2 CFR 200 Uniform Admin Req, Cost Principles, and Aud Req

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Displaying title 2, up to date as of 3/16/2022. Title 2 was last amended 10/18/2021.

Title 2 - Grants and Agreements
Subtitle A - Office of Management and Budget Guidance for Grants and Agreements
Chapter II - Office of Management and Budget Guidance
ENHANCED CONTENT - TABLE OF CONTENTS

Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards
Subpart A
Acronyms
§ 200.0
§ 200.1
Subpart B
§ 200.100
§ 200.101
§ 200.102
§ 200.103
§ 200.104
§ 200.105
§ 200.106
§ 200.107
§ 200.108
§ 200.109
§ 200.110
§ 200.111
§ 200.112
§ 200.113
Subpart C
§ 200.200
§ 200.201
§ 200.202
§ 200.203
§ 200.204
§ 200.205
§ 200.206
§ 200.207
§ 200.208
§ 200.209
§ 200.210
§ 200.211
§ 200.212
§ 200.213
§ 200.214
§ 200.215
§ 200.216
Subpart D
§ 200.300
§ 200.301
§ 200.302
§ 200.303
§ 200.304

Acronyms and Definitions

200.0 – 200.521
200.0 – 200.1
200.0 – 200.1

Acronyms.
Definitions.
General Provisions
200.100 – 200.113
Purpose.
Applicability.
Exceptions.
Authorities.
Supersession.
Effect on other issuances.
Agency implementation.
OMB responsibilities.
Inquiries.
Review date.
Effective/applicability date.
English language.
Conflict of interest.
Mandatory disclosures.
Pre-Federal Award Requirements and Contents of Federal Awards
200.200 – 200.216
Purpose.
Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts.
Program planning and design.
Requirement to provide public notice of Federal financial assistance programs.
Notices of funding opportunities.
Federal awarding agency review of merit of proposals.
Federal awarding agency review of risk posed by applicants.
Standard application requirements.
Specific conditions.
Certifications and representations.
Pre-award costs.
Information contained in a Federal award.
Public access to Federal award information.
Reporting a determination that a non-Federal entity is not qualified for a Federal award.
Suspension and debarment.
Never contract with the enemy.
Prohibition on certain telecommunications and video surveillance services or equipment.
Post Federal Award Requirements
200.300 – 200.346
Statutory and national policy
requirements.
Performance measurement.
Financial management.
Internal controls.
Bonds.

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§ 200.305
§ 200.306
§ 200.307
§ 200.308
§ 200.309

Federal payment.
Cost sharing or matching.
Program income.
Revision of budget and
program plans.
Modifications to Period of
Performance.
200.310 – 200.316

Property Standards
§ 200.310 Insurance coverage.
§ 200.311 Real property.
§ 200.312 Federally-owned and exempt property.
§ 200.313 Equipment.
§ 200.314 Supplies.
§ 200.315 Intangible property.
§ 200.316 Property trust relationship.
Procurement Standards
200.317 – 200.327
§ 200.317 Procurements by states.
§ 200.318 General procurement standards.
§ 200.319 Competition.
§ 200.320 Methods of procurement to be followed.
§ 200.321 Contracting with small and minority businesses, women's business enterprises, and labor surplus area firms.
§ 200.322 Domestic preferences for procurements.
§ 200.323 Procurement of recovered materials.
§ 200.324 Contract cost and price.
§ 200.325 Federal awarding agency or pass-through entity review.
§ 200.326 Bonding requirements.
§ 200.327 Contract provisions.
Performance and Financial Monitoring and Reporting
200.328 – 200.330
§ 200.328 Financial reporting.
§ 200.329 Monitoring and reporting program performance.
§ 200.330 Reporting on real property.
Subrecipient Monitoring and Management
200.331 – 200.333
§ 200.331 Subrecipient and contractor determinations.
§ 200.332 Requirements for pass-through entities.
§ 200.333 Fixed amount subawards.
Record Retention and Access
200.334 – 200.338
§ 200.334 Retention requirements for records.
§ 200.335 Requests for transfer of records.
§ 200.336 Methods for collection, transmission, and storage of information.
§ 200.337 Access to records.
§ 200.338 Restrictions on public access to records.
Remedies for Noncompliance
200.339 – 200.343
§ 200.339 Remedies for noncompliance.
§ 200.340 Termination.
§ 200.341 Notification of termination requirement.
§ 200.342 Opportunities to object, hearings, and appeals.
§ 200.343 Effects of suspension and termination.
Closeout
200.344
§ 200.344 Closeout.
Post-Closeout Adjustments and Continuing Responsibilities
200.345
§ 200.345 Post-closeout adjustments and continuing responsibilities.
Collection of Amounts Due
200.346
§ 200.346 Collection of amounts due.
Subpart E
Cost Principles
200.400 – 200.476
General Provisions
200.400 – 200.401
§ 200.400 Policy guide.
§ 200.401 Application.
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Basic Considerations
200.402 – 200.411
§ 200.402 Composition of costs.
§ 200.403 Factors affecting allowability of costs.
§ 200.404 Reasonable costs.
§ 200.405 Allocable costs.
§ 200.406 Applicable credits.
§ 200.407 Prior written approval (prior approval).
§ 200.408 Limitation on allowance of costs.
§ 200.409 Special considerations.
§ 200.410 Collection of unallowable costs.
§ 200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable costs.
Direct and Indirect (F&A) Costs
200.412 – 200.415
§ 200.412 Classification of costs.
§ 200.413 Direct costs.
§ 200.414 Indirect (F&A) costs.
§ 200.415 Required certifications.
Special Considerations for States, Local Governments and Indian Tribes
200.416 – 200.417
§ 200.416 Cost allocation plans and indirect cost proposals.
§ 200.417 Interagency service.
Special Considerations for Institutions of Higher Education
200.418 – 200.419
§ 200.418 Costs incurred by states and local governments.
§ 200.419 Cost accounting standards and disclosure statement.
General Provisions for Selected Items of Cost
200.420 – 200.476

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§ 200.420 Considerations for selected items of cost.
§ 200.421 Advertising and public relations.
§ 200.422 Advisory councils.
§ 200.423 Alcoholic beverages.
§ 200.424 Alumni/ae activities.
§ 200.425 Audit services.
§ 200.426 Bad debts.
§ 200.427 Bonding costs.
§ 200.428 Collections of improper payments.
§ 200.429 Commencement and convocation costs.
§ 200.430 Compensation - personal services.
§ 200.431 Compensation - fringe benefits.
§ 200.432 Conferences.
§ 200.433 Contingency provisions.
§ 200.434 Contributions and donations.
§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements.
§ 200.436 Depreciation.
§ 200.437 Employee health and welfare costs.
§ 200.438 Entertainment costs.
§ 200.439 Equipment and other capital expenditures.
§ 200.440 Exchange rates.
§ 200.441 Fines, penalties, damages and other settlements.
§ 200.442 Fund raising and investment management costs.
§ 200.443 Gains and losses on disposition of depreciable assets.
§ 200.444 General costs of government.
§ 200.445 Goods or services for personal use.
§ 200.446 Idle facilities and idle capacity.
§ 200.447 Insurance and indemnification.
§ 200.448 Intellectual property.
§ 200.449 Interest.
§ 200.450 Lobbying.
§ 200.451 Losses on other awards or contracts.
§ 200.452 Maintenance and repair costs.
§ 200.453 Materials and supplies costs, including costs of computing devices.
§ 200.454 Memberships, subscriptions, and professional activity costs.
§ 200.455 Organization costs.
§ 200.456 Participant support costs.
§ 200.457 Plant and security costs.
§ 200.458 Pre-award costs.
§ 200.459 Professional service costs.
§ 200.460 Proposal costs.
§ 200.461 Publication and printing costs.
§ 200.462 Rearrangement and reconversion costs.
§ 200.463 Recruiting costs.
§ 200.464 Relocation costs of employees.
§ 200.465 Rental costs of real property and equipment.
§ 200.466 Scholarships and student aid costs.
§ 200.467 Selling and marketing costs.
§ 200.468 Specialized service facilities.
§ 200.469 Student activity costs.
§ 200.470 Taxes (including Value Added Tax).
§ 200.471 Telecommunication costs and video surveillance costs.
§ 200.472 Termination costs.
§ 200.473 Training and education costs.
§ 200.474 Transportation costs.
§ 200.475 Travel costs.
§ 200.476 Trustees.
Subpart F
Audit Requirements
200.500 – 200.521
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General
§ 200.500 Purpose.
Audits
§ 200.501 Audit requirements.
§ 200.502 Basis for determining Federal awards expended.
§ 200.503 Relation to other audit requirements.
§ 200.504 Frequency of audits.
§ 200.505 Sanctions.
§ 200.506 Audit costs.
§ 200.507 Program-specific audits.
Auditees
§ 200.508 Auditee responsibilities.
§ 200.509 Auditor selection.
§ 200.510 Financial statements.
§ 200.511 Audit findings follow-up.
§ 200.512 Report submission.
Federal Agencies
§ 200.513 Responsibilities.
Auditors
§ 200.514 Scope of audit.
§ 200.515 Audit reporting.
§ 200.516 Audit findings.
§ 200.517 Audit documentation.
§ 200.518 Major program determination.
§ 200.519 Criteria for Federal program risk.
§ 200.520 Criteria for a low-risk auditee.
Management Decisions
§ 200.521 Management decision.

200.500
200.501 – 200.507

200.508 – 200.512

200.513
200.514 – 200.520

200.521

Appendix I to Part 200

Full Text of Notice of Funding Opportunity
Appendix II to Part 200

Contract Provisions for Non-Federal Entity Contracts Under Federal Awards
Appendix III to Part 200

Indirect (F&A) Costs Identification and Assignment, and Rate Determination for
Institutions of Higher Education (IHEs)
Appendix IV to Part 200

Indirect (F&A) Costs Identification and Assignment, and Rate Determination for
Nonprofit Organizations
Appendix V to Part 200

State/Local Governmentwide Central Service Cost Allocation Plans
Appendix VI to Part 200

Public Assistance Cost Allocation Plans
Appendix VII to Part 200

States and Local Government and Indian Tribe Indirect Cost Proposals
Appendix VIII to Part 200

Nonprofit Organizations Exempted From Subpart E of Part 200
Appendix IX to Part 200

Hospital Cost Principles
Appendix X to Part 200

Data Collection Form (Form SF-SAC)
Appendix XI to Part 200

Compliance Supplement
Appendix XII to Part 200

Award Term and Condition for Recipient Integrity and Performance Matters
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PART 200 - UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND
AUDIT REQUIREMENTS FOR FEDERAL AWARDS
Authority: 31 U.S.C. 503
Source: 78 FR 78608, Dec. 26, 2013, unless otherwise noted.
Subpart A - Acronyms and Definitions
Acronyms

§ 200.0 Acronyms.

Acronym Term
CAS Cost Accounting Standards
CFR Code of Federal Regulations
CMIA Cash Management Improvement Act
COG Councils Of Governments
COSO Committee of Sponsoring Organizations of the Treadway Commission
EPA Environmental Protection Agency
ERISA Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301-1461)
EUI Energy Usage Index
F&A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification Number
FAPIIS Federal Awardee Performance and Integrity Information System
FAR Federal Acquisition Regulation
FFATA Federal Funding Accountability and Transparency Act of 2006 or Transparency Act - Public Law 109-282, as amended by section 6202(a) of
Public Law 110-252 (31 U.S.C. 6101)
FICA Federal Insurance Contributions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full-time equivalent
GAAP Generally Accepted Accounting Principles
GAGAS Generally Accepted Government Auditing Standards
GAO Government Accountability Office
GOCO Government owned, contractor operated
GSA General Services Administration
IBS Institutional Base Salary

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IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self-Determination and Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
NFE Non-Federal Entity
OMB Office of Management and Budget
PII Personally Identifiable Information
PMS Payment Management System
PRHP Post-retirement Health Plans
PTE Pass-through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SFA Student Financial Aid
SNAP Supplemental Nutrition Assistance Program
SPOC Single Point of Contact
TANF Temporary Assistance for Needy Families
TFM Treasury Financial Manual
U.S.C. United States Code
VAT Value Added Tax
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014; 80 FR 43308, July 22, 2015; 85 FR 49529, Aug. 13, 2020]

§ 200.1 Definitions.
These are the definitions for terms used in this part. Different definitions may be found in Federal statutes or regulations that apply more
specifically to particular programs or activities. These definitions could be supplemented by additional instructional information provided in
governmentwide standard information collections. For purposes of this part, the following definitions apply:
Acquisition cost means the cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for equipment, for
example, means the net invoice price of the equipment, including the cost of any modifications, attachments, accessories, or auxiliary
apparatus necessary to make it usable for the purpose for which it is acquired. Acquisition costs for software includes those
development costs capitalized in accordance with generally accepted accounting principles (GAAP). Ancillary charges, such as taxes,
duty, protective in transit insurance, freight, and installation may be included in or excluded from the acquisition cost in accordance with
the non-Federal entity's regular accounting practices.
Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any appropriate payment mechanism,
including a predetermined payment schedule, before the non-Federal entity disburses the funds for program purposes.
Allocation means the process of assigning a cost, or a group of costs, to one or more cost objective(s), in reasonable proportion to the benefit
provided or other equitable relationship. The process may entail assigning a cost(s) directly to a final cost objective or through one or
more intermediate cost objectives.
Assistance listings refers to the publicly available listing of Federal assistance programs managed and administered by the General Services
Administration, formerly known as the Catalog of Federal Domestic Assistance (CFDA).
Assistance listing number means a unique number assigned to identify a Federal Assistance Listings, formerly known as the CFDA Number.
Assistance listing program title means the title that corresponds to the Federal Assistance Listings Number, formerly known as the CFDA
program title.

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Audit finding means deficiencies which the auditor is required by § 200.516(a) to report in the schedule of findings and questioned costs.
Auditee means any non-Federal entity that expends Federal awards which must be audited under subpart F of this part.
Auditor means an auditor who is a public accountant or a Federal, State, local government, or Indian tribe audit organization, which meets the
general standards specified for external auditors in generally accepted government auditing standards (GAGAS). The term auditor does
not include internal auditors of nonprofit organizations.
Budget means the financial plan for the Federal award that the Federal awarding agency or pass-through entity approves during the Federal
award process or in subsequent amendments to the Federal award. It may include the Federal and non-Federal share or only the Federal
share, as determined by the Federal awarding agency or pass-through entity.
Budget period means the time interval from the start date of a funded portion of an award to the end date of that funded portion during which
recipients are authorized to expend the funds awarded, including any funds carried forward or other revisions pursuant to § 200.308.
Capital assets means:
(1) Tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with
GAAP. Capital assets include:
(i)

Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase,
construction, manufacture, exchange, or through a lease accounted for as financed purchase under Government Accounting
Standards Board (GASB) standards or a finance lease under Financial Accounting Standards Board (FASB) standards; and

(ii) Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations or alterations to capital
assets that materially increase their value or useful life (not ordinary repairs and maintenance).
(2) For purpose of this part, capital assets do not include intangible right-to-use assets (per GASB) and right-to-use operating lease
assets (per FASB). For example, assets capitalized that recognize a lessee's right to control the use of property and/or equipment
for a period of time under a lease contract. See also § 200.465.
Capital expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications,
replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful
life.
Central service cost allocation plan means the documentation identifying, accumulating, and allocating or developing billing rates based on
the allowable costs of services provided by a State or local government or Indian tribe on a centralized basis to its departments and
agencies. The costs of these services may be allocated or billed to users.
Claim means, depending on the context, either:
(1) A written demand or written assertion by one of the parties to a Federal award seeking as a matter of right:
(i)

The payment of money in a sum certain;

(ii) The adjustment or interpretation of the terms and conditions of the Federal award; or
(iii) Other relief arising under or relating to a Federal award.
(2) A request for payment that is not in dispute when submitted.
Class of Federal awards means a group of Federal awards either awarded under a specific program or group of programs or to a specific type
of non-Federal entity or group of non-Federal entities to which specific provisions or exceptions may apply.
Closeout means the process by which the Federal awarding agency or pass-through entity determines that all applicable administrative
actions and all required work of the Federal award have been completed and takes actions as described in § 200.344.
Cluster of programs means a grouping of closely related programs that share common compliance requirements. The types of clusters of
programs are research and development (R&D), student financial aid (SFA), and other clusters. “Other clusters” are as defined by OMB in
the compliance supplement or as designated by a State for Federal awards the State provides to its subrecipients that meet the
definition of a cluster of programs. When designating an “other cluster,” a State must identify the Federal awards included in the cluster
and advise the subrecipients of compliance requirements applicable to the cluster, consistent with § 200.332(a). A cluster of programs
must be considered as one program for determining major programs, as described in § 200.518, and, with the exception of R&D as
described in § 200.501(c), whether a program-specific audit may be elected.
Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in § 200.513(a). The cognizant
agency for audit is not necessarily the same as the cognizant agency for indirect costs. A list of cognizant agencies for audit can be
found on the Federal Audit Clearinghouse (FAC) website.
Cognizant agency for indirect costs means the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or
indirect cost proposals developed under this part on behalf of all Federal agencies. The cognizant agency for indirect cost is not
necessarily the same as the cognizant agency for audit. For assignments of cognizant agencies see the following:
(1) For Institutions of Higher Education (IHEs): Appendix III to this part, paragraph C.11.
(2) For nonprofit organizations: Appendix IV to this part, paragraph C.2.a.
(3) For State and local governments: Appendix V to this part, paragraph F.1.

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(4) For Indian tribes: Appendix VII to this part, paragraph D.1.
Compliance supplement means an annually updated authoritative source for auditors that serves to identify existing important compliance
requirements that the Federal Government expects to be considered as part of an audit. Auditors use it to understand the Federal
program's objectives, procedures, and compliance requirements, as well as audit objectives and suggested audit procedures for
determining compliance with the relevant Federal program.
Computing devices means machines used to acquire, store, analyze, process, and publish data and other information electronically, including
accessories (or “peripherals”) for printing, transmitting and receiving, or storing electronic information. See also the definitions of
supplies and information technology systems in this section.
Contract means, for the purpose of Federal financial assistance, a legal instrument by which a recipient or subrecipient purchases property or
services needed to carry out the project or program under a Federal award. For additional information on subrecipient and contractor
determinations, see § 200.331. See also the definition of subaward in this section.
Contractor means an entity that receives a contract as defined in this section.
Cooperative agreement means a legal instrument of financial assistance between a Federal awarding agency and a recipient or a passthrough entity and a subrecipient that, consistent with 31 U.S.C. 6302-6305:
(1) Is used to enter into a relationship the principal purpose of which is to transfer anything of value to carry out a public purpose
authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to acquire property or services for the Federal Government
or pass-through entity's direct benefit or use;
(2) Is distinguished from a grant in that it provides for substantial involvement of the Federal awarding agency in carrying out the
activity contemplated by the Federal award.
(3) The term does not include:
(i)

A cooperative research and development agreement as defined in 15 U.S.C. 3710a; or

(ii) An agreement that provides only:
(A) Direct United States Government cash assistance to an individual;
(B) A subsidy;
(C) A loan;
(D) A loan guarantee; or
(E) Insurance.
Cooperative audit resolution means the use of audit follow-up techniques which promote prompt corrective action by improving
communication, fostering collaboration, promoting trust, and developing an understanding between the Federal agency and the nonFederal entity. This approach is based upon:
(1) A strong commitment by Federal agency and non-Federal entity leadership to program integrity;
(2) Federal agencies strengthening partnerships and working cooperatively with non-Federal entities and their auditors; and non-Federal
entities and their auditors working cooperatively with Federal agencies;
(3) A focus on current conditions and corrective action going forward;
(4) Federal agencies offering appropriate relief for past noncompliance when audits show prompt corrective action has occurred; and
(5) Federal agency leadership sending a clear message that continued failure to correct conditions identified by audits which are likely
to cause improper payments, fraud, waste, or abuse is unacceptable and will result in sanctions.
Corrective action means action taken by the auditee that:
(1) Corrects identified deficiencies;
(2) Produces recommended improvements; or
(3) Demonstrates that audit findings are either invalid or do not warrant auditee action.
Cost allocation plan means central service cost allocation plan or public assistance cost allocation plan.
Cost objective means a program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired
and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. A cost objective
may be a major function of the non-Federal entity, a particular service or project, a Federal award, or an indirect (Facilities &
Administrative (F&A)) cost activity, as described in subpart E of this part. See also the definitions of final cost objective and intermediate
cost objective in this section.
Cost sharing or matching means the portion of project costs not paid by Federal funds or contributions (unless otherwise authorized by
Federal statute). See also § 200.306.
Cross-cutting audit finding means an audit finding where the same underlying condition or issue affects all Federal awards (including Federal
awards of more than one Federal awarding agency or pass-through entity).

