cognizant agencies
for States and their subdivisions and larger local governments and their
subdivisions. Other Federal agencies may participate with an assigned
cognizant agency, in order to fulfill the cognizance responsibilities.
Smaller governments not assigned a cognizant agency will be under the
general oversight of the Federal agency that provides them the most funds
whether directly or indirectly.

b. A cognizant agency shall have the following responsibilities:

(1) Ensure that audits are made and reports are received in a timely
manner and in accordance with the requirements of this Circular.

(2) Provide technical advice and liaison to State and local governments
and independent auditors.

(3) Obtain or make quality control reviews of selected audits made by
non-Federal audit organizations, and provide the results, when
appropriate, to other interested organizations.

(4) Promptly inform other affected Federal agencies and appropriate
Federal law enforcement officials of any reported illegal acts or
irregularities. They should also inform State or local law enforcement and
prosecuting authorities, if not advised by the recipient, of any violation
of law within their jurisdiction.

(5) Advise the recipient of audits that have been found not to have met
the requirements set forth in this Circular. In such instances, the
recipient will be expected to work with the auditor to take corrective
action. If corrective action is not taken, the cognizant agency shall
notify the recipient and Federal awarding agencies of the facts and make
recommendations for followup action. Major inadequacies or repetitive
substandard performance of independent auditors shall be referred to
appropriate professional bodies for disciplinary action.

(6) Coordinate, to the extent practicable, audits made by or for
Federal agencies that are in addition to the audits made pursuant to this
Circular; so that the additional audits build upon such audits.

(7) Oversee the resolution of audit findings that affect the programs
of more than one agency.

12. Illegal acts or irregularities. If the auditor becomes aware
of illegal acts or other irregularities, prompt notice shall be given to
recipient management officials above the level of involvement. (See also
paragraph 13(a)(3) below for the auditor's reporting responsibilities.)
The recipient, in turn, shall promptly notify the cognizant agency of the
illegal acts or irregularities and of proposed and actual actions, if any.
Illegal acts and irregularities include such matters as conflicts of
interest, falsification of records or reports, and misappropriations of
funds or other assets.

13. Audit Reports. Audit reports must be prepared at the
completion of the audit. Reports serve many needs of State and local
governments as well as meeting the requirements of the Single Audit
Act.

a. The audit report shall state that the audit was made in accordance
with the provisions of this Circular. The report shall be made up of at
least:

(1) The auditor's report on financial statements and on a schedule of
Federal assistance; the financial statements; and a schedule of Federal
assistance, showing the total expenditures for each Federal assistance
program as identified in the Catalog of Federal Domestic Assistance.
Federal programs or grants that have not been assigned a catalog
number shall be identified under the caption “other Federal
assistance.”

(2) The auditor's report on the study and evaluation of internal
control systems must identify the organization's significant internal
accounting controls, and those controls designed to provide reasonable
assurance that Federal programs are being managed in compliance with laws
and regulations. It must also identify the controls that were evaluated,
the controls that were not evaluated, and the material weaknesses
identified as a result of the evaluation.

(3) The auditor's report on compliance containing:

—A statement of positive assurance with respect to those items tested
for compliance, including compliance with law and regulations pertaining
to financial reports and claims for advances and reimbursements;

—Negative assurance on those items not tested;

—A summary of all instances of noncompliance; and

—An identification of total amounts questioned, if any, for each
Federal assistance award, as a result of noncompliance.

b. The three parts of the audit report may be bound into a single
report, or presented at the same time as separate documents.

c. All fraud abuse, or illegal acts or indications of such acts,
including all questioned costs found as the result of these acts that
auditors become aware of, should normally be covered in a separate written
report submitted in accordance with paragraph 13f.

d. In addition to the audit report, the recipient shall provide
comments on the findings and recommendations in the report, including a
plan for corrective action taken or planned and comments on the status of
corrective action taken on prior findings. If corrective action is not
necessary, a statement describing the reason it is not should accompany
the audit report.

e. The reports shall be made available by the State or local government
for public inspection within 30 days after the completion of the
audit.

f. In accordance with generally accepted government audit standards,
reports shall be submitted by the auditor to the organization audited and
to those requiring or arranging for the audit. In addition, the recipient
shall submit copies of the reports to each Federal department or agency
that provided Federal assistance funds to the recipient. Subrecipients
shall submit copies to recipients that provided them Federal assistance
funds. The reports shall be sent within 30 days after the completion of
the audit, but no later than one year after the end of the audit period
unless a longer period is agreed to with the cognizant agency.

g. Recipients of more than $100,000 in Federal funds shall submit one
copy of the audit report within 30 days after issuance to a central
clearinghouse to be designated by the Office of Management and Budget. The
clearinghouse will keep completed audits on file and follow up with State
and local governments that have not submitted required audit reports.

h. Recipients shall keep audit reports on file for three years from
their issuance.

14. Audit Resolution. As provided in paragraph 11, the cognizant
agency shall be responsible for monitoring the resolution of audit
findings that affect the programs of more than one Federal agency.
Resolution of findings that relate to the programs of a single Federal
agency will be the responsibility of the recipient and that agency.
Alternate arrangements may be made on case-by-case basis by a case-by-case
basis by agreement among the agenices concerned.