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Disallowed costs means those charges to a Federal award that the Federal awarding agency or pass-through entity determines to be
unallowable, in accordance with the applicable Federal statutes, regulations, or the terms and conditions of the Federal award.
Discretionary award means an award in which the Federal awarding agency, in keeping with specific statutory authority that enables the
agency to exercise judgment (“discretion”), selects the recipient and/or the amount of Federal funding awarded through a competitive
process or based on merit of proposals. A discretionary award may be selected on a non-competitive basis, as appropriate.
Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a perunit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial
statement purposes, or $5,000. See also the definitions of capital assets, computing devices, general purpose equipment, information
technology systems, special purpose equipment, and supplies in this section.
Expenditures means charges made by a non-Federal entity to a project or program for which a Federal award was received.
(1) The charges may be reported on a cash or accrual basis, as long as the methodology is disclosed and is consistently applied.
(2) For reports prepared on a cash basis, expenditures are the sum of:
(i)

Cash disbursements for direct charges for property and services;

(ii) The amount of indirect expense charged;
(iii) The value of third-party in-kind contributions applied; and
(iv) The amount of cash advance payments and payments made to subrecipients.
(3) For reports prepared on an accrual basis, expenditures are the sum of:
(i)

Cash disbursements for direct charges for property and services;

(ii) The amount of indirect expense incurred;
(iii) The value of third-party in-kind contributions applied; and
(iv) The net increase or decrease in the amounts owed by the non-Federal entity for:
(A) Goods and other property received;
(B) Services performed by employees, contractors, subrecipients, and other payees; and
(C) Programs for which no current services or performance are required such as annuities, insurance claims, or other benefit
payments.
Federal agency means an “agency” as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f).
Federal Audit Clearinghouse (FAC) means the clearinghouse designated by OMB as the repository of record where non-Federal entities are
required to transmit the information required by subpart F of this part.
Federal award has the meaning, depending on the context, in either paragraph (1) or (2) of this definition:
(1)
(i)

The Federal financial assistance that a recipient receives directly from a Federal awarding agency or indirectly from a passthrough entity, as described in § 200.101; or

(ii) The cost-reimbursement contract under the Federal Acquisition Regulations that a non-Federal entity receives directly from a
Federal awarding agency or indirectly from a pass-through entity, as described in § 200.101.
(2) The instrument setting forth the terms and conditions. The instrument is the grant agreement, cooperative agreement, other
agreement for assistance covered in paragraph (2) of the definition of Federal financial assistance in this section, or the costreimbursement contract awarded under the Federal Acquisition Regulations.
(3) Federal award does not include other contracts that a Federal agency uses to buy goods or services from a contractor or a contract
to operate Federal Government owned, contractor operated facilities (GOCOs).
(4) See also definitions of Federal financial assistance, grant agreement, and cooperative agreement.
Federal award date means the date when the Federal award is signed by the authorized official of the Federal awarding agency.
Federal awarding agency means the Federal agency that provides a Federal award directly to a non-Federal entity.
Federal financial assistance means
(1) Assistance that non-Federal entities receive or administer in the form of:
(i)

Grants;

(ii) Cooperative agreements;
(iii) Non-cash contributions or donations of property (including donated surplus property);
(iv) Direct appropriations;

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(v) Food commodities; and
(vi) Other financial assistance (except assistance listed in paragraph (2) of this definition).

(2) For § 200.203 and subpart F of this part, Federal financial assistance also includes assistance that non-Federal entities receive or
administer in the form of:
(i)

Loans;

(ii) Loan Guarantees;
(iii) Interest subsidies; and
(iv) Insurance.
(3) For § 200.216, Federal financial assistance includes assistance that non-Federal entities receive or administer in the form of:
(i)

Grants;

(ii) Cooperative agreements;
(iii) Loans; and
(iv) Loan Guarantees.
(4) Federal financial assistance does not include amounts received as reimbursement for services rendered to individuals as described
in § 200.502(h) and (i).
Federal interest means, for purposes of § 200.330 or when used in connection with the acquisition or improvement of real property,
equipment, or supplies under a Federal award, the dollar amount that is the product of the:
(1) The percentage of Federal participation in the total cost of the real property, equipment, or supplies; and
(2) Current fair market value of the property, improvements, or both, to the extent the costs of acquiring or improving the property were
included as project costs.
Federal program means:
(1) All Federal awards which are assigned a single Assistance Listings Number.
(2) When no Assistance Listings Number is assigned, all Federal awards from the same agency made for the same purpose must be
combined and considered one program.
(3) Notwithstanding paragraphs (1) and (2) of this definition, a cluster of programs. The types of clusters of programs are:
(i)

Research and development (R&D);

(ii) Student financial aid (SFA); and
(iii) “Other clusters,” as described in the definition of cluster of programs in this section.
Federal share means the portion of the Federal award costs that are paid using Federal funds.
Final cost objective means a cost objective which has allocated to it both direct and indirect costs and, in the non-Federal entity's
accumulation system, is one of the final accumulation points, such as a particular award, internal project, or other direct activity of a nonFederal entity. See also the definitions of cost objective and intermediate cost objective in this section.
Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property
and services, contracts and subawards made, and similar transactions that require payment.
Fixed amount awards means a type of grant or cooperative agreement under which the Federal awarding agency or pass-through entity
provides a specific level of support without regard to actual costs incurred under the Federal award. This type of Federal award reduces
some of the administrative burden and record-keeping requirements for both the non-Federal entity and Federal awarding agency or
pass-through entity. Accountability is based primarily on performance and results. See §§ 200.102(c), 200.201(b), and 200.333.
Foreign organization means an entity that is:
(1) A public or private organization located in a country other than the United States and its territories that is subject to the laws of the
country in which it is located, irrespective of the citizenship of project staff or place of performance;
(2) A private nongovernmental organization located in a country other than the United States that solicits and receives cash
contributions from the general public;
(3) A charitable organization located in a country other than the United States that is nonprofit and tax exempt under the laws of its
country of domicile and operation, and is not a university, college, accredited degree-granting institution of education, private
foundation, hospital, organization engaged exclusively in research or scientific activities, church, synagogue, mosque or other
similar entities organized primarily for religious purposes; or
(4) An organization located in a country other than the United States not recognized as a foreign public entity.
Foreign public entity means:

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(1) A foreign government or foreign governmental entity;
(2) A public international organization, which is an organization entitled to enjoy privileges, exemptions, and immunities as an
international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f);
(3) An entity owned (in whole or in part) or controlled by a foreign government; or
(4) Any other entity consisting wholly or partially of one or more foreign governments or foreign governmental entities.
General purpose equipment means equipment which is not limited to research, medical, scientific or other technical activities. Examples
include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air
conditioning equipment, reproduction and printing equipment, and motor vehicles. See also the definitions of equipment and special
purpose equipment in this section.
Generally accepted accounting principles (GAAP) has the meaning specified in accounting standards issued by the GASB and the FASB.
Generally accepted government auditing standards (GAGAS), also known as the Yellow Book, means generally accepted government auditing
standards issued by the Comptroller General of the United States, which are applicable to financial audits.
Grant agreement means a legal instrument of financial assistance between a Federal awarding agency or pass-through entity and a nonFederal entity that, consistent with 31 U.S.C. 6302, 6304:
(1) Is used to enter into a relationship the principal purpose of which is to transfer anything of value to carry out a public purpose
authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to acquire property or services for the Federal awarding
agency or pass-through entity's direct benefit or use;
(2) Is distinguished from a cooperative agreement in that it does not provide for substantial involvement of the Federal awarding
agency in carrying out the activity contemplated by the Federal award.
(3) Does not include an agreement that provides only:
(i)

Direct United States Government cash assistance to an individual;

(ii) A subsidy;
(iii) A loan;
(vi) A loan guarantee; or
(v) Insurance.
Highest level owner means the entity that owns or controls an immediate owner of the offeror, or that owns or controls one or more entities
that control an immediate owner of the offeror. No entity owns or exercises control of the highest-level owner as defined in the Federal
Acquisition Regulations (FAR) (48 CFR 52.204-17).
Hospital means a facility licensed as a hospital under the law of any state or a facility operated as a hospital by the United States, a state, or a
subdivision of a state.
Improper payment means:
(1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative,
or other legally applicable requirements.
(i)

Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of
payment or service, any payment that does not account for credit for applicable discounts, payments that are for an incorrect
amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or
for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law).

Note 1 to paragraph (1)(i) of this definition. Applicable discounts are only those discounts where it is both advantageous and within the
agency's control to claim them.
(ii) When an agency's review is unable to discern whether a payment was proper as a result of insufficient or lack of
documentation, this payment should also be considered an improper payment. When establishing documentation
requirements for payments, agencies should ensure that all documentation requirements are necessary and should refrain
from imposing additional burdensome documentation requirements.
(iii) Interest or other fees that may result from an underpayment by an agency are not considered an improper payment if the
interest was paid correctly. These payments are generally separate transactions and may be necessary under certain statutory,
contractual, administrative, or other legally applicable requirements.
(iv) A “questioned cost” (as defined in this section) should not be considered an improper payment until the transaction has been
completely reviewed and is confirmed to be improper.
(v) The term “payment” in this definition means any disbursement or transfer of Federal funds (including a commitment for future
payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal
entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or
other organization administering a Federal program or activity.

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(vi) The term “payment” includes disbursements made pursuant to prime contracts awarded under the Federal Acquisition
Regulation and Federal awards subject to this part that are expended by recipients.

(2) See definition of improper payment in OMB Circular A-123 appendix C, part I A (1) “What is an improper payment?” Questioned
costs, including those identified in audits, are not an improper payment until reviewed and confirmed to be improper as defined in
OMB Circular A-123 appendix C.
Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or
village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Chapter 33), which is
recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians
(25 U.S.C. 450b(e)). See annually published Bureau of Indian Affairs list of Indian Entities Recognized and Eligible to Receive Services.
Institutions of Higher Education (IHEs) is defined at 20 U.S.C. 1001.
Indirect (facilities & administrative (F&A)) costs means those costs incurred for a common or joint purpose benefitting more than one cost
objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved.
To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools
of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an
equitable result in consideration of relative benefits derived.
Indirect cost rate proposal means the documentation prepared by a non-Federal entity to substantiate its request for the establishment of an
indirect cost rate as described in appendices III through VII and appendix IX to this part.
Information technology systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services
(including support services), and related resources. See also the definitions of computing devices and equipment in this section.
Intangible property means property having no physical existence, such as trademarks, copyrights, patents and patent applications and
property, such as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership
(whether the property is tangible or intangible).
Intermediate cost objective means a cost objective that is used to accumulate indirect costs or service center costs that are subsequently
allocated to one or more indirect cost pools or final cost objectives. See also the definitions of cost objective and final cost objective in
this section.
Internal controls for non-Federal entities means:
(1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of
objectives in the following categories:
(i)

Effectiveness and efficiency of operations;

(ii) Reliability of reporting for internal and external use; and
(iii) Compliance with applicable laws and regulations.
(2) Federal awarding agencies are required to follow internal control compliance requirements in OMB Circular No. A-123,
Management's Responsibility for Enterprise Risk Management and Internal Control.
Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity, except as used in the definition of program
income in this section.
(1) The term “direct loan” means a disbursement of funds by the Federal Government to a non-Federal borrower under a contract that
requires the repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by
another lender and financing arrangements that defer payment for more than 90 days, including the sale of a Federal Government
asset on credit terms. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default claims or
the price support loans of the Commodity Credit Corporation.
(2) The term “direct loan obligation” means a binding agreement by a Federal awarding agency to make a direct loan when specified
conditions are fulfilled by the borrower.
(3) The term “loan guarantee” means any Federal Government guarantee, insurance, or other pledge with respect to the payment of all
or a part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender, but does not include
the insurance of deposits, shares, or other withdrawable accounts in financial institutions.
(4) The term “loan guarantee commitment” means a binding agreement by a Federal awarding agency to make a loan guarantee when
specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement.
Local government means any unit of government within a state, including a:
(1) County;
(2) Borough;
(3) Municipality;
(4) City;
(5) Town;

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(6) Township;
(7) Parish;
(8) Local public authority, including any public housing agency under the United States Housing Act of 1937;
(9) Special district;
(10) School district;
(11) Intrastate district;
(12) Council of governments, whether or not incorporated as a nonprofit corporation under State law; and
(13) Any other agency or instrumentality of a multi-, regional, or intra-State or local government.
Major program means a Federal program determined by the auditor to be a major program in accordance with § 200.518 or a program
identified as a major program by a Federal awarding agency or pass-through entity in accordance with § 200.503(e).
Management decision means the Federal awarding agency's or pass-through entity's written determination, provided to the auditee, of the
adequacy of the auditee's proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed
corrective actions.
Micro-purchase means a purchase of supplies or services, the aggregate amount of which does not exceed the micro-purchase threshold.
Micro-purchases comprise a subset of a non-Federal entity's small purchases as defined in § 200.320.
Micro-purchase threshold means the dollar amount at or below which a non-Federal entity may purchase property or services using micropurchase procedures (see § 200.320). Generally, the micro-purchase threshold for procurement activities administered under Federal
awards is not to exceed the amount set by the FAR at 48 CFR part 2, subpart 2.1, unless a higher threshold is requested by the nonFederal entity and approved by the cognizant agency for indirect costs.
Modified Total Direct Cost (MTDC) means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and
up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes
equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant
support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a
serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.
Non-discretionary award means an award made by the Federal awarding agency to specific recipients in accordance with statutory, eligibility
and compliance requirements, such that in keeping with specific statutory authority the agency has no ability to exercise judgement
(“discretion”). A non-discretionary award amount could be determined specifically or by formula.
Non-Federal entity (NFE) means a State, local government, Indian tribe, Institution of Higher Education (IHE), or nonprofit organization that
carries out a Federal award as a recipient or subrecipient.
Nonprofit organization means any corporation, trust, association, cooperative, or other organization, not including IHEs, that:
(1) Is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest;
(2) Is not organized primarily for profit; and
(3) Uses net proceeds to maintain, improve, or expand the operations of the organization.
Notice of funding opportunity means a formal announcement of the availability of Federal funding through a financial assistance program
from a Federal awarding agency. The notice of funding opportunity provides information on the award, who is eligible to apply, the
evaluation criteria for selection of an awardee, required components of an application, and how to submit the application. The notice of
funding opportunity is any paper or electronic issuance that an agency uses to announce a funding opportunity, whether it is called a
“program announcement,” “notice of funding availability,” “broad agency announcement,” “research announcement,” “solicitation,” or some
other term.
Office of Management and Budget (OMB) means the Executive Office of the President, Office of Management and Budget.
Oversight agency for audit means the Federal awarding agency that provides the predominant amount of funding directly (direct funding) (as
listed on the schedule of expenditures of Federal awards, see § 200.510(b)) to a non-Federal entity unless OMB designates a specific
cognizant agency for audit. When the direct funding represents less than 25 percent of the total Federal expenditures (as direct and subawards) by the non-Federal entity, then the Federal agency with the predominant amount of total funding is the designated oversight
agency for audit. When there is no direct funding, the Federal awarding agency which is the predominant source of pass-through funding
must assume the oversight responsibilities. The duties of the oversight agency for audit and the process for any reassignments are
described in § 200.513(b).
Participant support costs means direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees
paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects.
Pass-through entity (PTE) means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program.
Performance goal means a target level of performance expressed as a tangible, measurable objective, against which actual achievement can
be compared, including a goal expressed as a quantitative standard, value, or rate. In some instances (e.g., discretionary research
awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with agency
policy).

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Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which
may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per §
200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period.
Personal property means property other than real property. It may be tangible, having physical existence, or intangible.
Personally Identifiable Information (PII) means information that can be used to distinguish or trace an individual's identity, either alone or when
combined with other personal or identifying information that is linked or linkable to a specific individual. Some information that is
considered to be PII is available in public sources such as telephone books, public websites, and university listings. This type of
information is considered to be Public PII and includes, for example, first and last name, address, work telephone number, email address,
home telephone number, and general educational credentials. The definition of PII is not anchored to any single category of information
or technology. Rather, it requires a case-by-case assessment of the specific risk that an individual can be identified. Non-PII can become
PII whenever additional information is made publicly available, in any medium and from any source, that, when combined with other
available information, could be used to identify an individual.
Program income means gross income earned by the non-Federal entity that is directly generated by a supported activity or earned as a result
of the Federal award during the period of performance except as provided in § 200.307(f). (See the definition of period of performance in
this section.) Program income includes but is not limited to income from fees for services performed, the use or rental or real or personal
property acquired under Federal awards, the sale of commodities or items fabricated under a Federal award, license fees and royalties on
patents and copyrights, and principal and interest on loans made with Federal award funds. Interest earned on advances of Federal funds
is not program income. Except as otherwise provided in Federal statutes, regulations, or the terms and conditions of the Federal award,
program income does not include rebates, credits, discounts, and interest earned on any of them. See also § 200.407. See also 35 U.S.C.
200-212 “Disposition of Rights in Educational Awards” applies to inventions made under Federal awards.
Project cost means total allowable costs incurred under a Federal award and all required cost sharing and voluntary committed cost sharing,
including third-party contributions.
Property means real property or personal property. See also the definitions of real property and personal property in this section.
Protected Personally Identifiable Information (Protected PII) means an individual's first name or first initial and last name in combination with
any one or more of types of information, including, but not limited to, social security number, passport number, credit card numbers,
clearances, bank numbers, biometrics, date and place of birth, mother's maiden name, criminal, medical and financial records,
educational transcripts. This does not include PII that is required by law to be disclosed. See also the definition of Personally Identifiable
Information (PII) in this section.
Questioned cost means a cost that is questioned by the auditor because of an audit finding:
(1) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award,
including for funds used to match Federal funds;
(2) Where the costs, at the time of the audit, are not supported by adequate documentation; or
(3) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances.
(4) Questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A-123
appendix C. (See also the definition of Improper payment in this section).
Real property means land, including land improvements, structures and appurtenances thereto, but excludes moveable machinery and
equipment.
Recipient means an entity, usually but not limited to non-Federal entities that receives a Federal award directly from a Federal awarding
agency. The term recipient does not include subrecipients or individuals that are beneficiaries of the award.
Renewal award means an award made subsequent to an expiring Federal award for which the start date is contiguous with, or closely follows,
the end of the expiring Federal award. A renewal award's start date will begin a distinct period of performance.
Research and Development (R&D) means all research activities, both basic and applied, and all development activities that are performed by
non-Federal entities. The term research also includes activities involving the training of individuals in research techniques where such
activities utilize the same facilities as other research and development activities and where such activities are not included in the
instruction function. “Research” is defined as a systematic study directed toward fuller scientific knowledge or understanding of the
subject studied. “Development” is the systematic use of knowledge and understanding gained from research directed toward the
production of useful materials, devices, systems, or methods, including design and development of prototypes and processes.
Simplified acquisition threshold means the dollar amount below which a non-Federal entity may purchase property or services using small
purchase methods (see § 200.320). Non-Federal entities adopt small purchase procedures in order to expedite the purchase of items at
or below the simplified acquisition threshold. The simplified acquisition threshold for procurement activities administered under Federal
awards is set by the FAR at 48 CFR part 2, subpart 2.1. The non-Federal entity is responsible for determining an appropriate simplified
acquisition threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. However, in no
circumstances can this threshold exceed the dollar value established in the FAR (48 CFR part 2, subpart 2.1) for the simplified acquisition
threshold. Recipients should determine if local government laws on purchasing apply.
Special purpose equipment means equipment which is used only for research, medical, scientific, or other technical activities. Examples of
special purpose equipment include microscopes, x-ray machines, surgical instruments, and spectrometers. See also the definitions of
equipment and general purpose equipment in this section.

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State means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, U.S. Virgin Islands, Guam, American
Samoa, the Commonwealth of the Northern Mariana Islands, and any agency or instrumentality thereof exclusive of local governments.
Student Financial Aid (SFA) means Federal awards under those programs of general student assistance, such as those authorized by Title IV
of the Higher Education Act of 1965, as amended, (20 U.S.C. 1070-1099d), which are administered by the U.S. Department of Education,
and similar programs provided by other Federal agencies. It does not include Federal awards under programs that provide fellowships or
similar Federal awards to students on a competitive basis, or for specified studies or research.
Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a Federal award
received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a
Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity
considers a contract.
Subrecipient means an entity, usually but not limited to non-Federal entities, that receives a subaward from a pass-through entity to carry out
part of a Federal award; but does not include an individual that is a beneficiary of such award. A subrecipient may also be a recipient of
other Federal awards directly from a Federal awarding agency.
Subsidiary means an entity in which more than 50 percent of the entity is owned or controlled directly by a parent corporation or through
another subsidiary of a parent corporation.
Supplies means all tangible personal property other than those described in the definition of equipment in this section. A computing device is
a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-Federal entity for financial
statement purposes or $5,000, regardless of the length of its useful life. See also the definitions of computing devices and equipment in
this section.
Telecommunications cost means the cost of using communication and telephony technologies such as mobile phones, land lines, and
internet.
Termination means the ending of a Federal award, in whole or in part at any time prior to the planned end of period of performance. A lack of
available funds is not a termination.
Third-party in-kind contributions means the value of non-cash contributions (i.e., property or services) that (1) Benefit a federally-assisted project or program; and
(2) Are contributed by non-Federal third parties, without charge, to a non-Federal entity under a Federal award.
Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity
that have not been paid (liquidated). For reports prepared on an accrual expenditure basis, these are financial obligations incurred by the
non-Federal entity for which an expenditure has not been recorded.
Unobligated balance means the amount of funds under a Federal award that the non-Federal entity has not obligated. The amount is
computed by subtracting the cumulative amount of the non-Federal entity's unliquidated financial obligations and expenditures of funds
under the Federal award from the cumulative amount of the funds that the Federal awarding agency or pass-through entity authorized
the non-Federal entity to obligate.
Voluntary committed cost sharing means cost sharing specifically pledged on a voluntary basis in the proposal's budget on the part of the
non-Federal entity and that becomes a binding requirement of Federal award. See also § 200.306.
[85 FR 49529, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

Subpart B - General Provisions
§ 200.100 Purpose.
(a) Purpose.
(1) This part establishes uniform administrative requirements, cost principles, and audit requirements for Federal awards to nonFederal entities, as described in § 200.101. Federal awarding agencies must not impose additional or inconsistent requirements,
except as provided in §§ 200.102 and 200.211, or unless specifically required by Federal statute, regulation, or Executive order.
(2) This part provides the basis for a systematic and periodic collection and uniform submission by Federal agencies of information on
all Federal financial assistance programs to the Office of Management and Budget (OMB). It also establishes Federal policies
related to the delivery of this information to the public, including through the use of electronic media. It prescribes the manner in
which General Services Administration (GSA), OMB, and Federal agencies that administer Federal financial assistance programs are
to carry out their statutory responsibilities under the Federal Program Information Act (31 U.S.C. 6101-6106).
(b) Administrative requirements. Subparts B through D of this part set forth the uniform administrative requirements for grant and
cooperative agreements, including the requirements for Federal awarding agency management of Federal grant programs before the
Federal award has been made, and the requirements Federal awarding agencies may impose on non-Federal entities in the Federal
award.
(c) Cost principles. Subpart E of this part establishes principles for determining the allowable costs incurred by non-Federal entities under
Federal awards. The principles are for the purpose of cost determination and are not intended to identify the circumstances or dictate
the extent of Federal Government participation in the financing of a particular program or project. The principles are designed to provide
that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by statute.

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(d) Single Audit Requirements and Audit Follow-up. Subpart F of this part is issued pursuant to the Single Audit Act Amendments of 1996,
(31 U.S.C. 7501-7507). It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of nonFederal entities expending Federal awards. These provisions also provide the policies and procedures for Federal awarding agencies and
pass-through entities when using the results of these audits.
(e) Guidance on challenges and prizes. For OMB guidance to Federal awarding agencies on challenges and prizes, please see memo M-10-11
Guidance on the Use of Challenges and Prizes to Promote Open Government, issued March 8, 2010, or its successor.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49536, Aug. 13, 2020]

§ 200.101 Applicability.
(a) General applicability to Federal agencies.
(1) The requirements established in this part apply to Federal agencies that make Federal awards to non-Federal entities. These
requirements are applicable to all costs related to Federal awards.
(2) Federal awarding agencies may apply subparts A through E of this part to Federal agencies, for-profit entities, foreign public entities,
or foreign organizations, except where the Federal awarding agency determines that the application of these subparts would be
inconsistent with the international responsibilities of the United States or the statutes or regulations of a foreign government.
(b) Applicability to different types of Federal awards.
(1) Throughout this part when the word “must” is used it indicates a requirement. Whereas, use of the word “should” or “may” indicates
a best practice or recommended approach rather than a requirement and permits discretion.
(2) The following table describes what portions of this part apply to which types of Federal awards. The terms and conditions of
Federal awards (including this part) flow down to subawards to subrecipients unless a particular section of this part or the terms
and conditions of the Federal award specifically indicate otherwise. This means that non-Federal entities must comply with
requirements in this part regardless of whether the non-Federal entity is a recipient or subrecipient of a Federal award. Pass-through
entities must comply with the requirements described in subpart D of this part, §§ 200.331 through 200.333, but not any
requirements in this part directed towards Federal awarding agencies unless the requirements of this part or the terms and
conditions of the Federal award indicate otherwise.

Table 1 to Paragraph (b)

The following portions of this
Part

Are applicable to the
following types of Federal
Awards and Fixed-Price
Contracts and Subcontracts
(except as noted in
paragraphs (d) and (e) of this
section):

Subpart A - Acronyms and
Definitions

- All

Subpart B - General Provisions,
except for §§ 200.111 English
Language, 200.112 Conflict of
Interest, 200.113 Mandatory
Disclosures

- All

§§ 200.111 English Language,
200.112 Conflict of Interest,
200.113 Mandatory Disclosures

- Grant Agreements and
cooperative agreements

https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200

Are NOT applicable to
the following types of
Federal Awards and
Fixed-Price Contracts
and Subcontracts:

- Agreements for loans,
loan guarantees,
interest subsidies and
insurance.

- Procurement
contracts awarded by
Federal Agencies
under the Federal
Acquisition Regulation
and subcontracts
under those contracts.
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The following portions of this
Part

Are applicable to the
following types of Federal
Awards and Fixed-Price
Contracts and Subcontracts
(except as noted in
paragraphs (d) and (e) of this
section):

Are NOT applicable to
the following types of
Federal Awards and
Fixed-Price Contracts
and Subcontracts:

Subparts C-D, except for §§
200.203 Requirement to provide
public notice of Federal financial
assistance programs, 200.303
Internal controls, 200.331-333
Subrecipient Monitoring and
Management

- Grant Agreements and
cooperative agreements

- Agreements for loans,
loan guarantees,
interest subsidies and
insurance.

- Procurement
contracts awarded by
Federal Agencies
under the Federal
Acquisition Regulation
and subcontracts
under those contracts.

§ 200.203 Requirement to provide
public notice of Federal financial
assistance programs

- Grant Agreements and
cooperative agreements

- Agreements for loans, loan
guarantees, interest subsidies
and insurance

- Procurement
contracts awarded by
Federal Agencies
under the Federal
Acquisition Regulation
and subcontracts
under those contracts.

§§ 200.303 Internal controls,
200.331-333 Subrecipient
Monitoring and Management

- All

Subpart E - Cost Principles

- Grant Agreements and
cooperative agreements,
except those providing food
commodities

- All procurement contracts
under the Federal Acquisition
Regulations except those that
are not negotiated

https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200

- Grant agreements
and cooperative
agreements providing
foods commodities.

- Fixed amount awards.
- Agreements for loans,
loans guarantees,
interest subsidies and
insurance.

- Federal awards to
hospitals (see
Appendix IX Hospital
Cost Principles).

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The following portions of this
Part

Subpart F - Audit Requirements

Are applicable to the
following types of Federal
Awards and Fixed-Price
Contracts and Subcontracts
(except as noted in
paragraphs (d) and (e) of this
section):
- Grant Agreements and
cooperative agreements

- Contracts and subcontracts,
except for fixed price contacts
and subcontracts, awarded
under the Federal Acquisition
Regulation

- Agreements for loans, loans
guarantees, interest subsidies
and insurance and other forms
of Federal Financial
Assistance as defined by the
Single Audit Act Amendment
of 1996

Are NOT applicable to
the following types of
Federal Awards and
Fixed-Price Contracts
and Subcontracts:

- Fixed-price contracts
and subcontracts
awarded under the
Federal Acquisition
Regulation.

(c) Federal award of cost-reimbursement contract under the FAR to a non-Federal entity. When a non-Federal entity is awarded a costreimbursement contract, only subpart D, §§ 200.331 through 200.333, and subparts E and F of this part are incorporated by reference
into the contract, but the requirements of subparts D, E, and F are supplementary to the FAR and the contract. When the Cost Accounting
Standards (CAS) are applicable to the contract, they take precedence over the requirements of this part, including subpart F of this part,
which are supplementary to the CAS requirements. In addition, costs that are made unallowable under 10 U.S.C. 2324(e) and 41 U.S.C.
4304(a) as described in the FAR 48 CFR part 31, subpart 31.2, and 48 CFR 31.603 are always unallowable. For requirements other than
those covered in subpart D, §§ 200.331 through 200.333, and subparts E and F of this part, the terms of the contract and the FAR apply.
Note that when a non-Federal entity is awarded a FAR contract, the FAR applies, and the terms and conditions of the contract shall prevail
over the requirements of this part.
(d) Governing provisions. With the exception of subpart F of this part, which is required by the Single Audit Act, in any circumstances where
the provisions of Federal statutes or regulations differ from the provisions of this part, the provision of the Federal statutes or regulations
govern. This includes, for agreements with Indian tribes, the provisions of the Indian Self-Determination and Education and Assistance
Act (ISDEAA), as amended, 25 U.S.C 450-458ddd-2.
(e) Program applicability. Except for §§ 200.203, 200.216, and 200.331 through 200.333, the requirements in subparts C, D, and E of this part
do not apply to the following programs:
(1) The block grant awards authorized by the Omnibus Budget Reconciliation Act of 1981 (including Community Services), except to the
extent that subpart E of this part apply to subrecipients of Community Services Block Grant funds pursuant to 42 U.S.C. 9916(a)(1)
(B);
(2) Federal awards to local education agencies under 20 U.S.C. 7702-7703b, (portions of the Impact Aid program);
(3) Payments under the Department of Veterans Affairs' State Home Per Diem Program (38 U.S.C. 1741); and
(4) Federal awards authorized under the Child Care and Development Block Grant Act of 1990, as amended:
(i)

Child Care and Development Block Grant (42 U.S.C. 9858).

(ii) Child Care Mandatory and Matching Funds of the Child Care and Development Fund (42 U.S.C. 9858).
(f) Additional program applicability. Except for §§ 200.203 and 200.216, the guidance in subpart C of this part does not apply to the
following programs:
(1) Entitlement Federal awards to carry out the following programs of the Social Security Act:
(i)

Temporary Assistance for Needy Families (title IV-A of the Social Security Act, 42 U.S.C. 601-619);

(ii) Child Support Enforcement and Establishment of Paternity (title IV-D of the Social Security Act, 42 U.S.C. 651-669b);
(iii) Foster Care and Adoption Assistance (title IV-E of the Act, 42 U.S.C. 670-679c);
(iv) Aid to the Aged, Blind, and Disabled (titles I, X, XIV, and XVI-AABD of the Act, as amended);

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(v) Medical Assistance (Medicaid) (title XIX of the Act, 42 U.S.C. 1396-1396w-5) not including the State Medicaid Fraud Control
program authorized by section 1903(a)(6)(B) of the Social Security Act (42 U.S.C. 1396b(a)(6)(B)); and
(vi) Children's Health Insurance Program (title XXI of the Act, 42 U.S.C. 1397aa-1397mm).

(2) A Federal award for an experimental, pilot, or demonstration project that is also supported by a Federal award listed in paragraph (f)
(1) of this section.
(3) Federal awards under subsection 412(e) of the Immigration and Nationality Act and subsection 501(a) of the Refugee Education
Assistance Act of 1980 (Pub. L. 96-422, 94 Stat. 1809), for cash assistance, medical assistance, and supplemental security income
benefits to refugees and entrants and the administrative costs of providing the assistance and benefits (8 U.S.C. 1522(e)).
(4) Entitlement awards under the following programs of The National School Lunch Act:
(i)

National School Lunch Program (section 4 of the Act, 42 U.S.C. 1753);

(ii) Commodity Assistance (section 6 of the Act, 42 U.S.C. 1755);
(iii) Special Meal Assistance (section 11 of the Act, 42 U.S.C. 1759a);
(iv) Summer Food Service Program for Children (section 13 of the Act, 42 U.S.C. 1761); and
(v) Child and Adult Care Food Program (section 17 of the Act, 42 U.S.C. 1766).
(5) Entitlement awards under the following programs of The Child Nutrition Act of 1966:
(i)

Special Milk Program (section 3 of the Act, 42 U.S.C. 1772);

(ii) School Breakfast Program (section 4 of the Act, 42 U.S.C. 1773); and
(iii) State Administrative Expenses (section 7 of the Act, 42 U.S.C. 1776).
(6) Entitlement awards for State Administrative Expenses under The Food and Nutrition Act of 2008 (section 16 of the Act, 7 U.S.C.
2025).
(7) Non-discretionary Federal awards under the following non-entitlement programs:
(i)

Special Supplemental Nutrition Program for Women, Infants and Children (section 17 of the Child Nutrition Act of 1966) 42
U.S.C. 1786;

(ii) The Emergency Food Assistance Programs (Emergency Food Assistance Act of 1983) 7 U.S.C. 7501 note; and
(iii) Commodity Supplemental Food Program (section 5 of the Agriculture and Consumer Protection Act of 1973) 7 U.S.C. 612c
note.
[85 FR 49536, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.102 Exceptions.
(a) With the exception of subpart F of this part, OMB may allow exceptions for classes of Federal awards or non-Federal entities subject to
the requirements of this part when exceptions are not prohibited by statute. In the interest of maximum uniformity, exceptions from the
requirements of this part will be permitted as described in this section.
(b) Exceptions on a case-by-case basis for individual non-Federal entities may be authorized by the Federal awarding agency or cognizant
agency for indirect costs, except where otherwise required by law or where OMB or other approval is expressly required by this part.
(c) The Federal awarding agency may adjust requirements to a class of Federal awards or non-Federal entities when approved by OMB, or
when required by Federal statutes or regulations, except for the requirements in subpart F of this part. A Federal awarding agency may
apply less restrictive requirements when making fixed amount awards as defined in subpart A of this part, except for those requirements
imposed by statute or in subpart F of this part.
(d) Federal awarding agencies may request exceptions in support of innovative program designs that apply a risk-based, data-driven
framework to alleviate select compliance requirements and hold recipients accountable for good performance. See also § 200.206.
[85 FR 49538, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.103 Authorities.
This part is issued under the following authorities.
(a) Subparts B through D of this part are authorized under 31 U.S.C. 503 (the Chief Financial Officers Act, Functions of the Deputy Director
for Management), 41 U.S.C. 1101-1131 (the Office of Federal Procurement Policy Act), Reorganization Plan No. 2 of 1970, and Executive
Order 11541 (“Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of
the President”), the Single Audit Act Amendments of 1996, (31 U.S.C. 7501-7507), as well as The Federal Program Information Act (Pub.
L. 95-220 and Pub. L. 98-169, as amended, codified at 31 U.S.C. 6101-6106).

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(b) Subpart E of this part is authorized under the Budget and Accounting Act of 1921, as amended; the Budget and Accounting Procedures
Act of 1950, as amended (31 U.S.C. 1101-1125); the Chief Financial Officers Act of 1990 (31 U.S.C. 503-504); Reorganization Plan No. 2
of 1970; and Executive Order 11541, “Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in
the Executive Office of the President.”
(c) Subpart F of this part is authorized under the Single Audit Act Amendments of 1996, (31 U.S.C. 7501-7507).
[85 FR 49538, Aug. 13, 2020]

§ 200.104 Supersession.
As described in § 200.110, this part supersedes the following OMB guidance documents and regulations under title 2 of the Code of Federal
Regulations:
(a) A-21, “Cost Principles for Educational Institutions” (2 CFR part 220);
(b) A-87, “Cost Principles for State, Local and Indian Tribal Governments” (2 CFR part 225) and also Federal Register notice 51 FR 552
(January 6, 1986);
(c) A-89, “Federal Domestic Assistance Program Information”;
(d) A-102, “Grant Awards and Cooperative Agreements with State and Local Governments”;
(e) A-110, “Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and
Other Nonprofit Organizations” (codified at 2 CFR 215);
(f) A-122, “Cost Principles for Non-Profit Organizations” (2 CFR part 230);
(g) A-133, “Audits of States, Local Governments and Non-Profit Organizations”; and
(h) Those sections of A-50 related to audits performed under subpart F of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75882, Dec. 19, 2014; 85 FR 49538, Aug. 13, 2020]

§ 200.105 Effect on other issuances.
(a) Superseding inconsistent requirements. For Federal awards subject to this part, all administrative requirements, program manuals,
handbooks and other non-regulatory materials that are inconsistent with the requirements of this part must be superseded upon
implementation of this part by the Federal agency, except to the extent they are required by statute or authorized in accordance with the
provisions in § 200.102.
(b) Imposition of requirements on recipients. Agencies may impose legally binding requirements on recipients only through the notice and
public comment process through an approved agency process, including as authorized by this part, other statutes or regulations, or as
incorporated into the terms of a Federal award.
[85 FR 49538, Aug. 13, 2020]

§ 200.106 Agency implementation.
The specific requirements and responsibilities of Federal agencies and non-Federal entities are set forth in this part. Federal agencies making
Federal awards to non-Federal entities must implement the language in subparts C through F of this part in codified regulations unless different
provisions are required by Federal statute or are approved by OMB.
[85 FR 49538, Aug. 13, 2020]

§ 200.107 OMB responsibilities.
OMB will review Federal agency regulations and implementation of this part, and will provide interpretations of policy requirements and assistance
to ensure effective and efficient implementation. Any exceptions will be subject to approval by OMB. Exceptions will only be made in particular
cases where adequate justification is presented.

§ 200.108 Inquiries.
Inquiries concerning this part may be directed to the Office of Federal Financial Management Office of Management and Budget, in Washington,
DC. Non-Federal entities' inquiries should be addressed to the Federal awarding agency, cognizant agency for indirect costs, cognizant or oversight
agency for audit, or pass-through entity as appropriate.

§ 200.109 Review date.
OMB will review this part at least every five years after December 26, 2013.

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§ 200.110 Effective/applicability date.
(a) The standards set forth in this part that affect the administration of Federal awards issued by Federal awarding agencies become
effective once implemented by Federal awarding agencies or when any future amendment to this part becomes final.
(b) Existing negotiated indirect cost rates (as of the publication date of the revisions to the guidance) will remain in place until they expire.
The effective date of changes to indirect cost rates must be based upon the date that a newly re-negotiated rate goes into effect for a
specific non-Federal entity's fiscal year. Therefore, for indirect cost rates and cost allocation plans, the revised Uniform Guidance (as of
the publication date for revisions to the guidance) become effective in generating proposals and negotiating a new rate (when the rate is
re-negotiated).
[85 FR 49538, Aug. 13, 2020]

§ 200.111 English language.
(a) All Federal financial assistance announcements and Federal award information must be in the English language. Applications must be
submitted in the English language and must be in the terms of U.S. dollars. If the Federal awarding agency receives applications in
another currency, the Federal awarding agency will evaluate the application by converting the foreign currency to United States currency
using the date specified for receipt of the application.
(b) Non-Federal entities may translate the Federal award and other documents into another language. In the event of inconsistency between
any terms and conditions of the Federal award and any translation into another language, the English language meaning will control.
Where a significant portion of the non-Federal entity's employees who are working on the Federal award are not fluent in English, the nonFederal entity must provide the Federal award in English and the language(s) with which employees are more familiar.

§ 200.112 Conflict of interest.
The Federal awarding agency must establish conflict of interest policies for Federal awards. The non-Federal entity must disclose in writing any
potential conflict of interest to the Federal awarding agency or pass-through entity in accordance with applicable Federal awarding agency policy.

§ 200.113 Mandatory disclosures.
The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through
entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Non-Federal entities
that have received a Federal award including the term and condition outlined in appendix XII to this part are required to report certain civil, criminal,
or administrative proceedings to SAM (currently FAPIIS). Failure to make required disclosures can result in any of the remedies described in §
200.339. (See also 2 CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.)
[85 FR 49539, Aug. 13, 2020]

Subpart C - Pre-Federal Award Requirements and Contents of Federal Awards
Source: 85 FR 49539, Aug. 13, 2020, unless otherwise noted.

§ 200.200 Purpose.
Sections 200.201 through 200.216 prescribe instructions and other pre-award matters to be used by Federal awarding agencies in the program
planning, announcement, application and award processes.

§ 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts.
(a) Federal award instrument. The Federal awarding agency or pass-through entity must decide on the appropriate instrument for the Federal
award (i.e., grant agreement, cooperative agreement, or contract) in accordance with the Federal Grant and Cooperative Agreement Act
(31 U.S.C. 6301-08).
(b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through
entities as permitted in § 200.333, may use fixed amount awards (see Fixed amount awards in § 200.1) to which the following conditions
apply:
(1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The Federal awarding
agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if
adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of
actual cost. Payments are based on meeting specific requirements of the Federal award. Accountability is based on performance
and results. Except in the case of termination before completion of the Federal award, there is no governmental review of the actual
costs incurred by the non-Federal entity in performance of the award. Some of the ways in which the Federal award may be paid
include, but are not limited to:
(i)

In several partial payments, the amount of each agreed upon in advance, and the “milestone” or event triggering the payment
also agreed upon in advance, and set forth in the Federal award;

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(ii) On a unit price basis, for a defined unit or units, at a defined price or prices, agreed to in advance of performance of the Federal
award and set forth in the Federal award; or,
(iii) In one payment at Federal award completion.

(2) A fixed amount award cannot be used in programs which require mandatory cost sharing or match.
(3) The non-Federal entity must certify in writing to the Federal awarding agency or pass-through entity at the end of the Federal award
that the project or activity was completed or the level of effort was expended. If the required level of activity or effort was not
carried out, the amount of the Federal award must be adjusted.
(4) Periodic reports may be established for each Federal award.
(5) Changes in principal investigator, project leader, project partner, or scope of effort must receive the prior written approval of the
Federal awarding agency or pass-through entity.

§ 200.202 Program planning and design.
The Federal awarding agency must design a program and create an Assistance Listing before announcing the Notice of Funding Opportunity. The
program must be designed with clear goals and objectives that facilitate the delivery of meaningful results consistent with the Federal authorizing
legislation of the program. Program performance shall be measured based on the goals and objectives developed during program planning and
design. See § 200.301 for more information on performance measurement. Performance measures may differ depending on the type of program.
The program must align with the strategic goals and objectives within the Federal awarding agency's performance plan and should support the
Federal awarding agency's performance measurement, management, and reporting as required by Part 6 of OMB Circular A-11 (Preparation,
Submission, and Execution of the Budget). The program must also be designed to align with the Program Management Improvement
Accountability Act (Pub. L. 114-264).

§ 200.203 Requirement to provide public notice of Federal financial assistance programs.
(a) The Federal awarding agency must notify the public of Federal programs in the Federal Assistance Listings maintained by the General
Services Administration (GSA).
(1) The Federal Assistance Listings is the single, authoritative, governmentwide comprehensive source of Federal financial assistance
program information produced by the executive branch of the Federal Government.
(2) The information that the Federal awarding agency must submit to GSA for approval by OMB is listed in paragraph (b) of this section.
GSA must prescribe the format for the submission in coordination with OMB.
(3) The Federal awarding agency may not award Federal financial assistance without assigning it to a program that has been included
in the Federal Assistance Listings as required in this section unless there are exigent circumstances requiring otherwise, such as
timing requirements imposed by statute.
(b) For each program that awards discretionary Federal awards, non-discretionary Federal awards, loans, insurance, or any other type of
Federal financial assistance, the Federal awarding agency must, to the extent practicable, create, update, and manage Assistance
Listings entries based on the authorizing statute for the program and comply with additional guidance provided by GSA in consultation
with OMB to ensure consistent, accurate information is available to prospective applicants. Accordingly, Federal awarding agencies must
submit the following information to GSA:
(1) Program Description, Purpose, Goals, and Measurement. A brief summary of the statutory or regulatory requirements of the program
and its intended outcome. Where appropriate, the Program Description, Purpose, Goals, and Measurement should align with the
strategic goals and objectives within the Federal awarding agency's performance plan and should support the Federal awarding
agency's performance measurement, management, and reporting as required by Part 6 of OMB Circular A-11;
(2) Identification. Identification of whether the program makes Federal awards on a discretionary basis or the Federal awards are
prescribed by Federal statute, such as in the case of formula grants.
(3) Projected total amount of funds available for the program. Estimates based on previous year funding are acceptable if current
appropriations are not available at the time of the submission;
(4) Anticipated source of available funds. The statutory authority for funding the program and, to the extent possible, agency, subagency, or, if known, the specific program unit that will issue the Federal awards, and associated funding identifier (e.g., Treasury
Account Symbol(s));
(5) General eligibility requirements. The statutory, regulatory or other eligibility factors or considerations that determine the applicant's
qualification for Federal awards under the program (e.g., type of non-Federal entity); and
(6) Applicability of Single Audit Requirements. Applicability of Single Audit Requirements as required by subpart F of this part.