Resolution shall be made within six months after receipt of the report
by the Federal departments and agencies. Corrective action should proceed
as rapidly as possible.

15. Audit workpapers and reports. Workpapers and reports shall
be retained for a minimum of three years from the date of the audit
report, unless the auditor is notified in writing by the cognizant agency
to extend the retention period. Audit workpapers shall be made available
upon request to the cognizant agency or its designee or the General
Accounting Office, at the completion of the audit.

16. Audit Costs. The cost of audits made in accordance with the
provisions of this Circular are allowable charges to Federal assistance
programs.

a. The charges may be considered a direct cost or an allocated indirect
cost, determined in accordance with the provision of Circular A–87, “Cost
principles for State and local governments.”

b. Generally, the percentage of costs charged to Federal assistance
programs for a single audit shall not exceed the percentage that Federal
funds expended represent of total funds expended by the recipient during
the fiscal year. The percentage may be exceeded, however, if appropriate
documentation demonstrates higher actual cost.

17. Sanctions. The Single Audit Act provides that no cost may be
charged to Federal assistance programs for audits required by the Act that
are not made in accordance with this Circular. In cases of continued
inability or unwillingness to have a proper audit, Federal agencies must
consider other appropropriate sanctions including:

—Withholding a percentage of assistance payments until the audit is
completed satisfactorily,

—Withholding or disallowing overhead costs, and

—Suspending the Federal assistance agreement until the audit is
made.

18. Auditor Selection. In arranging for audit services State and
local governments shall follow the procurement standards prescribed by
Attachment O of Circular A–102, “Uniform requirements for grants to State
and local governments.” The standards provide that while recipients are
encouraged to enter into intergovernmental agreements for audit and other
services, analysis should be made to determine whether it would be more
economical to purchase the services from private firms. In instances where
use of such intergovernmental agreements are required by State statutes
(e.g., audit services) these statutes will take precedence.

19. Small and Minority Audit Firms. Small audit firms and audit
firms owned and controlled by socially and economically disadvantaged
individuals shall have the maximum practicable opportunity to participate
in contracts awarded to fulfill the requirements of this Circular.
Recipients of Federal assistance shall take the following steps to further
this goal:

a. Assure that small audit firms and audit firms owned and controlled
by socially and economically disadvantaged individuals are used to the
fullest extent practicable.

b. Make information on forthcoming opportunities available and arrange
timeframes for the audit so as to encourage and facilitate participation
by small audit firms and audit firms owned and controlled by socially and
economically disadvantaged individuals.

c. Consider in the contract process whether firms competing for large
audits intend to subcontract with small audit firms and audit firms owned
and controlled by socially and economically disadvantaged individuals.

d. Encourage contracting with small audit firms or audit firms owned
and controlled by socially and economically disadvantaged individuals
which have traditionally audited government programs and, in such cases
where this is not possible, assure that these firms are given
consideration for audit subcontracting opportunities.

e. Encourage contracting with consortiums of small audit firms as
described in paragraph (a) above when a contract is too large for an
individual small audit firm or audit firm owned and controlled by socially
and economically disadvantaged individuals.

f. Use the services and assistance, as appropriate, of such
organizations as the Small Business Administration in the solicitation and
utilization of small audit firms or audit firms owned and controlled by
socially and economically disadvantaged individuals.

20. Reporting. Each Federal agency will report to the Director
of OMB on or before March 1, 1987, and annually thereafter on the
effectiveness of State and local governments in carrying out the
provisions of this Circular. The report must identify each State or local
government or Indian tribe that, in the opinion of the agency, is failing
to comply with the Circular.

21. Regulations. Each Federal agency shall include the
provisions of this Circular in its regulations implementing the Single
Audit Act.

22. Effective date. This Circular is effective upon publication
and shall apply to fiscal years of State and local governments that begin
after December 31, 1984. Earlier implementation is encouraged. However,
until it is implemented, the audit provisions of Attachment P to Circular
A–102 shall continue to be observed.

23. Inquiries. All questions or inquiries should be addressed to
Financial Management Division, Office of Management and Budget, telephone
number 202/395–3993.

24. Sunset review date. This Circular shall have an independent
policy review to ascertain its effectiveness three years from the date of
issuance.

David A. Stockman,

Director.

Definition of Major Program as Provided in Pub. L. 98–502

“Major Federal Assistance Program,” for State and local governments
having Federal assistance expenditures between $100,000 and $100,000,000,
means any program for which Federal expenditures during the applicable
year exceed the larger of $300,000, or 3 percent of such total
expenditures.

Where total expenditures of Federal assistance exceed $100,000,000, the
following criteria apply:

Total expenditures of
Federal
financial assistance for all programs

Major
federal
assistance program means any program that exceeds

More than

But less than

$100 million

$1 billion

$3 million

1 billion

2 billion

4 million

2 billion

3 billion

7 million

3 billion

4 billion

10 million

4 billion

5 billion

13 million

5 billion

6 billion

16 million

6 billion

7 billion

19 million

Over 7 billion

20
million

[50 FR 28763, July 16, 1985]

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