§ 200.204 Notices of funding opportunities.
For discretionary grants and cooperative agreements that are competed, the Federal awarding agency must announce specific funding
opportunities by providing the following information in a public notice:

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(a) Summary information in notices of funding opportunities. The Federal awarding agency must display the following information posted on
the OMB-designated governmentwide website for funding and applying for Federal financial assistance, in a location preceding the full
text of the announcement:
(1) Federal Awarding Agency Name;
(2) Funding Opportunity Title;
(3) Announcement Type (whether the funding opportunity is the initial announcement of this funding opportunity or a modification of a
previously announced opportunity);
(4) Funding Opportunity Number (required, if applicable). If the Federal awarding agency has assigned or will assign a number to the
funding opportunity announcement, this number must be provided;
(5) Assistance Listings Number(s);
(6) Key Dates. Key dates include due dates for applications or Executive Order 12372 submissions, as well as for any letters of intent or
pre-applications. For any announcement issued before a program's application materials are available, key dates also include the
date on which those materials will be released; and any other additional information, as deemed applicable by the relevant Federal
awarding agency.
(b) Availability period. The Federal awarding agency must generally make all funding opportunities available for application for at least 60
calendar days. The Federal awarding agency may make a determination to have a less than 60 calendar day availability period but no
funding opportunity should be available for less than 30 calendar days unless exigent circumstances require as determined by the
Federal awarding agency head or delegate.
(c) Full text of funding opportunities. The Federal awarding agency must include the following information in the full text of each funding
opportunity. For specific instructions on the content required in this section, refer to appendix I to this part.
(1) Full programmatic description of the funding opportunity.
(2) Federal award information, including sufficient information to help an applicant make an informed decision about whether to submit
an application. (See also § 200.414(c)(4)).
(3) Specific eligibility information, including any factors or priorities that affect an applicant's or its application's eligibility for selection.
(4) Application Preparation and Submission Information, including the applicable submission dates and time.
(5) Application Review Information including the criteria and process to be used to evaluate applications. See also §§ 200.205 and
200.206.
(6) Federal Award Administration Information. See also § 200.211.
(7) Applicable terms and conditions for resulting awards, including any exceptions from these standard terms.

§ 200.205 Federal awarding agency review of merit of proposals.
For discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must design and execute a merit review
process for applications, with the objective of selecting recipients most likely to be successful in delivering results based on the program
objectives outlined in section § 200.202. A merit review is an objective process of evaluating Federal award applications in accordance with written
standards set forth by the Federal awarding agency. This process must be described or incorporated by reference in the applicable funding
opportunity (see appendix I to this part.). See also § 200.204. The Federal awarding agency must also periodically review its merit review process.

§ 200.206 Federal awarding agency review of risk posed by applicants.
(a) Review of OMB-designated repositories of governmentwide data.
(1) Prior to making a Federal award, the Federal awarding agency is required by the Payment Integrity Information Act of 2019, 31
U.S.C. 3301 note, and 41 U.S.C. 2313 to review information available through any OMB-designated repositories of governmentwide
eligibility qualification or financial integrity information as appropriate. See also suspension and debarment requirements at 2 CFR
part 180 as well as individual Federal agency suspension and debarment regulations in title 2 of the Code of Federal Regulations.
(2) In accordance 41 U.S.C. 2313, the Federal awarding agency is required to review the non-public segment of the OMB-designated
integrity and performance system accessible through SAM (currently the Federal Awardee Performance and Integrity Information
System (FAPIIS)) prior to making a Federal award where the Federal share is expected to exceed the simplified acquisition
threshold, defined in 41 U.S.C. 134, over the period of performance. As required by Public Law 112-239, National Defense
Authorization Act for Fiscal Year 2013, prior to making a Federal award, the Federal awarding agency must consider all of the
information available through FAPIIS with regard to the applicant and any immediate highest level owner, predecessor (i.e.; a nonFederal entity that is replaced by a successor), or subsidiary, identified for that applicant in FAPIIS, if applicable. At a minimum, the
information in the system for a prior Federal award recipient must demonstrate a satisfactory record of executing programs or
activities under Federal grants, cooperative agreements, or procurement awards; and integrity and business ethics. The Federal
awarding agency may make a Federal award to a recipient who does not fully meet these standards, if it is determined that the
information is not relevant to the current Federal award under consideration or there are specific conditions that can appropriately
mitigate the effects of the non-Federal entity's risk in accordance with § 200.208.

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(b) Risk evaluation.
(1) The Federal awarding agency must have in place a framework for evaluating the risks posed by applicants before they receive
Federal awards. This evaluation may incorporate results of the evaluation of the applicant's eligibility or the quality of its application.
If the Federal awarding agency determines that a Federal award will be made, special conditions that correspond to the degree of
risk assessed may be applied to the Federal award. Criteria to be evaluated must be described in the announcement of funding
opportunity described in § 200.204.
(2) In evaluating risks posed by applicants, the Federal awarding agency may use a risk-based approach and may consider any items
such as the following:
(i)

Financial stability. Financial stability;

(ii) Management systems and standards. Quality of management systems and ability to meet the management standards
prescribed in this part;
(iii) History of performance. The applicant's record in managing Federal awards, if it is a prior recipient of Federal awards, including
timeliness of compliance with applicable reporting requirements, conformance to the terms and conditions of previous Federal
awards, and if applicable, the extent to which any previously awarded amounts will be expended prior to future awards;
(iv) Audit reports and findings. Reports and findings from audits performed under subpart F of this part or the reports and findings
of any other available audits; and
(v) Ability to effectively implement requirements. The applicant's ability to effectively implement statutory, regulatory, or other
requirements imposed on non-Federal entities.
(c) Risk-based requirements adjustment. The Federal awarding agency may adjust requirements when a risk-evaluation indicates that it may
be merited either pre-award or post-award.
(d) Suspension and debarment compliance.
(1) The Federal awarding agency must comply with the guidelines on governmentwide suspension and debarment in 2 CFR part 180,
and must require non-Federal entities to comply with these provisions. These provisions restrict Federal awards, subawards and
contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal
programs or activities.
[85 FR 49539, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.207 Standard application requirements.
(a) Paperwork clearances. The Federal awarding agency may only use application information collections approved by OMB under the
Paperwork Reduction Act of 1995 and OMB's implementing regulations in 5 CFR part 1320 and in alignment with OMB-approved,
governmentwide data elements available from the OMB-designated standards lead. Consistent with these requirements, OMB will
authorize additional information collections only on a limited basis.
(b) Information collection. If applicable, the Federal awarding agency may inform applicants and recipients that they do not need to provide
certain information otherwise required by the relevant information collection.

§ 200.208 Specific conditions.
(a) Federal awarding agencies are responsible for ensuring that specific Federal award conditions are consistent with the program design
reflected in § 200.202 and include clear performance expectations of recipients as required in § 200.301.
(b) The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, in accordance with this
section, based on an analysis of the following factors:
(1) Based on the criteria set forth in § 200.206;
(2) The applicant or recipient's history of compliance with the general or specific terms and conditions of a Federal award;
(3) The applicant or recipient's ability to meet expected performance goals as described in § 200.211; or
(4) A responsibility determination of an applicant or recipient.
(c) Additional Federal award conditions may include items such as the following:
(1) Requiring payments as reimbursements rather than advance payments;
(2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given performance
period;
(3) Requiring additional, more detailed financial reports;
(4) Requiring additional project monitoring;
(5) Requiring the non-Federal entity to obtain technical or management assistance; or

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(6) Establishing additional prior approvals.
(d) If the Federal awarding agency or pass-through entity is imposing additional requirements, they must notify the applicant or non-Federal
entity as to:
(1) The nature of the additional requirements;
(2) The reason why the additional requirements are being imposed;
(3) The nature of the action needed to remove the additional requirement, if applicable;
(4) The time allowed for completing the actions if applicable; and
(5) The method for requesting reconsideration of the additional requirements imposed.
(e) Any additional requirements must be promptly removed once the conditions that prompted them have been satisfied.

§ 200.209 Certifications and representations.
Unless prohibited by the U.S. Constitution, Federal statutes or regulations, each Federal awarding agency or pass-through entity is authorized to
require the non-Federal entity to submit certifications and representations required by Federal statutes, or regulations on an annual basis.
Submission may be required more frequently if the non-Federal entity fails to meet a requirement of a Federal award.

§ 200.210 Pre-award costs.
For requirements on costs incurred by the applicant prior to the start date of the period of performance of the Federal award, see § 200.458.

§ 200.211 Information contained in a Federal award.
A Federal award must include the following information:
(a) Federal award performance goals. Performance goals, indicators, targets, and baseline data must be included in the Federal award, where
applicable. The Federal awarding agency must also specify how performance will be assessed in the terms and conditions of the Federal
award, including the timing and scope of expected performance. See §§ 200.202 and 200.301 for more information on Federal award
performance goals.
(b) General Federal award information. The Federal awarding agency must include the following general Federal award information in each
Federal award:
(1) Recipient name (which must match the name associated with its unique entity identifier as defined at 2 CFR 25.315);
(2) Recipient's unique entity identifier;
(3) Unique Federal Award Identification Number (FAIN);
(4) Federal Award Date (see Federal award date in § 200.201);
(5) Period of Performance Start and End Date;
(6) Budget Period Start and End Date;
(7) Amount of Federal Funds Obligated by this action;
(8) Total Amount of Federal Funds Obligated;
(9) Total Approved Cost Sharing or Matching, where applicable;
(10) Total Amount of the Federal Award including approved Cost Sharing or Matching;
(11) Budget Approved by the Federal Awarding Agency;
(11) Federal award description, (to comply with statutory requirements (e.g., FFATA));
(12) Name of Federal awarding agency and contact information for awarding official,
(13) Assistance Listings Number and Title;
(14) Identification of whether the award is R&D; and
(15) Indirect cost rate for the Federal award (including if the de minimis rate is charged per § 200.414).
(c) General terms and conditions.
(1) Federal awarding agencies must incorporate the following general terms and conditions either in the Federal award or by reference,
as applicable:
(i)

Administrative requirements. Administrative requirements implemented by the Federal awarding agency as specified in this
part.

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(ii) National policy requirements. These include statutory, executive order, other Presidential directive, or regulatory requirements
that apply by specific reference and are not program-specific. See § 200.300 Statutory and national policy requirements.
(iii) Recipient integrity and performance matters. If the total Federal share of the Federal award may include more than $500,000
over the period of performance, the Federal awarding agency must include the term and condition available in appendix XII of
this part. See also § 200.113.
(iv) Future budget periods. If it is anticipated that the period of performance will include multiple budget periods, the Federal
awarding agency must indicate that subsequent budget periods are subject to the availability of funds, program authority,
satisfactory performance, and compliance with the terms and conditions of the Federal award.
(v) Termination provisions. Federal awarding agencies must make recipients aware, in a clear and unambiguous manner, of the
termination provisions in § 200.340, including the applicable termination provisions in the Federal awarding agency's
regulations or in each Federal award.

(2) The Federal award must incorporate, by reference, all general terms and conditions of the award, which must be maintained on the
agency's website.
(3) If a non-Federal entity requests a copy of the full text of the general terms and conditions, the Federal awarding agency must
provide it.
(4) Wherever the general terms and conditions are publicly available, the Federal awarding agency must maintain an archive of previous
versions of the general terms and conditions, with effective dates, for use by the non-Federal entity, auditors, or others.
(d) Federal awarding agency, program, or Federal award specific terms and conditions. The Federal awarding agency must include with each
Federal award any terms and conditions necessary to communicate requirements that are in addition to the requirements outlined in the
Federal awarding agency's general terms and conditions. See also § 200.208. Whenever practicable, these specific terms and conditions
also should be shared on the agency's website and in notices of funding opportunities (as outlined in § 200.204) in addition to being
included in a Federal award. See also § 200.207.
(e) Federal awarding agency requirements. Any other information required by the Federal awarding agency.

§ 200.212 Public access to Federal award information.
(a) In accordance with statutory requirements for Federal spending transparency (e.g., FFATA), except as noted in this section, for applicable
Federal awards the Federal awarding agency must announce all Federal awards publicly and publish the required information on a
publicly available OMB-designated governmentwide website.
(b) All information posted in the designated integrity and performance system accessible through SAM (currently FAPIIS) on or after April 15,
2011 will be publicly available after a waiting period of 14 calendar days, except for:
(1) Past performance reviews required by Federal Government contractors in accordance with the Federal Acquisition Regulation (FAR)
48 CFR part 42, subpart 42.15;
(2) Information that was entered prior to April 15, 2011; or
(3) Information that is withdrawn during the 14-calendar day waiting period by the Federal Government official.
(c) Nothing in this section may be construed as requiring the publication of information otherwise exempt under the Freedom of Information
Act (5 U.S.C 552), or controlled unclassified information pursuant to Executive Order 13556.

§ 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award.
(a) If a Federal awarding agency does not make a Federal award to a non-Federal entity because the official determines that the non-Federal
entity does not meet either or both of the minimum qualification standards as described in § 200.206(a)(2), the Federal awarding agency
must report that determination to the designated integrity and performance system accessible through SAM (currently FAPIIS), only if all
of the following apply:
(1) The only basis for the determination described in this paragraph (a) is the non-Federal entity's prior record of executing programs or
activities under Federal awards or its record of integrity and business ethics, as described in § 200.206(a)(2) (i.e., the entity was
determined to be qualified based on all factors other than those two standards); and
(2) The total Federal share of the Federal award that otherwise would be made to the non-Federal entity is expected to exceed the
simplified acquisition threshold over the period of performance.
(b) The Federal awarding agency is not required to report a determination that a non-Federal entity is not qualified for a Federal award if they
make the Federal award to the non-Federal entity and include specific award terms and conditions, as described in § 200.208.
(c) If a Federal awarding agency reports a determination that a non-Federal entity is not qualified for a Federal award, as described in
paragraph (a) of this section, the Federal awarding agency also must notify the non-Federal entity that (1) The determination was made and reported to the designated integrity and performance system accessible through SAM, and
include with the notification an explanation of the basis for the determination;

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(2) The information will be kept in the system for a period of five years from the date of the determination, as required by section 872 of
Public Law 110-417, as amended (41 U.S.C. 2313), then archived;
(3) Each Federal awarding agency that considers making a Federal award to the non-Federal entity during that five year period must
consider that information in judging whether the non-Federal entity is qualified to receive the Federal award when the total Federal
share of the Federal award is expected to include an amount of Federal funding in excess of the simplified acquisition threshold
over the period of performance;
(4) The non-Federal entity may go to the awardee integrity and performance portal accessible through SAM (currently the Contractor
Performance Assessment Reporting System (CPARS)) and comment on any information the system contains about the non-Federal
entity itself; and
(5) Federal awarding agencies will consider that non-Federal entity's comments in determining whether the non-Federal entity is
qualified for a future Federal award.
(d) If a Federal awarding agency enters information into the designated integrity and performance system accessible through SAM about a
determination that a non-Federal entity is not qualified for a Federal award and subsequently:
(1) Learns that any of that information is erroneous, the Federal awarding agency must correct the information in the system within
three business days; and
(2) Obtains an update to that information that could be helpful to other Federal awarding agencies, the Federal awarding agency is
strongly encouraged to amend the information in the system to incorporate the update in a timely way.
(e) Federal awarding agencies must not post any information that will be made publicly available in the non-public segment of designated
integrity and performance system that is covered by a disclosure exemption under the Freedom of Information Act. If the recipient
asserts within seven calendar days to the Federal awarding agency that posted the information that some or all of the information made
publicly available is covered by a disclosure exemption under the Freedom of Information Act, the Federal awarding agency that posted
the information must remove the posting within seven calendar days of receiving the assertion. Prior to reposting the releasable
information, the Federal awarding agency must resolve the issue in accordance with the agency's Freedom of Information Act
procedures.

§ 200.214 Suspension and debarment.
Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689,
2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or
otherwise excluded from or ineligible for participation in Federal assistance programs or activities.

§ 200.215 Never contract with the enemy.
Federal awarding agencies and recipients are subject to the regulations implementing Never Contract with the Enemy in 2 CFR part 183. The
regulations in 2 CFR part 183 affect covered contracts, grants and cooperative agreements that are expected to exceed $50,000 within the period
of performance, are performed outside the United States and its territories, and are in support of a contingency operation in which members of the
Armed Forces are actively engaged in hostilities.

§ 200.216 Prohibition on certain telecommunications and video surveillance services or equipment.
(a) Recipients and subrecipients are prohibited from obligating or expending loan or grant funds to:
(1) Procure or obtain;
(2) Extend or renew a contract to procure or obtain; or
(3) Enter into a contract (or extend or renew a contract) to procure or obtain equipment, services, or systems that uses covered
telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part
of any system. As described in Public Law 115-232, section 889, covered telecommunications equipment is telecommunications
equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities).
(i)

For the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and
other national security purposes, video surveillance and telecommunications equipment produced by Hytera Communications
Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of
such entities).

(ii) Telecommunications or video surveillance services provided by such entities or using such equipment.
(iii) Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of
Defense, in consultation with the Director of the National Intelligence or the Director of the Federal Bureau of Investigation,
reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign
country.
(b) In implementing the prohibition under Public Law 115-232, section 889, subsection (f), paragraph (1), heads of executive agencies
administering loan, grant, or subsidy programs shall prioritize available funding and technical support to assist affected businesses,
institutions and organizations as is reasonably necessary for those affected entities to transition from covered communications

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equipment and services, to procure replacement equipment and services, and to ensure that communications service to users and
customers is sustained.
(c) See Public Law 115-232, section 889 for additional information.
(d) See also § 200.471.

Subpart D - Post Federal Award Requirements
Source: 85 FR 49543, Aug. 13, 2020, unless otherwise noted.

§ 200.300 Statutory and national policy requirements.
(a) The Federal awarding agency must manage and administer the Federal award in a manner so as to ensure that Federal funding is
expended and associated programs are implemented in full accordance with the U.S. Constitution, Federal Law, and public policy
requirements: Including, but not limited to, those protecting free speech, religious liberty, public welfare, the environment, and prohibiting
discrimination. The Federal awarding agency must communicate to the non-Federal entity all relevant public policy requirements,
including those in general appropriations provisions, and incorporate them either directly or by reference in the terms and conditions of
the Federal award.
(b) The non-Federal entity is responsible for complying with all requirements of the Federal award. For all Federal awards, this includes the
provisions of FFATA, which includes requirements on executive compensation, and also requirements implementing the Act for the nonFederal entity at 2 CFR parts 25 and 170. See also statutory requirements for whistleblower protections at 10 U.S.C. 2409, 41 U.S.C.
4712, and 10 U.S.C. 2324, 41 U.S.C. 4304 and 4310.

§ 200.301 Performance measurement.
(a) The Federal awarding agency must measure the recipient's performance to show achievement of program goals and objectives, share
lessons learned, improve program outcomes, and foster adoption of promising practices. Program goals and objectives should be
derived from program planning and design. See § 200.202 for more information. Where appropriate, the Federal award may include
specific program goals, indicators, targets, baseline data, data collection, or expected outcomes (such as outputs, or services
performance or public impacts of any of these) with an expected timeline for accomplishment. Where applicable, this should also
include any performance measures or independent sources of data that may be used to measure progress. The Federal awarding agency
will determine how performance progress is measured, which may differ by program. Performance measurement progress must be both
measured and reported. See § 200.329 for more information on monitoring program performance. The Federal awarding agency may
include program-specific requirements, as applicable. These requirements must be aligned, to the extent permitted by law, with the
Federal awarding agency strategic goals, strategic objectives or performance goals that are relevant to the program. See also OMB
Circular A-11, Preparation, Submission, and Execution of the Budget Part 6.
(b) The Federal awarding agency should provide recipients with clear performance goals, indicators, targets, and baseline data as described
in § 200.211. Performance reporting frequency and content should be established to not only allow the Federal awarding agency to
understand the recipient progress but also to facilitate identification of promising practices among recipients and build the evidence
upon which the Federal awarding agency's program and performance decisions are made. See § 200.328 for more information on
reporting program performance.
(c) This provision is designed to operate in tandem with evidence-related statutes (e.g.; The Foundations for Evidence-Based Policymaking
Act of 2018, which emphasizes collaboration and coordination to advance data and evidence-building functions in the Federal
government). The Federal awarding agency should also specify any requirements of award recipients' participation in a federally funded
evaluation, and any evaluation activities required to be conducted by the Federal award.

§ 200.302 Financial management.
(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting
for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records
documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to
permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of
expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and
conditions of the Federal award. See also § 200.450.
(b) The financial management system of each non-Federal entity must provide for the following (see also §§ 200.334, 200.335, 200.336, and
200.337):
(1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were
received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number,
Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any.
(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the
reporting requirements set forth in §§ 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis
from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual

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accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on
hand. Similarly, a pass-through entity must not require a subrecipient to establish an accrual accounting system and must allow the
subrecipient to develop accrual data for its reports on the basis of an analysis of the documentation on hand.

(3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain
information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income
and interest and be supported by source documentation.
(4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard
all assets and assure that they are used solely for authorized purposes. See § 200.303.
(5) Comparison of expenditures with budget amounts for each Federal award.
(6) Written procedures to implement the requirements of § 200.305.
(7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions
of the Federal award.

§ 200.303 Internal controls.
The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is
managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These
internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the
Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
(b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards.
(c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards.
(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.
(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency
or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State,
local, and tribal laws regarding privacy and responsibility over confidentiality.

§ 200.304 Bonds.
The Federal awarding agency may include a provision on bonding, insurance, or both in the following circumstances:
(a) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Federal awarding agency, at
its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the non-Federal entity are not
deemed adequate to protect the interest of the Federal Government.
(b) The Federal awarding agency may require adequate fidelity bond coverage where the non-Federal entity lacks sufficient coverage to
protect the Federal Government's interest.
(c) Where bonds are required in the situations described above, the bonds must be obtained from companies holding certificates of
authority as acceptable sureties, as prescribed in 31 CFR part 223.

§ 200.305 Federal payment.
(a) For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures
codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”.
(b) For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the
United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by
electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also § 200.302(b)(6). Except
as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information
collection requests to request payment.
(1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written
procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial
management systems that meet the standards for fund control and accountability as established in this part. Advance payments to
a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate
cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount
of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for
direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make
timely payment to contractors in accordance with the contract provisions.

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(2) Whenever possible, advance payments must be consolidated to cover anticipated cash needs for all Federal awards made by the
Federal awarding agency to the recipient.
(i)

Advance payment mechanisms include, but are not limited to, Treasury check and electronic funds transfer and must comply
with applicable guidance in 31 CFR part 208.

(ii) Non-Federal entities must be authorized to submit requests for advance payments and reimbursements at least monthly when
electronic fund transfers are not used, and as often as they like when electronic transfers are used, in accordance with the
provisions of the Electronic Fund Transfer Act (15 U.S.C. 1693-1693r).
(3) Reimbursement is the preferred method when the requirements in this paragraph (b) cannot be met, when the Federal awarding
agency sets a specific condition per § 200.208, or when the non-Federal entity requests payment by reimbursement. This method
may be used on any Federal award for construction, or if the major portion of the construction project is accomplished through
private market financing or Federal loans, and the Federal award constitutes a minor portion of the project. When the
reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days
after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be
improper.
(4) If the non-Federal entity cannot meet the criteria for advance payments and the Federal awarding agency or pass-through entity has
determined that reimbursement is not feasible because the non-Federal entity lacks sufficient working capital, the Federal awarding
agency or pass-through entity may provide cash on a working capital advance basis. Under this procedure, the Federal awarding
agency or pass-through entity must advance cash payments to the non-Federal entity to cover its estimated disbursement needs for
an initial period generally geared to the non-Federal entity's disbursing cycle. Thereafter, the Federal awarding agency or passthrough entity must reimburse the non-Federal entity for its actual cash disbursements. Use of the working capital advance method
of payment requires that the pass-through entity provide timely advance payments to any subrecipients in order to meet the
subrecipient's actual cash disbursements. The working capital advance method of payment must not be used by the pass-through
entity if the reason for using this method is the unwillingness or inability of the pass-through entity to provide timely advance
payments to the subrecipient to meet the subrecipient's actual cash disbursements.
(5) To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a
revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting
additional cash payments.
(6) Unless otherwise required by Federal statutes, payments for allowable costs by non-Federal entities must not be withheld at any
time during the period of performance unless the conditions of § 200.208, subpart D of this part, including § 200.339, or one or
more of the following applies:
(i)

The non-Federal entity has failed to comply with the project objectives, Federal statutes, regulations, or the terms and
conditions of the Federal award.

(ii) The non-Federal entity is delinquent in a debt to the United States as defined in OMB Circular A-129, “Policies for Federal Credit
Programs and Non-Tax Receivables.” Under such conditions, the Federal awarding agency or pass-through entity may, upon
reasonable notice, inform the non-Federal entity that payments must not be made for financial obligations incurred after a
specified date until the conditions are corrected or the indebtedness to the Federal Government is liquidated.
(iii) A payment withheld for failure to comply with Federal award conditions, but without suspension of the Federal award, must be
released to the non-Federal entity upon subsequent compliance. When a Federal award is suspended, payment adjustments
will be made in accordance with § 200.343.
(iv) A payment must not be made to a non-Federal entity for amounts that are withheld by the non-Federal entity from payment to
contractors to assure satisfactory completion of work. A payment must be made when the non-Federal entity actually
disburses the withheld funds to the contractors or to escrow accounts established to assure satisfactory completion of work.
(7) Standards governing the use of banks and other institutions as depositories of advance payments under Federal awards are as
follows.
(i)

The Federal awarding agency and pass-through entity must not require separate depository accounts for funds provided to a
non-Federal entity or establish any eligibility requirements for depositories for funds provided to the non-Federal entity.
However, the non-Federal entity must be able to account for funds received, obligated, and expended.

(ii) Advance payments of Federal funds must be deposited and maintained in insured accounts whenever possible.
(8) The non-Federal entity must maintain advance payments of Federal awards in interest-bearing accounts, unless the following apply:
(i)

The non-Federal entity receives less than $250,000 in Federal awards per year.

(ii) The best reasonably available interest-bearing account would not be expected to earn interest in excess of $500 per year on
Federal cash balances.
(iii) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal
and non-Federal cash resources.
(iv) A foreign government or banking system prohibits or precludes interest-bearing accounts.

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(9) Interest earned amounts up to $500 per year may be retained by the non-Federal entity for administrative expense. Any additional
interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department
of Health and Human Services Payment Management System (PMS) through an electronic medium using either Automated
Clearing House (ACH) network or a Fedwire Funds Service payment.
(i)

For returning interest on Federal awards paid through PMS, the refund should:
(A) Provide an explanation stating that the refund is for interest;
(B) List the PMS Payee Account Number(s) (PANs);
(C) List the Federal award number(s) for which the interest was earned; and
(D) Make returns payable to: Department of Health and Human Services.

(ii) For returning interest on Federal awards not paid through PMS, the refund should:
(A) Provide an explanation stating that the refund is for interest;
(B) Include the name of the awarding agency;
(C) List the Federal award number(s) for which the interest was earned; and
(D) Make returns payable to: Department of Health and Human Services.
(10) Funds, principal, and excess cash returns must be directed to the original Federal agency payment system. The non-Federal entity
should review instructions from the original Federal agency payment system. Returns should include the following information:
(i)

Payee Account Number (PAN), if the payment originated from PMS, or Agency information to indicate whom to credit the
funding if the payment originated from ASAP, NSF, or another Federal agency payment system.

(ii) PMS document number and subaccount(s), if the payment originated from PMS, or relevant account numbers if the payment
originated from another Federal agency payment system.
(iii) The reason for the return (e.g., excess cash, funds not spent, interest, part interest part other, etc.)
(11) When returning funds or interest to PMS you must include the following as applicable:
(i)

For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit Gateway - ACH Receiver St. Paul, MN

(ii) For Fedwire Returns1:
Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal Reserve Bank Treas NYC/Funds Transfer Division New York, NY
1

Please note that the organization initiating payment is likely to incur a charge from their Financial Institution for this type of
payment.
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street, New York, NY 10013 USA
Payment Details (Line 70): Agency Locator Code (ALC): 75010501
Name (abbreviated when possible) and ALC Agency POC
(iv) For recipients that do not have electronic remittance capability, please make check2 payable to: “The Department of Health and
Human Services.”
Mail Check to Treasury approved lockbox:

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HHS Program Support Center, P.O. Box 530231, Atlanta, GA 30353-0231
2

Please allow 4-6 weeks for processing of a payment by check to be applied to the appropriate PMS account.

(v) Questions can be directed to PMS at 877-614-5533 or [email protected].

§ 200.306 Cost sharing or matching.
(a) Under Federal research proposals, voluntary committed cost sharing is not expected. It cannot be used as a factor during the merit
review of applications or proposals, but may be considered if it is both in accordance with Federal awarding agency regulations and
specified in a notice of funding opportunity. Criteria for considering voluntary committed cost sharing and any other program policy
factors that may be used to determine who may receive a Federal award must be explicitly described in the notice of funding opportunity.
See also §§ 200.414 and 200.204 and appendix I to this part.
(b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third-party in-kind contributions,
must be accepted as part of the non-Federal entity's cost sharing or matching when such contributions meet all of the following criteria:
(1) Are verifiable from the non-Federal entity's records;
(2) Are not included as contributions for any other Federal award;
(3) Are necessary and reasonable for accomplishment of project or program objectives;
(4) Are allowable under subpart E of this part;
(5) Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program
specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements
of other Federal programs;
(6) Are provided for in the approved budget when required by the Federal awarding agency; and
(7) Conform to other provisions of this part, as applicable.
(c) Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only
with the prior approval of the Federal awarding agency. Unrecovered indirect cost means the difference between the amount charged to
the Federal award and the amount which could have been charged to the Federal award under the non-Federal entity's approved
negotiated indirect cost rate.
(d) Values for non-Federal entity contributions of services and property must be established in accordance with the cost principles in
subpart E of this part. If a Federal awarding agency authorizes the non-Federal entity to donate buildings or land for
construction/facilities acquisition projects or long-term use, the value of the donated property for cost sharing or matching must be the
lesser of paragraph (d)(1) or (2) of this section.
(1) The value of the remaining life of the property recorded in the non-Federal entity's accounting records at the time of donation.
(2) The current fair market value. However, when there is sufficient justification, the Federal awarding agency may approve the use of
the current fair market value of the donated property, even if it exceeds the value described in paragraph (d)(1) of this section at the
time of donation.
(e) Volunteer services furnished by third-party professional and technical personnel, consultants, and other skilled and unskilled labor may
be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for
third-party volunteer services must be consistent with those paid for similar work by the non-Federal entity. In those instances in which
the required skills are not found in the non-Federal entity, rates must be consistent with those paid for similar work in the labor market in
which the non-Federal entity competes for the kind of services involved. In either case, paid fringe benefits that are reasonable,
necessary, allocable, and otherwise allowable may be included in the valuation.
(f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of
pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the
third-party organization's approved federally-negotiated indirect cost rate or, a rate in accordance with § 200.414(d) provided these
services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect
cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made.
(g) Donated property from third parties may include such items as equipment, office supplies, laboratory supplies, or workshop and
classroom supplies. Value assessed to donated property included in the cost sharing or matching share must not exceed the fair market
value of the property at the time of the donation.
(h) The method used for determining cost sharing or matching for third-party-donated equipment, buildings and land for which title passes
to the non-Federal entity may differ according to the purpose of the Federal award, if paragraph (h)(1) or (2) of this section applies.
(1) If the purpose of the Federal award is to assist the non-Federal entity in the acquisition of equipment, buildings or land, the
aggregate value of the donated property may be claimed as cost sharing or matching.
(2) If the purpose of the Federal award is to support activities that require the use of equipment, buildings or land, normally only
depreciation charges for equipment and buildings may be made. However, the fair market value of equipment or other capital
assets and fair rental charges for land may be allowed, provided that the Federal awarding agency has approved the charges. See
also § 200.420.

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The value of donated property must be determined in accordance with the usual accounting policies of the non-Federal entity, with the
following qualifications:
(1) The value of donated land and buildings must not exceed its fair market value at the time of donation to the non-Federal entity as
established by an independent appraiser (e.g., certified real property appraiser or General Services Administration representative)
and certified by a responsible official of the non-Federal entity as required by the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601-4655) (Uniform Act) except as provided in the implementing
regulations at 49 CFR part 24, “Uniform Relocation Assistance And Real Property Acquisition For Federal And Federally-Assisted
Programs”.
(2) The value of donated equipment must not exceed the fair market value of equipment of the same age and condition at the time of
donation.
(3) The value of donated space must not exceed the fair rental value of comparable space as established by an independent appraisal
of comparable space and facilities in a privately-owned building in the same locality.
(4) The value of loaned equipment must not exceed its fair rental value.

(j)

For third-party in-kind contributions, the fair market value of goods and services must be documented and to the extent feasible
supported by the same methods used internally by the non-Federal entity.

(k) For IHEs, see also OMB memorandum M-01-06, dated January 5, 2001, Clarification of OMB A-21 Treatment of Voluntary Uncommitted
Cost Sharing and Tuition Remission Costs.

§ 200.307 Program income.
(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate.
(b) Cost of generating program income. If authorized by Federal regulations or the Federal award, costs incidental to the generation of
program income may be deducted from gross income to determine program income, provided these costs have not been charged to the
Federal award.
(c) Governmental revenues. Taxes, special assessments, levies, fines, and other such revenues raised by a non-Federal entity are not
program income unless the revenues are specifically identified in the Federal award or Federal awarding agency regulations as program
income.
(d) Property. Proceeds from the sale of real property, equipment, or supplies are not program income; such proceeds will be handled in
accordance with the requirements of the Property Standards §§ 200.311, 200.313, and 200.314, or as specifically identified in Federal
statutes, regulations, or the terms and conditions of the Federal award.
(e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal
award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards
made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and
conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alternatives
to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and
income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes
the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted
from expenditures.
(1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program
income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the nonFederal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non-Federal entity
contributions rather than to increase the funds committed to the project.
(2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in
this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The
program income must be used for the purposes and under the conditions of the Federal award.
(3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost
sharing or matching requirement of the Federal award. The amount of the Federal award remains the same.
(f) Income after the period of performance. There are no Federal requirements governing the disposition of income earned after the end of
the period of performance for the Federal award, unless the Federal awarding agency regulations or the terms and conditions of the
Federal award provide otherwise. The Federal awarding agency may negotiate agreements with recipients regarding appropriate uses of
income earned after the period of performance as part of the grant closeout process. See also § 200.344.
(g) License fees and royalties. Unless the Federal statute, regulations, or terms and conditions for the Federal award provide otherwise, the
non-Federal entity is not accountable to the Federal awarding agency with respect to program income earned from license fees and
royalties for copyrighted material, patents, patent applications, trademarks, and inventions made under a Federal award to which 37 CFR
part 401 is applicable.

§ 200.308 Revision of budget and program plans.

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(a) The approved budget for the Federal award summarizes the financial aspects of the project or program as approved during the Federal
award process. It may include either the Federal and non-Federal share (see definition for Federal share in § 200.1) or only the Federal
share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance
and program evaluation purposes whenever required in accordance with the terms and conditions of the award.
(b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding
agencies for budget and program plan revisions, in accordance with this section.
(c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for the following program
or budget-related reasons:
(1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written
approval).
(2) Change in a key person specified in the application or the Federal award.
(3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the
approved project director or principal investigator.
(4) The inclusion, unless waived by the Federal awarding agency, of costs that require prior approval in accordance with subpart E of
this part as applicable.
(5) The transfer of funds budgeted for participant support costs to other categories of expense.
(6) Unless described in the application and funded in the approved Federal awards, the subawarding, transferring or contracting out of
any work under a Federal award, including fixed amount subawards as described in § 200.333. This provision does not apply to the
acquisition of supplies, material, equipment or general support services.
(7) Changes in the approved cost-sharing or matching provided by the non-Federal entity.
(8) The need arises for additional Federal funds to complete the project.
(d) No other prior approval requirements for specific items may be imposed unless an exception has been approved by OMB. See also §§
200.102 and 200.407.
(e) Except for requirements listed in paragraphs (c)(1) through (8) of this section, the Federal awarding agency is authorized, at its option, to
waive other cost-related and administrative prior written approvals contained in subparts D and E of this part. Such waivers may include
authorizing recipients to do any one or more of the following:
(1) Incur project costs 90 calendar days before the Federal awarding agency makes the Federal award. Expenses more than 90
calendar days pre-award require prior approval of the Federal awarding agency. All costs incurred before the Federal awarding
agency makes the Federal award are at the recipient's risk (i.e., the Federal awarding agency is not required to reimburse such costs
if for any reason the recipient does not receive a Federal award or if the Federal award is less than anticipated and inadequate to
cover such costs). See also § 200.458.
(2) Initiate a one-time extension of the period of performance by up to 12 months unless one or more of the conditions outlined in
paragraphs (e)(2)(i) through (iii) of this section apply. For one-time extensions, the recipient must notify the Federal awarding
agency in writing with the supporting reasons and revised period of performance at least 10 calendar days before the end of the
period of performance specified in the Federal award. This one-time extension must not be exercised merely for the purpose of
using unobligated balances. Extensions require explicit prior Federal awarding agency approval when:
(i)

The terms and conditions of the Federal award prohibit the extension.

(ii) The extension requires additional Federal funds.
(iii) The extension involves any change in the approved objectives or scope of the project.
(3) Carry forward unobligated balances to subsequent budget periods.
(4) For Federal awards that support research, unless the Federal awarding agency provides otherwise in the Federal award or in the
Federal awarding agency's regulations, the prior approval requirements described in this paragraph (e) are automatically waived
(i.e., recipients need not obtain such prior approvals) unless one of the conditions included in paragraph (e)(2) of this section
applies.
(f) The Federal awarding agency may, at its option, restrict the transfer of funds among direct cost categories or programs, functions and
activities for Federal awards in which the Federal share of the project exceeds the simplified acquisition threshold and the cumulative
amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the Federal awarding
agency. The Federal awarding agency cannot permit a transfer that would cause any Federal appropriation to be used for purposes other
than those consistent with the appropriation.
(g) All other changes to non-construction budgets, except for the changes described in paragraph (c) of this section, do not require prior
approval (see also § 200.407).
(h) For construction Federal awards, the recipient must request prior written approval promptly from the Federal awarding agency for budget
revisions whenever paragraph (h)(1), (2), or (3) of this section applies:
(1) The revision results from changes in the scope or the objective of the project or program.

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(2) The need arises for additional Federal funds to complete the project.
(3) A revision is desired which involves specific costs for which prior written approval requirements may be imposed consistent with
applicable OMB cost principles listed in subpart E.
(4) No other prior approval requirements for budget revisions may be imposed unless an exception has been approved by OMB.
(5) When a Federal awarding agency makes a Federal award that provides support for construction and non-construction work, the
Federal awarding agency may require the recipient to obtain prior approval from the Federal awarding agency before making any
fund or budget transfers between the two types of work supported.
(i)

When requesting approval for budget revisions, the recipient must use the same format for budget information that was used in the
application, unless the Federal awarding agency indicates a letter of request suffices.

(j)

Within 30 calendar days from the date of receipt of the request for budget revisions, the Federal awarding agency must review the
request and notify the recipient whether the budget revisions have been approved. If the revision is still under consideration at the end of
30 calendar days, the Federal awarding agency must inform the recipient in writing of the date when the recipient may expect the
decision.

§ 200.309 Modifications to Period of Performance.
If a Federal awarding agency or pass-through entity approves an extension, or if a recipient extends under § 200.308(e)(2), the Period of
Performance will be amended to end at the completion of the extension. If a termination occurs, the Period of Performance will be amended to end
upon the effective date of termination. If a renewal award is issued, a distinct Period of Performance will begin.

Property Standards

§ 200.310 Insurance coverage.
The non-Federal entity must, at a minimum, provide the equivalent insurance coverage for real property and equipment acquired or improved with
Federal funds as provided to property owned by the non-Federal entity. Federally-owned property need not be insured unless required by the terms
and conditions of the Federal award.

§ 200.311 Real property.
(a) Title. Subject to the requirements and conditions set forth in this section, title to real property acquired or improved under a Federal
award will vest upon acquisition in the non-Federal entity.
(b) Use. Except as otherwise provided by Federal statutes or by the Federal awarding agency, real property will be used for the originally
authorized purpose as long as needed for that purpose, during which time the non-Federal entity must not dispose of or encumber its
title or other interests.
(c) Disposition. When real property is no longer needed for the originally authorized purpose, the non-Federal entity must obtain disposition
instructions from the Federal awarding agency or pass-through entity. The instructions must provide for one of the following alternatives:
(1) Retain title after compensating the Federal awarding agency. The amount paid to the Federal awarding agency will be computed by
applying the Federal awarding agency's percentage of participation in the cost of the original purchase (and costs of any
improvements) to the fair market value of the property. However, in those situations where the non-Federal entity is disposing of real
property acquired or improved with a Federal award and acquiring replacement real property under the same Federal award, the net
proceeds from the disposition may be used as an offset to the cost of the replacement property.
(2) Sell the property and compensate the Federal awarding agency. The amount due to the Federal awarding agency will be calculated
by applying the Federal awarding agency's percentage of participation in the cost of the original purchase (and cost of any
improvements) to the proceeds of the sale after deduction of any actual and reasonable selling and fixing-up expenses. If the
Federal award has not been closed out, the net proceeds from sale may be offset against the original cost of the property. When the
non-Federal entity is directed to sell property, sales procedures must be followed that provide for competition to the extent
practicable and result in the highest possible return.
(3) Transfer title to the Federal awarding agency or to a third party designated/approved by the Federal awarding agency. The nonFederal entity is entitled to be paid an amount calculated by applying the non-Federal entity's percentage of participation in the
purchase of the real property (and cost of any improvements) to the current fair market value of the property.

§ 200.312 Federally-owned and exempt property.
(a) Title to federally-owned property remains vested in the Federal Government. The non-Federal entity must submit annually an inventory
listing of federally-owned property in its custody to the Federal awarding agency. Upon completion of the Federal award or when the
property is no longer needed, the non-Federal entity must report the property to the Federal awarding agency for further Federal agency
utilization.
(b) If the Federal awarding agency has no further need for the property, it must declare the property excess and report it for disposal to the
appropriate Federal disposal authority, unless the Federal awarding agency has statutory authority to dispose of the property by
alternative methods (e.g., the authority provided by the Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to donate research

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equipment to educational and nonprofit organizations in accordance with Executive Order 12999, “Educational Technology: Ensuring
Opportunity for All Children in the Next Century.”). The Federal awarding agency must issue appropriate instructions to the non-Federal
entity.
(c) Exempt property means property acquired under a Federal award where the Federal awarding agency has chosen to vest title to the
property to the non-Federal entity without further responsibility to the Federal Government, based upon the explicit terms and conditions
of the Federal award. The Federal awarding agency may exercise this option when statutory authority exists. Absent statutory authority
and specific terms and conditions of the Federal award, title to exempt property acquired under the Federal award remains with the
Federal Government.

§ 200.313 Equipment.
See also § 200.439.
(a) Title. Subject to the requirements and conditions set forth in this section, title to equipment acquired under a Federal award will vest
upon acquisition in the non-Federal entity. Unless a statute specifically authorizes the Federal agency to vest title in the non-Federal entity
without further responsibility to the Federal Government, and the Federal agency elects to do so, the title must be a conditional title. Title
must vest in the non-Federal entity subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance, or until the property is no longer
needed for the purposes of the project.
(2) Not encumber the property without approval of the Federal awarding agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws
and procedures. Other non-Federal entities must follow paragraphs (c) through (e) of this section.
(c) Use.
(1) Equipment must be used by the non-Federal entity in the program or project for which it was acquired as long as needed, whether or
not the project or program continues to be supported by the Federal award, and the non-Federal entity must not encumber the
property without prior approval of the Federal awarding agency. The Federal awarding agency may require the submission of the
applicable common form for equipment. When no longer needed for the original program or project, the equipment may be used in
other activities supported by the Federal awarding agency, in the following order of priority:
(i)

Activities under a Federal award from the Federal awarding agency which funded the original program or project, then

(ii) Activities under Federal awards from other Federal awarding agencies. This includes consolidated equipment for information
technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the non-Federal entity must also make
equipment available for use on other projects or programs currently or previously supported by the Federal Government, provided
that such use will not interfere with the work on the projects or program for which it was originally acquired. First preference for
other use must be given to other programs or projects supported by Federal awarding agency that financed the equipment and
second preference must be given to programs or projects under Federal awards from other Federal awarding agencies. Use for nonfederally-funded programs or projects is also permissible. User fees should be considered if appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the non-Federal entity must not use equipment acquired
with the Federal award to provide services for a fee that is less than private companies charge for equivalent services unless
specifically authorized by Federal statute for as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the non-Federal entity may use the equipment to be replaced as a trade-in or sell the
property and use the proceeds to offset the cost of the replacement property.
(d) Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part
under a Federal award, until disposition takes place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the
source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of
Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and
condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two
years.
(3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss,
damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good condition.
(5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the
highest possible return.

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(e) Disposition. When original or replacement equipment acquired under a Federal award is no longer needed for the original project or
program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in Federal
statutes, regulations, or Federal awarding agency disposition instructions, the non-Federal entity must request disposition instructions
from the Federal awarding agency if required by the terms and conditions of the Federal award. Disposition of the equipment will be
made as follows, in accordance with Federal awarding agency disposition instructions:
(1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold or otherwise disposed of with no
further responsibility to the Federal awarding agency.
(2) Except as provided in § 200.312(b), or if the Federal awarding agency fails to provide requested disposition instructions within 120
days, items of equipment with a current per-unit fair market value in excess of $5,000 may be retained by the non-Federal entity or
sold. The Federal awarding agency is entitled to an amount calculated by multiplying the current market value or proceeds from
sale by the Federal awarding agency's percentage of participation in the cost of the original purchase. If the equipment is sold, the
Federal awarding agency may permit the non-Federal entity to deduct and retain from the Federal share $500 or ten percent of the
proceeds, whichever is less, for its selling and handling expenses.
(3) The non-Federal entity may transfer title to the property to the Federal Government or to an eligible third party provided that, in such
cases, the non-Federal entity must be entitled to compensation for its attributable percentage of the current fair market value of the
property.
(4) In cases where a non-Federal entity fails to take appropriate disposition actions, the Federal awarding agency may direct the nonFederal entity to take disposition actions.

§ 200.314 Supplies.
See also § 200.453.
(a) Title to supplies will vest in the non-Federal entity upon acquisition. If there is a residual inventory of unused supplies exceeding $5,000 in
total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other Federal
award, the non-Federal entity must retain the supplies for use on other activities or sell them, but must, in either case, compensate the
Federal Government for its share. The amount of compensation must be computed in the same manner as for equipment. See § 200.313
(e)(2) for the calculation methodology.
(b) As long as the Federal Government retains an interest in the supplies, the non-Federal entity must not use supplies acquired under a
Federal award to provide services to other organizations for a fee that is less than private companies charge for equivalent services,
unless specifically authorized by Federal statute.

§ 200.315 Intangible property.
(a) Title to intangible property (see definition for Intangible property in § 200.1) acquired under a Federal award vests upon acquisition in the
non-Federal entity. The non-Federal entity must use that property for the originally-authorized purpose, and must not encumber the
property without approval of the Federal awarding agency. When no longer needed for the originally authorized purpose, disposition of
the intangible property must occur in accordance with the provisions in § 200.313(e).
(b) The non-Federal entity may copyright any work that is subject to copyright and was developed, or for which ownership was acquired,
under a Federal award. The Federal awarding agency reserves a royalty-free, nonexclusive and irrevocable right to reproduce, publish, or
otherwise use the work for Federal purposes, and to authorize others to do so.
(c) The non-Federal entity is subject to applicable regulations governing patents and inventions, including governmentwide regulations
issued by the Department of Commerce at 37 CFR part 401, “Rights to Inventions Made by Nonprofit Organizations and Small Business
Firms Under Government Awards, Contracts and Cooperative Agreements.”
(d) The Federal Government has the right to:
(1) Obtain, reproduce, publish, or otherwise use the data produced under a Federal award; and
(2) Authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes.
(e)
(1) In response to a Freedom of Information Act (FOIA) request for research data relating to published research findings produced
under a Federal award that were used by the Federal Government in developing an agency action that has the force and effect of
law, the Federal awarding agency must request, and the non-Federal entity must provide, within a reasonable time, the research data
so that they can be made available to the public through the procedures established under the FOIA. If the Federal awarding agency
obtains the research data solely in response to a FOIA request, the Federal awarding agency may charge the requester a reasonable
fee equaling the full incremental cost of obtaining the research data. This fee should reflect costs incurred by the Federal agency
and the non-Federal entity. This fee is in addition to any fees the Federal awarding agency may assess under the FOIA (5 U.S.C.
552(a)(4)(A)).
(2) Published research findings means when:
(i)

Research findings are published in a peer-reviewed scientific or technical journal; or

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(ii) A Federal agency publicly and officially cites the research findings in support of an agency action that has the force and effect
of law. “Used by the Federal Government in developing an agency action that has the force and effect of law” is defined as
when an agency publicly and officially cites the research findings in support of an agency action that has the force and effect
of law.

(3) Research data means the recorded factual material commonly accepted in the scientific community as necessary to validate
research findings, but not any of the following: Preliminary analyses, drafts of scientific papers, plans for future research, peer
reviews, or communications with colleagues. This “recorded” material excludes physical objects (e.g., laboratory samples).
Research data also do not include:
(i)

Trade secrets, commercial information, materials necessary to be held confidential by a researcher until they are published, or
similar information which is protected under law; and

(ii) Personnel and medical information and similar information the disclosure of which would constitute a clearly unwarranted
invasion of personal privacy, such as information that could be used to identify a particular person in a research study.

§ 200.316 Property trust relationship.
Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity
as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The Federal awarding agency may
require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or
improved with a Federal award and that use and disposition conditions apply to the property.

Procurement Standards

§ 200.317 Procurements by states.
When procuring property and services under a Federal award, a State must follow the same policies and procedures it uses for procurements from
its non-Federal funds. The State will comply with §§ 200.321, 200.322, and 200.323 and ensure that every purchase order or other contract
includes any clauses required by § 200.327. All other non-Federal entities, including subrecipients of a State, must follow the procurement
standards in §§ 200.318 through 200.327.

§ 200.318 General procurement standards.
(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and
regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The
non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through
200.327.
(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and
specifications of their contracts or purchase orders.
(c)
(1) The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its
employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the
selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest.
Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her
partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest
in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity
may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts.
However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an
unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of
such standards by officers, employees, or agents of the non-Federal entity.
(2) If the non-Federal entity has a parent, affiliate, or subsidiary organization that is not a State, local government, or Indian tribe, the
non-Federal entity must also maintain written standards of conduct covering organizational conflicts of interest. Organizational
conflicts of interest means that because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal
entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization.
(d) The non-Federal entity's procedures must avoid acquisition of unnecessary or duplicative items. Consideration should be given to
consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis will be made of lease
versus purchase alternatives, and any other appropriate analysis to determine the most economical approach.
(e) To foster greater economy and efficiency, and in accordance with efforts to promote cost-effective use of shared services across the
Federal Government, the non-Federal entity is encouraged to enter into state and local intergovernmental agreements or inter-entity
agreements where appropriate for procurement or use of common or shared goods and services. Competition requirements will be met
with documented procurement actions using strategic sourcing, shared services, and other similar procurement arrangements.
(f) The non-Federal entity is encouraged to use Federal excess and surplus property in lieu of purchasing new equipment and property
whenever such use is feasible and reduces project costs.

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(g) The non-Federal entity is encouraged to use value engineering clauses in contracts for construction projects of sufficient size to offer
reasonable opportunities for cost reductions. Value engineering is a systematic and creative analysis of each contract item or task to
ensure that its essential function is provided at the overall lower cost.
(h) The non-Federal entity must award contracts only to responsible contractors possessing the ability to perform successfully under the
terms and conditions of a proposed procurement. Consideration will be given to such matters as contractor integrity, compliance with
public policy, record of past performance, and financial and technical resources. See also § 200.214.
(i)

The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not
necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or
rejection, and the basis for the contract price.

(j)
(1) The non-Federal entity may use a time-and-materials type contract only after a determination that no other contract is suitable and if
the contract includes a ceiling price that the contractor exceeds at its own risk. Time-and-materials type contract means a contract
whose cost to a non-Federal entity is the sum of:
(i)

The actual cost of materials; and

(ii) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses, and profit.
(2) Since this formula generates an open-ended contract price, a time-and-materials contract provides no positive profit incentive to the
contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its
own risk. Further, the non-Federal entity awarding such a contract must assert a high degree of oversight in order to obtain
reasonable assurance that the contractor is using efficient methods and effective cost controls.
(k) The non-Federal entity alone must be responsible, in accordance with good administrative practice and sound business judgment, for the
settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to, source
evaluation, protests, disputes, and claims. These standards do not relieve the non-Federal entity of any contractual responsibilities under
its contracts. The Federal awarding agency will not substitute its judgment for that of the non-Federal entity unless the matter is primarily
a Federal concern. Violations of law will be referred to the local, state, or Federal authority having proper jurisdiction.
[85 FR 49543, Aug. 13, 2020, as amended at 86 FR 10440, Feb. 22, 2021]

§ 200.319 Competition.
(a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner
providing full and open competition consistent with the standards of this section and § 200.320.
(b) In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft
specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for
such procurements. Some of the situations considered to be restrictive of competition include but are not limited to:
(1) Placing unreasonable requirements on firms in order for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or
other relevant requirements of the procurement; and
(7) Any arbitrary action in the procurement process.
(c) The non-Federal entity must conduct procurements in a manner that prohibits the use of statutorily or administratively imposed state,
local, or tribal geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes
expressly mandate or encourage geographic preference. Nothing in this section preempts state licensing laws. When contracting for
architectural and engineering (A/E) services, geographic location may be a selection criterion provided its application leaves an
appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.
(d) The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations:
(1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such
description must not, in competitive procurements, contain features which unduly restrict competition. The description may include
a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those
minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Detailed product
specifications should be avoided if at all possible. When it is impractical or uneconomical to make a clear and accurate description
of the technical requirements, a “brand name or equivalent” description may be used as a means to define the performance or other
salient requirements of procurement. The specific features of the named brand which must be met by offers must be clearly stated;
and

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(2) Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.
(e) The non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and
services are current and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity
must not preclude potential bidders from qualifying during the solicitation period.
(f) Noncompetitive procurements can only be awarded in accordance with § 200.320(c).

§ 200.320 Methods of procurement to be followed.
The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317,
200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal
award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the
simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement
methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions
and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or
below the SAT include:
(1) Micro-purchases (i)

Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase
threshold (See the definition of micro-purchase in § 200.1). To the maximum extent practicable, the non-Federal entity should
distribute micro-purchases equitably among qualified suppliers.

(ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the nonFederal entity considers the price to be reasonable based on research, experience, purchase history or other information and
documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved
by the non-Federal entity.
(iii) Micro-purchase thresholds. The non-Federal entity is responsible for determining and documenting an appropriate micropurchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. The micropurchase threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or
regulations. Non-Federal entities may establish a threshold higher than the Federal threshold established in the Federal
Acquisition Regulations (FAR) in accordance with paragraphs (a)(1)(iv) and (v) of this section.
(iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold
higher than the micro-purchase threshold identified in the FAR in accordance with the requirements of this section. The nonFederal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made
available to the Federal awarding agency and auditors in accordance with § 200.334. The self-certification must include a
justification, clear identification of the threshold, and supporting documentation of any of the following:
(A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit;
(B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or,
(C) For public institutions, a higher threshold consistent with State law.
(v) Non-Federal entity increase to the micro-purchase threshold over $50,000. Micro-purchase thresholds higher than $50,000
must be approved by the cognizant agency for indirect costs. The non-federal entity must submit a request with the
requirements included in paragraph (a)(1)(iv) of this section. The increased threshold is valid until there is a change in status
in which the justification was approved.
(2) Small purchases (i)

Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the
micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used,
price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the
non-Federal entity.

(ii) Simplified acquisition thresholds. The non-Federal entity is responsible for determining an appropriate simplified acquisition
threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not
exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal
entity must be authorized or not prohibited under State, local, or tribal laws or regulations.
(b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award
exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a
non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods
of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the
simplified acquisition threshold the non-Federal entity determines to be appropriate:

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(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is
awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the
lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions.
(i)

In order for sealed bidding to be feasible, the following conditions should be present:
(A) A complete, adequate, and realistic specification or purchase description is available;
(B) Two or more responsible bidders are willing and able to compete effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made
principally on the basis of price.

(ii) If sealed bids are used, the following requirements apply:
(A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the
date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services
in order for the bidder to properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the
bids must be opened publicly;
(D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified
in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in
determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience
indicates that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound documented reason.
(2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are
generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following
requirements:
(i)

Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be
solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be
considered to the maximum extent practical;

(ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making
selections;
(iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with
price and other factors considered; and
(iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of
architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified
offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a
selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of
services though A/E firms that are a potential source to perform the proposed effort.
(c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive
procurement can only be awarded if one or more of the following circumstances apply:
(1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see
paragraph (a)(1) of this section);
(2) The item is available only from a single source;
(3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation;
(4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written
request from the non-Federal entity; or
(5) After solicitation of a number of sources, competition is determined inadequate.

§ 200.321 Contracting with small and minority businesses, women's business enterprises, and labor surplus area firms.
(a) The non-Federal entity must take all necessary affirmative steps to assure that minority businesses, women's business enterprises, and
labor surplus area firms are used when possible.
(b) Affirmative steps must include:
(1) Placing qualified small and minority businesses and women's business enterprises on solicitation lists;
(2) Assuring that small and minority businesses, and women's business enterprises are solicited whenever they are potential sources;

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(3) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small
and minority businesses, and women's business enterprises;
(4) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses,
and women's business enterprises;
(5) Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority
Business Development Agency of the Department of Commerce; and
(6) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (b)(1) through (5) of
this section.

§ 200.322 Domestic preferences for procurements.
(a) As appropriate and to the extent consistent with law, the non-Federal entity should, to the greatest extent practicable under a Federal
award, provide a preference for the purchase, acquisition, or use of goods, products, or materials produced in the United States (including
but not limited to iron, aluminum, steel, cement, and other manufactured products). The requirements of this section must be included in
all subawards including all contracts and purchase orders for work or products under this award.
(b) For purposes of this section:
(1) “Produced in the United States” means, for iron and steel products, that all manufacturing processes, from the initial melting stage
through the application of coatings, occurred in the United States.
(2) “Manufactured products” means items and construction materials composed in whole or in part of non-ferrous metals such as
aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including
optical fiber; and lumber.

§ 200.323 Procurement of recovered materials.
A non-Federal entity that is a state agency or agency of a political subdivision of a state and its contractors must comply with section 6002 of the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act. The requirements of Section 6002 include procuring only
items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered
materials practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the
value of the quantity acquired during the preceding fiscal year exceeded $10,000; procuring solid waste management services in a manner that
maximizes energy and resource recovery; and establishing an affirmative procurement program for procurement of recovered materials identified
in the EPA guidelines.

§ 200.324 Contract cost and price.
(a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified
Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the
particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids
or proposals.
(b) The non-Federal entity must negotiate profit as a separate element of the price for each contract in which there is no price competition
and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consideration must be given to the
complexity of the work to be performed, the risk borne by the contractor, the contractor's investment, the amount of subcontracting, the
quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.
(c) Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent that costs incurred or
cost estimates included in negotiated prices would be allowable for the non-Federal entity under subpart E of this part. The non-Federal
entity may reference its own cost principles that comply with the Federal cost principles.
(d) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used.

§ 200.325 Federal awarding agency or pass-through entity review.
(a) The non-Federal entity must make available, upon request of the Federal awarding agency or pass-through entity, technical specifications
on proposed procurements where the Federal awarding agency or pass-through entity believes such review is needed to ensure that the
item or service specified is the one being proposed for acquisition. This review generally will take place prior to the time the specification
is incorporated into a solicitation document. However, if the non-Federal entity desires to have the review accomplished after a
solicitation has been developed, the Federal awarding agency or pass-through entity may still review the specifications, with such review
usually limited to the technical aspects of the proposed purchase.
(b) The non-Federal entity must make available upon request, for the Federal awarding agency or pass-through entity pre-procurement
review, procurement documents, such as requests for proposals or invitations for bids, or independent cost estimates, when:
(1) The non-Federal entity's procurement procedures or operation fails to comply with the procurement standards in this part;
(2) The procurement is expected to exceed the Simplified Acquisition Threshold and is to be awarded without competition or only one
bid or offer is received in response to a solicitation;

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(3) The procurement, which is expected to exceed the Simplified Acquisition Threshold, specifies a “brand name” product;
(4) The proposed contract is more than the Simplified Acquisition Threshold and is to be awarded to other than the apparent low bidder
under a sealed bid procurement; or
(5) A proposed contract modification changes the scope of a contract or increases the contract amount by more than the Simplified
Acquisition Threshold.
(c) The non-Federal entity is exempt from the pre-procurement review in paragraph (b) of this section if the Federal awarding agency or passthrough entity determines that its procurement systems comply with the standards of this part.
(1) The non-Federal entity may request that its procurement system be reviewed by the Federal awarding agency or pass-through entity
to determine whether its system meets these standards in order for its system to be certified. Generally, these reviews must occur
where there is continuous high-dollar funding, and third-party contracts are awarded on a regular basis;
(2) The non-Federal entity may self-certify its procurement system. Such self-certification must not limit the Federal awarding agency's
right to survey the system. Under a self-certification procedure, the Federal awarding agency may rely on written assurances from
the non-Federal entity that it is complying with these standards. The non-Federal entity must cite specific policies, procedures,
regulations, or standards as being in compliance with these requirements and have its system available for review.

§ 200.326 Bonding requirements.
For construction or facility improvement contracts or subcontracts exceeding the Simplified Acquisition Threshold, the Federal awarding agency or
pass-through entity may accept the bonding policy and requirements of the non-Federal entity provided that the Federal awarding agency or passthrough entity has made a determination that the Federal interest is adequately protected. If such a determination has not been made, the
minimum requirements must be as follows:
(a) A bid guarantee from each bidder equivalent to five percent of the bid price. The “bid guarantee” must consist of a firm commitment such
as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of
the bid, execute such contractual documents as may be required within the time specified.
(b) A performance bond on the part of the contractor for 100 percent of the contract price. A “performance bond” is one executed in
connection with a contract to secure fulfillment of all the contractor's requirements under such contract.
(c) A payment bond on the part of the contractor for 100 percent of the contract price. A “payment bond” is one executed in connection with
a contract to assure payment as required by law of all persons supplying labor and material in the execution of the work provided for in
the contract.

§ 200.327 Contract provisions.
The non-Federal entity's contracts must contain the applicable provisions described in appendix II to this part.

Performance and Financial Monitoring and Reporting

§ 200.328 Financial reporting.
Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for
collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data
elements available from the OMB-designated standards lead. This information must be collected with the frequency required by the terms and
conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for
example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program
outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information
collections, as applicable, when providing financial and performance reporting information.

§ 200.329 Monitoring and reporting program performance.
(a) Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations of the Federal award supported
activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal
requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function
or activity. See also § 200.332.
(b) Reporting program performance. The Federal awarding agency must use OMB-approved common information collections, as applicable,
when providing financial and performance reporting information. As appropriate and in accordance with above mentioned information
collections, the Federal awarding agency must require the recipient to relate financial data and accomplishments to performance goals
and objectives of the Federal award. Also, in accordance with above mentioned common information collections, and when required by
the terms and conditions of the Federal award, recipients must provide cost information to demonstrate cost effective practices (e.g.,
through unit cost data). In some instances (e.g., discretionary research awards), this will be limited to the requirement to submit
technical performance reports (to be evaluated in accordance with Federal awarding agency policy). Reporting requirements must be
clearly articulated such that, where appropriate, performance during the execution of the Federal award has a standard against which
non-Federal entity performance can be measured.

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(c) Non-construction performance reports. The Federal awarding agency must use standard, governmentwide OMB-approved data elements
for collection of performance information including performance progress reports, Research Performance Progress Reports.
(1) The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through
entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor
more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the
effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the nonFederal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted
quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding
agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final
performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days
after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days
after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal
award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date
for any performance report.
(2) As appropriate in accordance with above mentioned performance reporting, these reports will contain, for each Federal award, brief
information on the following unless other data elements are approved by OMB in the agency information collection request:
(i)

A comparison of actual accomplishments to the objectives of the Federal award established for the period. Where the
accomplishments of the Federal award can be quantified, a computation of the cost (for example, related to units of
accomplishment) may be required if that information will be useful. Where performance trend data and analysis would be
informative to the Federal awarding agency program, the Federal awarding agency should include this as a performance
reporting requirement.

(ii) The reasons why established goals were not met, if appropriate.
(iii) Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs.
(d) Construction performance reports. For the most part, onsite technical inspections and certified percentage of completion data are relied
on heavily by Federal awarding agencies and pass-through entities to monitor progress under Federal awards and subawards for
construction. The Federal awarding agency may require additional performance reports only when considered necessary.
(e) Significant developments. Events may occur between the scheduled performance reporting dates that have significant impact upon the
supported activity. In such cases, the non-Federal entity must inform the Federal awarding agency or pass-through entity as soon as the
following types of conditions become known:
(1) Problems, delays, or adverse conditions which will materially impair the ability to meet the objective of the Federal award. This
disclosure must include a statement of the action taken, or contemplated, and any assistance needed to resolve the situation.
(2) Favorable developments which enable meeting time schedules and objectives sooner or at less cost than anticipated or producing
more or different beneficial results than originally planned.
(f) Site visits. The Federal awarding agency may make site visits as warranted by program needs.
(g) Performance report requirement waiver. The Federal awarding agency may waive any performance report required by this part if not
needed.

§ 200.330 Reporting on real property.
The Federal awarding agency or pass-through entity must require a non-Federal entity to submit reports at least annually on the status of real
property in which the Federal Government retains an interest, unless the Federal interest in the real property extends 15 years or longer. In those
instances where the Federal interest attached is for a period of 15 years or more, the Federal awarding agency or pass-through entity, at its option,
may require the non-Federal entity to report at various multi-year frequencies (e.g., every two years or every three years, not to exceed a five-year
reporting period; or a Federal awarding agency or pass-through entity may require annual reporting for the first three years of a Federal award and
thereafter require reporting every five years).

Subrecipient Monitoring and Management

§ 200.331 Subrecipient and contractor determinations.
The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its
agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations
whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or
a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations
provided such guidance does not conflict with this section.
(a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship
with the subrecipient. See definition for Subaward in § 200.1 of this part. Characteristics which support the classification of the nonFederal entity as a subrecipient include when the non-Federal entity:
(1) Determines who is eligible to receive what Federal assistance;

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(2) Has its performance measured in relation to whether objectives of a Federal program were met;
(3) Has responsibility for programmatic decision-making;
(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
(5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing
statute, as opposed to providing goods or services for the benefit of the pass-through entity.
(b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a
procurement relationship with the contractor. See the definition of contract in § 200.1 of this part. Characteristics indicative of a
procurement relationship between the non-Federal entity and a contractor are when the contractor:
(1) Provides the goods and services within normal business operations;
(2) Provides similar goods or services to many different purchasers;
(3) Normally operates in a competitive environment;
(4) Provides goods or services that are ancillary to the operation of the Federal program; and
(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may
apply for other reasons.
(c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal
entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the
agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in
classifying each agreement as a subaward or a procurement contract.

§ 200.332 Requirements for pass-through entities.
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of
the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this
information is not available, the pass-through entity must provide the best information available to describe the Federal award and
subaward. Required information includes:
(1) Federal award identification.
(i)

Subrecipient name (which must match the name associated with its unique entity identifier);

(ii) Subrecipient's unique entity identifier;
(iii) Federal Award Identification Number (FAIN);
(iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal
agency;
(v) Subaward Period of Performance Start and End Date;
(vi) Subaward Budget Period Start and End Date;
(vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
(viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial
obligation;
(ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
(x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act
(FFATA);
(xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity;
(xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each
Federal award and the Assistance Listings Number at time of disbursement;
(xiii) Identification of whether the award is R&D; and
(xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with
Federal statutes, regulations and the terms and conditions of the Federal award;
(3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its
own responsibility to the Federal awarding agency including identification of any required financial and performance reports;
(4)

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(i)

An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no
approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which
is either:
(A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior
negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the
pass-through entity is not required to collect information justifying this rate, but may elect to do so;
(B) The de minimis indirect cost rate.

(ii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved
rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d).
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and
financial statements as necessary for the pass-through entity to meet the requirements of this part; and
(6) Appropriate terms and conditions concerning closeout of the subaward.
(b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for
purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include
consideration of such factors as:
(1) The subrecipient's prior experience with the same or similar subawards;
(2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this
part, and the extent to which the same or similar subaward has been audited as a major program;
(3) Whether the subrecipient has new personnel or new or substantially changed systems; and
(4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a
Federal awarding agency).
(c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208.
(d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with
Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Passthrough entity monitoring of the subrecipient must include:
(1) Reviewing financial and performance reports required by the pass-through entity.
(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal
award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation
from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular
subaward.
(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from
the pass-through entity as required by § 200.521.
(4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for
resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has
not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may
rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management
decisions related to cross-cutting findings in accordance with section § 200.513(a)(3)(vii). Such reliance does not eliminate the
responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage
risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward.
(e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section),
the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program
requirements and achievement of performance goals:
(1) Providing subrecipients with training and technical assistance on program-related matters; and
(2) Performing on-site reviews of the subrecipient's program operations;
(3) Arranging for agreed-upon-procedures engagements as described in § 200.425.
(f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards
expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501.
(g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate
adjustments to the pass-through entity's own records.
(h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program
regulations.
[85 FR 49543, Aug. 13, 2020, as amended at 86 FR 10440, Feb. 22, 2021]

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§ 200.333 Fixed amount subawards.
With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the
Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in § 200.201.

Record Retention and Access

§ 200.334 Retention requirements for records.
Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained
for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually,
from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or passthrough entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention
requirements upon non-Federal entities. The only exceptions are the following:
(a) If any litigation, claim, or audit is started before the expiration of the 3-year period, the records must be retained until all litigation, claims,
or audit findings involving the records have been resolved and final action taken.
(b) When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for audit, oversight agency for audit,
cognizant agency for indirect costs, or pass-through entity to extend the retention period.
(c) Records for real property and equipment acquired with Federal funds must be retained for 3 years after final disposition.
(d) When records are transferred to or maintained by the Federal awarding agency or pass-through entity, the 3-year retention requirement is
not applicable to the non-Federal entity.
(e) Records for program income transactions after the period of performance. In some cases recipients must report program income after
the period of performance. Where there is such a requirement, the retention period for the records pertaining to the earning of the
program income starts from the end of the non-Federal entity's fiscal year in which the program income is earned.
(f) Indirect cost rate proposals and cost allocations plans. This paragraph applies to the following types of documents and their supporting
records: Indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at
which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates).
(1) If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to the Federal Government (or to
the pass-through entity) to form the basis for negotiation of the rate, then the 3-year retention period for its supporting records
starts from the date of such submission.
(2) If not submitted for negotiation. If the proposal, plan, or other computation is not required to be submitted to the Federal
Government (or to the pass-through entity) for negotiation purposes, then the 3-year retention period for the proposal, plan, or
computation and its supporting records starts from the end of the fiscal year (or other accounting period) covered by the proposal,
plan, or other computation.

§ 200.335 Requests for transfer of records.
The Federal awarding agency must request transfer of certain records to its custody from the non-Federal entity when it determines that the
records possess long-term retention value. However, in order to avoid duplicate recordkeeping, the Federal awarding agency may make
arrangements for the non-Federal entity to retain any records that are continuously needed for joint use.

§ 200.336 Methods for collection, transmission, and storage of information.
The Federal awarding agency and the non-Federal entity should, whenever practicable, collect, transmit, and store Federal award-related
information in open and machine-readable formats rather than in closed formats or on paper in accordance with applicable legislative
requirements. A machine-readable format is a format in a standard computer language (not English text) that can be read automatically by a web
browser or computer system. The Federal awarding agency or pass-through entity must always provide or accept paper versions of Federal awardrelated information to and from the non-Federal entity upon request. If paper copies are submitted, the Federal awarding agency or pass-through
entity must not require more than an original and two copies. When original records are electronic and cannot be altered, there is no need to create
and retain paper copies. When original records are paper, electronic versions may be substituted through the use of duplication or other forms of
electronic media provided that they are subject to periodic quality control reviews, provide reasonable safeguards against alteration, and remain
readable.

§ 200.337 Access to records.
(a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the
pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records
of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The
right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related
to such documents.

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(b) Extraordinary and rare circumstances. Only under extraordinary and rare circumstances would such access include review of the true
name of victims of a crime. Routine monitoring cannot be considered extraordinary and rare circumstances that would necessitate
access to this information. When access to the true name of victims of a crime is necessary, appropriate steps to protect this sensitive
information must be taken by both the non-Federal entity and the Federal awarding agency. Any such access, other than under a court
order or subpoena pursuant to a bona fide confidential investigation, must be approved by the head of the Federal awarding agency or
delegate.
(c) Expiration of right of access. The rights of access in this section are not limited to the required retention period but last as long as the
records are retained. Federal awarding agencies and pass-through entities must not impose any other access requirements upon nonFederal entities.

§ 200.338 Restrictions on public access to records.
No Federal awarding agency may place restrictions on the non-Federal entity that limit public access to the records of the non-Federal entity
pertinent to a Federal award, except for protected personally identifiable information (PII) or when the Federal awarding agency can demonstrate
that such records will be kept confidential and would have been exempted from disclosure pursuant to the Freedom of Information Act (5 U.S.C.
552) or controlled unclassified information pursuant to Executive Order 13556 if the records had belonged to the Federal awarding agency. The
Freedom of Information Act (5 U.S.C. 552) (FOIA) does not apply to those records that remain under a non-Federal entity's control except as
required under § 200.315. Unless required by Federal, state, local, and tribal statute, non-Federal entities are not required to permit public access to
their records. The non-Federal entity's records provided to a Federal agency generally will be subject to FOIA and applicable exemptions.

Remedies for Noncompliance

§ 200.339 Remedies for noncompliance.
If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the
Federal awarding agency or pass-through entity may impose additional conditions, as described in § 200.208. If the Federal awarding agency or
pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or passthrough entity may take one or more of the following actions, as appropriate in the circumstances:
(a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by
the Federal awarding agency or pass-through entity.
(b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in
compliance.
(c) Wholly or partly suspend or terminate the Federal award.
(d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the
case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency).
(e) Withhold further Federal awards for the project or program.
(f) Take other remedies that may be legally available.

§ 200.340 Termination.
(a) The Federal award may be terminated in whole or in part as follows:
(1) By the Federal awarding agency or pass-through entity, if a non-Federal entity fails to comply with the terms and conditions of a
Federal award;
(2) By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates
the program goals or agency priorities;
(3) By the Federal awarding agency or pass-through entity with the consent of the non-Federal entity, in which case the two parties must
agree upon the termination conditions, including the effective date and, in the case of partial termination, the portion to be
terminated;
(4) By the non-Federal entity upon sending to the Federal awarding agency or pass-through entity written notification setting forth the
reasons for such termination, the effective date, and, in the case of partial termination, the portion to be terminated. However, if the
Federal awarding agency or pass-through entity determines in the case of partial termination that the reduced or modified portion of
the Federal award or subaward will not accomplish the purposes for which the Federal award was made, the Federal awarding
agency or pass-through entity may terminate the Federal award in its entirety; or
(5) By the Federal awarding agency or pass-through entity pursuant to termination provisions included in the Federal award.
(b) A Federal awarding agency should clearly and unambiguously specify termination provisions applicable to each Federal award, in
applicable regulations or in the award, consistent with this section.
(c) When a Federal awarding agency terminates a Federal award prior to the end of the period of performance due to the non-Federal entity's
material failure to comply with the Federal award terms and conditions, the Federal awarding agency must report the termination to the
OMB-designated integrity and performance system accessible through SAM (currently FAPIIS).

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(1) The information required under paragraph (c) of this section is not to be reported to designated integrity and performance system
until the non-Federal entity either (i)

Has exhausted its opportunities to object or challenge the decision, see § 200.342; or

(ii) Has not, within 30 calendar days after being notified of the termination, informed the Federal awarding agency that it intends to
appeal the Federal awarding agency's decision to terminate.
(2) If a Federal awarding agency, after entering information into the designated integrity and performance system about a termination,
subsequently:
(i)

Learns that any of that information is erroneous, the Federal awarding agency must correct the information in the system
within three business days;

(ii) Obtains an update to that information that could be helpful to other Federal awarding agencies, the Federal awarding agency is
strongly encouraged to amend the information in the system to incorporate the update in a timely way.
(3) Federal awarding agencies, must not post any information that will be made publicly available in the non-public segment of
designated integrity and performance system that is covered by a disclosure exemption under the Freedom of Information Act. If
the non-Federal entity asserts within seven calendar days to the Federal awarding agency who posted the information, that some of
the information made publicly available is covered by a disclosure exemption under the Freedom of Information Act, the Federal
awarding agency who posted the information must remove the posting within seven calendar days of receiving the assertion. Prior
to reposting the releasable information, the Federal agency must resolve the issue in accordance with the agency's Freedom of
Information Act procedures.
(d) When a Federal award is terminated or partially terminated, both the Federal awarding agency or pass-through entity and the non-Federal
entity remain responsible for compliance with the requirements in §§ 200.344 and 200.345.

§ 200.341 Notification of termination requirement.
(a) The Federal agency or pass-through entity must provide to the non-Federal entity a notice of termination.
(b) If the Federal award is terminated for the non-Federal entity's material failure to comply with the U.S. Constitution, Federal statutes,
regulations, or terms and conditions of the Federal award, the notification must state that (1) The termination decision will be reported to the OMB-designated integrity and performance system accessible through SAM
(currently FAPIIS);
(2) The information will be available in the OMB-designated integrity and performance system for a period of five years from the date of
the termination, then archived;
(3) Federal awarding agencies that consider making a Federal award to the non-Federal entity during that five year period must consider
that information in judging whether the non-Federal entity is qualified to receive the Federal award, when the Federal share of the
Federal award is expected to exceed the simplified acquisition threshold over the period of performance;
(4) The non-Federal entity may comment on any information the OMB-designated integrity and performance system contains about the
non-Federal entity for future consideration by Federal awarding agencies. The non-Federal entity may submit comments to the
awardee integrity and performance portal accessible through SAM (currently (CPARS).
(5) Federal awarding agencies will consider non-Federal entity comments when determining whether the non-Federal entity is qualified
for a future Federal award.
(c) Upon termination of a Federal award, the Federal awarding agency must provide the information required under FFATA to the Federal
website established to fulfill the requirements of FFATA, and update or notify any other relevant governmentwide systems or entities of
any indications of poor performance as required by 41 U.S.C. 417b and 31 U.S.C. 3321 and implementing guidance at 2 CFR part 77
(forthcoming at time of publication). See also the requirements for Suspension and Debarment at 2 CFR part 180.

§ 200.342 Opportunities to object, hearings, and appeals.
Upon taking any remedy for non-compliance, the Federal awarding agency must provide the non-Federal entity an opportunity to object and provide
information and documentation challenging the suspension or termination action, in accordance with written processes and procedures published
by the Federal awarding agency. The Federal awarding agency or pass-through entity must comply with any requirements for hearings, appeals or
other administrative proceedings to which the non-Federal entity is entitled under any statute or regulation applicable to the action involved.

§ 200.343 Effects of suspension and termination.
Costs to the non-Federal entity resulting from financial obligations incurred by the non-Federal entity during a suspension or after termination of a
Federal award or subaward are not allowable unless the Federal awarding agency or pass-through entity expressly authorizes them in the notice of
suspension or termination or subsequently. However, costs during suspension or after termination are allowable if:
(a) The costs result from financial obligations which were properly incurred by the non-Federal entity before the effective date of suspension
or termination, are not in anticipation of it; and

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(b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in
which the termination takes effect.

Closeout

§ 200.344 Closeout.
The Federal awarding agency or pass-through entity will close out the Federal award when it determines that all applicable administrative actions
and all required work of the Federal award have been completed by the non-Federal entity. If the non-Federal entity fails to complete the
requirements, the Federal awarding agency or pass-through entity will proceed to close out the Federal award with the information available. This
section specifies the actions the non-Federal entity and Federal awarding agency or pass-through entity must take to complete this process at the
end of the period of performance.
(a) The recipient must submit, no later than 120 calendar days after the end date of the period of performance, all financial, performance,
and other reports as required by the terms and conditions of the Federal award. A subrecipient must submit to the pass-through entity,
no later than 90 calendar days (or an earlier date as agreed upon by the pass-through entity and subrecipient) after the end date of the
period of performance, all financial, performance, and other reports as required by the terms and conditions of the Federal award. The
Federal awarding agency or pass-through entity may approve extensions when requested and justified by the non-Federal entity, as
applicable.
(b) Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all financial
obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as
specified in the terms and conditions of the Federal award.
(c) The Federal awarding agency or pass-through entity must make prompt payments to the non-Federal entity for costs meeting the
requirements in Subpart E of this part under the Federal award being closed out.
(d) The non-Federal entity must promptly refund any balances of unobligated cash that the Federal awarding agency or pass-through entity
paid in advance or paid and that are not authorized to be retained by the non-Federal entity for use in other projects. See OMB Circular A129 and see § 200.346, for requirements regarding unreturned amounts that become delinquent debts.
(e) Consistent with the terms and conditions of the Federal award, the Federal awarding agency or pass-through entity must make a
settlement for any upward or downward adjustments to the Federal share of costs after closeout reports are received.
(f) The non-Federal entity must account for any real and personal property acquired with Federal funds or received from the Federal
Government in accordance with §§ 200.310 through 200.316 and 200.330.
(g) When a recipient or subrecipient completes all closeout requirements, the Federal awarding agency or pass-through entity must promptly
complete all closeout actions for Federal awards. The Federal awarding agency must make every effort to complete closeout actions no
later than one year after the end of the period of performance unless otherwise directed by authorizing statutes. Closeout actions include
Federal awarding agency actions in the grants management and payment systems.
(h) If the non-Federal entity does not submit all reports in accordance with this section and the terms and conditions of the Federal Award,
the Federal awarding agency must proceed to close out with the information available within one year of the period of performance end
date.
(i)

If the non-Federal entity does not submit all reports in accordance with this section within one year of the period of performance end
date, the Federal awarding agency must report the non-Federal entity's material failure to comply with the terms and conditions of the
award with the OMB-designated integrity and performance system (currently FAPIIS). Federal awarding agencies may also pursue other
enforcement actions per § 200.339.

Post-Closeout Adjustments and Continuing Responsibilities

§ 200.345 Post-closeout adjustments and continuing responsibilities.
(a) The closeout of a Federal award does not affect any of the following:
(1) The right of the Federal awarding agency or pass-through entity to disallow costs and recover funds on the basis of a later audit or
other review. The Federal awarding agency or pass-through entity must make any cost disallowance determination and notify the
non-Federal entity within the record retention period.
(2) The requirement for the non-Federal entity to return any funds due as a result of later refunds, corrections, or other transactions
including final indirect cost rate adjustments.
(3) The ability of the Federal awarding agency to make financial adjustments to a previously closed award such as resolving indirect
cost payments and making final payments.
(4) Audit requirements in subpart F of this part.
(5) Property management and disposition requirements in §§ 200.310 through 200.316 of this subpart.
(6) Records retention as required in §§ 200.334 through 200.337 of this subpart.

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(b) After closeout of the Federal award, a relationship created under the Federal award may be modified or ended in whole or in part with the
consent of the Federal awarding agency or pass-through entity and the non-Federal entity, provided the responsibilities of the non-Federal
entity referred to in paragraph (a) of this section, including those for property management as applicable, are considered and provisions
made for continuing responsibilities of the non-Federal entity, as appropriate.

Collection of Amounts Due

§ 200.346 Collection of amounts due.
(a) Any funds paid to the non-Federal entity in excess of the amount to which the non-Federal entity is finally determined to be entitled under
the terms of the Federal award constitute a debt to the Federal Government. If not paid within 90 calendar days after demand, the Federal
awarding agency may reduce the debt by:
(1) Making an administrative offset against other requests for reimbursements;
(2) Withholding advance payments otherwise due to the non-Federal entity; or
(3) Other action permitted by Federal statute.
(b) Except where otherwise provided by statutes or regulations, the Federal awarding agency will charge interest on an overdue debt in
accordance with the Federal Claims Collection Standards (31 CFR parts 900 through 999). The date from which interest is computed is
not extended by litigation or the filing of any form of appeal.

Subpart E - Cost Principles
General Provisions

§ 200.400 Policy guide.
The application of these cost principles is based on the fundamental premises that:
(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound
management practices.
(b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements,
program objectives, and the terms and conditions of the Federal award.
(c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for
employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient
administration of the Federal award.
(d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the nonFederal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the
accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to the
Federal award.
(e) In reviewing, negotiating and approving cost allocation plans or indirect cost proposals, the cognizant agency for indirect costs should
generally assure that the non-Federal entity is applying these cost accounting principles on a consistent basis during their review and
negotiation of indirect cost proposals. Where wide variations exist in the treatment of a given cost item by the non-Federal entity, the
reasonableness and equity of such treatments should be fully considered. See the definition of indirect (facilities & administrative (F&A))
costs in § 200.1 of this part.
(f) For non-Federal entities that educate and engage students in research, the dual role of students as both trainees and employees
(including pre- and post-doctoral staff) contributing to the completion of Federal awards for research must be recognized in the
application of these principles.
(g) The non-Federal entity may not earn or keep any profit resulting from Federal financial assistance, unless explicitly authorized by the
terms and conditions of the Federal award. See also § 200.307.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13, 2020]

§ 200.401 Application.
(a) General. These principles must be used in determining the allowable costs of work performed by the non-Federal entity under Federal
awards. These principles also must be used by the non-Federal entity as a guide in the pricing of fixed-price contracts and subcontracts
where costs are used in determining the appropriate price. The principles do not apply to:
(1) Arrangements under which Federal financing is in the form of loans, scholarships, fellowships, traineeships, or other fixed amounts
based on such items as education allowance or published tuition rates and fees.
(2) For IHEs, capitation awards, which are awards based on case counts or number of beneficiaries according to the terms and
conditions of the Federal award.

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(3) Fixed amount awards. See also § 200.1 Definitions and 200.201.
(4) Federal awards to hospitals (see appendix IX to this part).
(5) Other awards under which the non-Federal entity is not required to account to the Federal Government for actual costs incurred.
(b) Federal contract. Where a Federal contract awarded to a non-Federal entity is subject to the Cost Accounting Standards (CAS), it
incorporates the applicable CAS clauses, Standards, and CAS administration requirements per the 48 CFR Chapter 99 and 48 CFR part 30
(FAR Part 30). CAS applies directly to the CAS-covered contract and the Cost Accounting Standards at 48 CFR parts 9904 or 9905 takes
precedence over the cost principles in this subpart E with respect to the allocation of costs. When a contract with a non-Federal entity is
subject to full CAS coverage, the allowability of certain costs under the cost principles will be affected by the allocation provisions of the
Cost Accounting Standards (e.g., CAS 414 - 48 CFR 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, and CAS 417
- 48 CFR 9904.417, Cost of Money as an Element of the Cost of Capital Assets Under Construction), apply rather the allowability
provisions of § 200.449. In complying with those requirements, the non-Federal entity's application of cost accounting practices for
estimating, accumulating, and reporting costs for other Federal awards and other cost objectives under the CAS-covered contract still
must be consistent with its cost accounting practices for the CAS-covered contracts. In all cases, only one set of accounting records
needs to be maintained for the allocation of costs by the non-Federal entity.
(c) Exemptions. Some nonprofit organizations, because of their size and nature of operations, can be considered to be similar to for-profit
entities for purpose of applicability of cost principles. Such nonprofit organizations must operate under Federal cost principles applicable
to for-profit entities located at 48 CFR 31.2. A listing of these organizations is contained in appendix VIII to this part. Other organizations,
as approved by the cognizant agency for indirect costs, may be added from time to time.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020]

Basic Considerations

§ 200.402 Composition of costs.
Total cost. The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.

§ 200.403 Factors affecting allowability of costs.
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
(d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same
purpose in like circumstances has been allocated to the Federal award as an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian
tribes only, as otherwise provided for in this part.
(f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the
current or a prior period. See also § 200.306(b).
(g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.
(h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior
written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020]

§ 200.404 Reasonable costs.
A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances
prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal
entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to:
(a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and
efficient performance of the Federal award.
(b) The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal,
and other laws and regulations; and terms and conditions of the Federal award.
(c) Market prices for comparable goods or services for the geographic area.
(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity,
its employees, where applicable its students or membership, the public at large, and the Federal Government.

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(e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which
may unjustifiably increase the Federal award's cost.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014]

§ 200.405 Allocable costs.
(a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to
that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost:
(1) Is incurred specifically for the Federal award;
(2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be
approximated using reasonable methods; and
(3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the
principles in this subpart.
(b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the
non-Federal entity or third parties, will receive an appropriate allocation of indirect costs.
(c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards
to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal
awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable
under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal
awards.
(d) Direct cost allocation principles: If a cost benefits two or more projects or activities in proportions that can be determined without undue
effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or
activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph
(c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Where the
purchase of equipment or other capital asset is specifically authorized under a Federal award, the costs are assignable to the Federal
award regardless of the use that may be made of the equipment or other capital asset involved when no longer needed for the purpose
for which it was originally required. See also §§ 200.310 through 200.316 and 200.439.
(e) If the contract is subject to CAS, costs must be allocated to the contract pursuant to the Cost Accounting Standards. To the extent that
CAS is applicable, the allocation of costs in accordance with CAS takes precedence over the allocation provisions in this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.406 Applicable credits.
(a) Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to
the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances,
recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent
that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award
either as a cost reduction or cash refund, as appropriate.
(b) In some instances, the amounts received from the Federal Government to finance activities or service operations of the non-Federal
entity should be treated as applicable credits. Specifically, the concept of netting such credit items (including any amounts used to meet
cost sharing or matching requirements) must be recognized in determining the rates or amounts to be charged to the Federal award.
(See §§ 200.436 and 200.468, for areas of potential application in the matter of Federal financing of activities.)
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.407 Prior written approval (prior approval).
Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid
subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of
the cognizant agency for indirect costs or the Federal awarding agency in advance of the incurrence of special or unusual costs. Prior written
approval should include the timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself,
affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain
circumstances in the following sections of this part:
(a) § 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts, paragraph (b)(5);
(b) § 200.306 Cost sharing or matching;
(c) § 200.307 Program income;
(d) § 200.308 Revision of budget and program plans;

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(e) § 200.311 Real property;
(f) § 200.313 Equipment;
(g) § 200.333 Fixed amount subawards;
(h) § 200.413 Direct costs, paragraph (c);
(i)

§ 200.430 Compensation - personal services, paragraph (h);

(j)

§ 200.431 Compensation - fringe benefits;

(k) § 200.438 Entertainment costs;
(l)

§ 200.439 Equipment and other capital expenditures;

(m) § 200.440 Exchange rates;
(n) § 200.441 Fines, penalties, damages and other settlements;
(o) § 200.442 Fund raising and investment management costs;
(p) § 200.445 Goods or services for personal use;
(q) § 200.447 Insurance and indemnification;
(r) § 200.454 Memberships, subscriptions, and professional activity costs, paragraph (c);
(s) § 200.455 Organization costs;
(t) § 200.456 Participant support costs;
(u) § 200.458 Pre-award costs;
(v) § 200.462 Rearrangement and reconversion costs;
(w) § 200.467 Selling and marketing costs;
(x) § 200.470 Taxes (including Value Added Tax); and
(y) § 200.475 Travel costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.408 Limitation on allowance of costs.
The Federal award may be subject to statutory requirements that limit the allowability of costs. When the maximum amount allowable under a
limitation is less than the total amount determined in accordance with the principles in this part, the amount not recoverable under the Federal
award may not be charged to the Federal award.

§ 200.409 Special considerations.
In addition to the basic considerations regarding the allowability of costs highlighted in this subtitle, other subtitles in this part describe special
considerations and requirements applicable to states, local governments, Indian tribes, and IHEs. In addition, certain provisions among the items of
cost in this subpart are only applicable to certain types of non-Federal entities, as specified in the following sections:
(a) Direct and Indirect (F&A) Costs (§§ 200.412-200.415) of this subpart;
(b) Special Considerations for States, Local Governments and Indian Tribes (§§ 200.416 and 200.417) of this subpart; and
(c) Special Considerations for Institutions of Higher Education (§§ 200.418 and 200.419) of this subpart.
[85 FR 49562, Aug. 13, 2020]

§ 200.410 Collection of unallowable costs.
Payments made for costs determined to be unallowable by either the Federal awarding agency, cognizant agency for indirect costs, or passthrough entity, either as direct or indirect costs, must be refunded (including interest) to the Federal Government in accordance with instructions
from the Federal agency that determined the costs are unallowable unless Federal statute or regulation directs otherwise. See also §§ 200.300
through 200.309 in subpart D of this part.
[85 FR 49562, Aug. 13, 2020]

§ 200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable costs.
(a) Negotiated indirect (F&A) cost rates based on a proposal later found to have included costs that:

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(1) Are unallowable as specified by Federal statutes, regulations or the terms and conditions of a Federal award; or
(2) Are unallowable because they are not allocable to the Federal award(s), must be adjusted, or a refund must be made, in accordance
with the requirements of this section. These adjustments or refunds are designed to correct the proposals used to establish the
rates and do not constitute a reopening of the rate negotiation. The adjustments or refunds will be made regardless of the type of
rate negotiated (predetermined, final, fixed, or provisional).
(b) For rates covering a future fiscal year of the non-Federal entity, the unallowable costs will be removed from the indirect (F&A) cost pools
and the rates appropriately adjusted.
(c) For rates covering a past period, the Federal share of the unallowable costs will be computed for each year involved and a cash refund
(including interest chargeable in accordance with applicable regulations) will be made to the Federal Government. If cash refunds are
made for past periods covered by provisional or fixed rates, appropriate adjustments will be made when the rates are finalized to avoid
duplicate recovery of the unallowable costs by the Federal Government.
(d) For rates covering the current period, either a rate adjustment or a refund, as described in paragraphs (b) and (c) of this section, must be
required by the cognizant agency for indirect costs. The choice of method must be at the discretion of the cognizant agency for indirect
costs, based on its judgment as to which method would be most practical.
(e) The amount or proportion of unallowable costs included in each year's rate will be assumed to be the same as the amount or proportion
of unallowable costs included in the base year proposal used to establish the rate.

Direct and Indirect (F&A) Costs

§ 200.412 Classification of costs.
There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system. A cost may be direct with
respect to some specific service or function, but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential
that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in
order to avoid possible double-charging of Federal awards. Guidelines for determining direct and indirect (F&A) costs charged to Federal awards
are provided in this subpart.

§ 200.413 Direct costs.
(a) General. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or
other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of
accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs.
See also § 200.405.
(b) Application to Federal awards. Identification with the Federal award rather than the nature of the goods and services involved is the
determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award
are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of
expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect
costs may also be considered direct costs. Examples include extraordinary utility consumption, the cost of materials supplied from stock
or services rendered by specialized facilities, program evaluation costs, or other institutional service operations.
(c) The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be
appropriate only if all of the following conditions are met:
(1) Administrative or clerical services are integral to a project or activity;
(2) Individuals involved can be specifically identified with the project or activity;
(3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and
(4) The costs are not also recovered as indirect costs.
(d) Minor items. Any direct cost of minor amount may be treated as an indirect (F&A) cost for reasons of practicality where such accounting
treatment for that item of cost is consistently applied to all Federal and non-Federal cost objectives.
(e) The costs of certain activities are not allowable as charges to Federal awards. However, even though these costs are unallowable for
purposes of computing charges to Federal awards, they nonetheless must be treated as direct costs for purposes of determining indirect
(F&A) cost rates and be allocated their equitable share of the non-Federal entity's indirect costs if they represent activities which:
(1) Include the salaries of personnel,
(2) Occupy space, and
(3) Benefit from the non-Federal entity's indirect (F&A) costs.
(f) For nonprofit organizations, the costs of activities performed by the non-Federal entity primarily as a service to members, clients, or the
general public when significant and necessary to the non-Federal entity's mission must be treated as direct costs whether or not
allowable, and be allocated an equitable share of indirect (F&A) costs. Some examples of these types of activities include:
(1) Maintenance of membership rolls, subscriptions, publications, and related functions. See also § 200.454.

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(2) Providing services and information to members, legislative or administrative bodies, or the public. See also §§ 200.454 and
200.450.
(3) Promotion, lobbying, and other forms of public relations. See also §§ 200.421 and 200.450.
(4) Conferences except those held to conduct the general administration of the non-Federal entity. See also § 200.432.
(5) Maintenance, protection, and investment of special funds not used in operation of the non-Federal entity. See also § 200.442.
(6) Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans,
and financial aid. See also § 200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.414 Indirect (F&A) costs.
(a) Facilities and administration classification. For major Institutions of Higher Education (IHE) and major nonprofit organizations, indirect
(F&A) costs must be classified within two broad categories: “Facilities” and “Administration.” “Facilities” is defined as depreciation on
buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements,
and operations and maintenance expenses. “Administration” is defined as general administration and general expenses such as the
director's office, accounting, personnel and all other types of expenditures not listed specifically under one of the subcategories of
“Facilities” (including cross allocations from other pools, where applicable). For nonprofit organizations, library expenses are included in
the “Administration” category; for IHEs, they are included in the “Facilities” category. Major IHEs are defined as those required to use the
Standard Format for Submission as noted in appendix III to this part, and Rate Determination for Institutions of Higher Education
paragraph C. 11. Major nonprofit organizations are those which receive more than $10 million dollars in direct Federal funding.
(b) Diversity of nonprofit organizations. Because of the diverse characteristics and accounting practices of nonprofit organizations, it is not
possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Federal award
rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of
Federal awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings
and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries
and expenses of executive officers, personnel administration, and accounting.
(c) Federal Agency Acceptance of Negotiated Indirect Cost Rates. (See also § 200.306.)
(1) The negotiated rates must be accepted by all Federal awarding agencies. A Federal awarding agency may use a rate different from
the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or
when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3)
of this section.
(2) The Federal awarding agency head or delegate must notify OMB of any approved deviations.
(3) The Federal awarding agency must implement, and make publicly available, the policies, procedures and general decision-making
criteria that their programs will follow to seek and justify deviations from negotiated rates.
(4) As required under § 200.204, the Federal awarding agency must include in the notice of funding opportunity the policies relating to
indirect cost rate reimbursement, matching, or cost share as approved under paragraph (e)(1) of this section. As appropriate, the
Federal agency should incorporate discussion of these policies into Federal awarding agency outreach activities with non-Federal
entities prior to the posting of a notice of funding opportunity.
(d) Pass-through entities are subject to the requirements in § 200.332(a)(4).
(e) Requirements for development and submission of indirect (F&A) cost rate proposals and cost allocation plans are contained in
Appendices III-VII and Appendix IX as follows:
(1) Appendix III to Part 200 - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher
Education (IHEs);
(2) Appendix IV to Part 200 - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations;
(3) Appendix V to Part 200 - State/Local Governmentwide Central Service Cost Allocation Plans;
(4) Appendix VI to Part 200 - Public Assistance Cost Allocation Plans;
(5) Appendix VII to Part 200 - States and Local Government and Indian Tribe Indirect Cost Proposals; and
(6) Appendix IX to Part 200 - Hospital Cost Principles.
(f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a
current negotiated (including provisional) rate, except for those non-Federal entities described in appendix VII to this part, paragraph
D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. No
documentation is required to justify the 10% de minimis indirect cost rate. As described in § 200.403, costs must be consistently
charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology
once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate,
which the non-Federal entity may apply to do at any time.

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(g) Any non-Federal entity that has a current federally-negotiated indirect cost rate may apply for a one-time extension of the rates in that
agreement for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect
costs. If an extension is granted the non-Federal entity may not request a rate review until the extension period ends. At the end of the 4year extension, the non-Federal entity must re-apply to negotiate a rate. Subsequent one-time extensions (up to four years) are permitted
if a renegotiation is completed between each extension request.
(h) The federally negotiated indirect rate, distribution base, and rate type for a non-Federal entity (except for the Indian tribes or tribal
organizations, as defined in the Indian Self Determination, Education and Assistance Act, 25 U.S.C. 450b(1)) must be available publicly
on an OMB-designated Federal website.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020]

§ 200.415 Required certifications.
Required certifications include:
(a) To assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project
budgets, the annual and final fiscal reports or vouchers requesting payment under the agreements must include a certification, signed by
an official who is authorized to legally bind the non-Federal entity, which reads as follows: “By signing this report, I certify to the best of
my knowledge and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for
the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware that any false, fictitious, or fraudulent
information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements,
false claims or otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729-3730 and 3801-3812).”
(b) Certification of cost allocation plan or indirect (F&A) cost rate proposal. Each cost allocation plan or indirect (F&A) cost rate proposal
must comply with the following:
(1) A proposal to establish a cost allocation plan or an indirect (F&A) cost rate, whether submitted to a Federal cognizant agency for
indirect costs or maintained on file by the non-Federal entity, must be certified by the non-Federal entity using the Certificate of Cost
Allocation Plan or Certificate of Indirect Costs as set forth in appendices III through VII, and IX of this part. The certificate must be
signed on behalf of the non-Federal entity by an individual at a level no lower than vice president or chief financial officer of the nonFederal entity that submits the proposal.
(2) Unless the non-Federal entity has elected the option under § 200.414(f), the Federal Government may either disallow all indirect
(F&A) costs or unilaterally establish such a plan or rate when the non-Federal entity fails to submit a certified proposal for
establishing such a plan or rate in accordance with the requirements. Such a plan or rate may be based upon audited historical data
or such other data that have been furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all
unallowable costs have been excluded. When a cost allocation plan or indirect cost rate is unilaterally established by the Federal
Government because the non-Federal entity failed to submit a certified proposal, the plan or rate established will be set to ensure
that potentially unallowable costs will not be reimbursed.
(c) Certifications by nonprofit organizations as appropriate that they did not meet the definition of a major nonprofit organization as defined
in § 200.414(a).
(d) See also § 200.450 for another required certification.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020]

Special Considerations for States, Local Governments and Indian Tribes

§ 200.416 Cost allocation plans and indirect cost proposals.
(a) For states, local governments and Indian tribes, certain services, such as motor pools, computer centers, purchasing, accounting, etc.,
are provided to operating agencies on a centralized basis. Since Federal awards are performed within the individual operating agencies,
there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable
and consistent basis. The central service cost allocation plan provides that process.
(b) Individual operating agencies (governmental department or agency), normally charge Federal awards for indirect costs through an
indirect cost rate. A separate indirect cost rate(s) proposal for each operating agency is usually necessary to claim indirect costs under
Federal awards. Indirect costs include:
(1) The indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and
(2) The costs of central governmental services distributed through the central service cost allocation plan and not otherwise treated as
direct costs.
(c) The requirements for development and submission of cost allocation plans (for central service costs and public assistance programs)
and indirect cost rate proposals are contained in appendices V, VI and VII to this part.
[78 FR 78608, Dec. 26, 2013, as amended at 86 FR 10440, Feb. 22, 2021]

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§ 200.417 Interagency service.
The cost of services provided by one agency to another within the governmental unit may include allowable direct costs of the service plus a prorated share of indirect costs. A standard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service
(excluding overtime, shift premiums, and fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services
do not include centralized services included in central service cost allocation plans as described in Appendix V to Part 200.
[85 FR 49564, Aug. 13, 2020]

Special Considerations for Institutions of Higher Education

§ 200.418 Costs incurred by states and local governments.
Costs incurred or paid by a state or local government on behalf of its IHEs for fringe benefit programs, such as pension costs and FICA and any
other costs specifically incurred on behalf of, and in direct benefit to, the IHEs, are allowable costs of such IHEs whether or not these costs are
recorded in the accounting records of the institutions, subject to the following:
(a) The costs meet the requirements of § 200.402-411 of this subpart;
(b) The costs are properly supported by approved cost allocation plans in accordance with applicable Federal cost accounting principles in
this part; and
(c) The costs are not otherwise borne directly or indirectly by the Federal Government.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

§ 200.419 Cost accounting standards and disclosure statement.
(a) An IHE that receive an aggregate total $50 million or more in Federal awards and instruments subject to this subpart (as specified in §
200.101) in its most recently completed fiscal year must comply with the Cost Accounting Standards Board's cost accounting standards
located at 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506. CAS-covered contracts and subcontracts awarded to the IHEs are
subject to the broader range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part 30 (FAR Part 30).
(b) Disclosure statement. An IHE that receives an aggregate total $50 million or more in Federal awards and instruments subject to this
subpart (as specified in § 200.101) during its most recently completed fiscal year must disclose their cost accounting practices by filing
a Disclosure Statement (DS-2), which is reproduced in Appendix III to Part 200. With the approval of the cognizant agency for indirect
costs, an IHE may meet the DS-2 submission by submitting the DS-2 for each business unit that received $50 million or more in Federal
awards and instruments.
(1) The DS-2 must be submitted to the cognizant agency for indirect costs with a copy to the IHE's cognizant agency for audit. The
initial DS-2 and revisions to the DS-2 must be submitted in coordination with the IHE's indirect (F&A) rate proposal, unless an earlier
submission is requested by the cognizant agency for indirect costs. IHEs with CAS-covered contracts or subcontracts meeting the
dollar threshold in 48 CFR 9903.202-1(f) must submit their initial DS-2 or revisions no later than prior to the award of a CAS-covered
contract or subcontract.
(2) An IHE must maintain an accurate DS-2 and comply with disclosed cost accounting practices. An IHE must file amendments to the
DS-2 to the cognizant agency for indirect costs in advance of a disclosed practice being changed to comply with a new or modified
standard, or when a practice is changed for other reasons. An IHE may proceed with implementing the change after it has notified
the Federal cognizant agency for indirect costs. If the change represents a variation from 2 CFR part 200, the change may require
approval by the Federal cognizant agency for indirect costs, in accordance with § 200.102(b). Amendments of a DS-2 may be
submitted at any time. Resubmission of a complete, updated DS-2 is discouraged except when there are extensive changes to
disclosed practices.
(3) Cost and funding adjustments. Cost adjustments must be made by the cognizant agency for indirect costs if an IHE fails to comply
with the cost policies in this part or fails to consistently follow its established or disclosed cost accounting practices when
estimating, accumulating or reporting the costs of Federal awards, and the aggregate cost impact on Federal awards is material.
The cost adjustment must normally be made on an aggregate basis for all affected Federal awards through an adjustment of the
IHE's future F&A costs rates or other means considered appropriate by the cognizant agency for indirect costs. Under the terms of
CAS covered contracts, adjustments in the amount of funding provided may also be required when the estimated proposal costs
were not determined in accordance with established cost accounting practices.
(4) Overpayments. Excess amounts paid in the aggregate by the Federal Government under Federal awards due to a noncompliant cost
accounting practice used to estimate, accumulate, or report costs must be credited or refunded, as deemed appropriate by the
cognizant agency for indirect costs. Interest applicable to the excess amounts paid in the aggregate during the period of
noncompliance must also be determined and collected in accordance with applicable Federal agency regulations.
(5) Compliant cost accounting practice changes. Changes from one compliant cost accounting practice to another compliant practice
that are approved by the cognizant agency for indirect costs may require cost adjustments if the change has a material effect on
Federal awards and the changes are deemed appropriate by the cognizant agency for indirect costs.
(6) Responsibilities. The cognizant agency for indirect cost must:

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(i)

Determine cost adjustments for all Federal awards in the aggregate on behalf of the Federal Government. Actions of the
cognizant agency for indirect cost in making cost adjustment determinations must be coordinated with all affected Federal
awarding agencies to the extent necessary.

(ii) Prescribe guidelines and establish internal procedures to promptly determine on behalf of the Federal Government that a DS-2
adequately discloses the IHE's cost accounting practices and that the disclosed practices are compliant with applicable CAS
and the requirements of this part.
(iii) Distribute to all affected Federal awarding agencies any DS-2 determination of adequacy or noncompliance.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13, 2020]

General Provisions for Selected Items of Cost

§ 200.420 Considerations for selected items of cost.
This section provides principles to be applied in establishing the allowability of certain items involved in determining cost, in addition to the
requirements of Subtitle II of this subpart. These principles apply whether or not a particular item of cost is properly treated as direct cost or
indirect (F&A) cost. Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable; rather,
determination as to allowability in each case should be based on the treatment provided for similar or related items of cost, and based on the
principles described in §§ 200.402 through 200.411. In case of a discrepancy between the provisions of a specific Federal award and the
provisions below, the Federal award governs. Criteria outlined in § 200.403 must be applied in determining allowability. See also § 200.102.
[85 FR 49564, Aug. 13, 2020]

§ 200.421 Advertising and public relations.
(a) The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include
magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like.
(b) The only allowable advertising costs are those which are solely for:
(1) The recruitment of personnel required by the non-Federal entity for performance of a Federal award (See also § 200.463);
(2) The procurement of goods and services for the performance of a Federal award;
(3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when non-Federal entities are
reimbursed for disposal costs at a predetermined amount; or
(4) Program outreach and other specific purposes necessary to meet the requirements of the Federal award.
(c) The term “public relations” includes community relations and means those activities dedicated to maintaining the image of the nonFederal entity or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of
the public.
(d) The only allowable public relations costs are:
(1) Costs specifically required by the Federal award;
(2) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from
performance of the Federal award (these costs are considered necessary as part of the outreach effort for the Federal award); or
(3) Costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are
limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of
funding opportunities, financial matters, etc.
(e) Unallowable advertising and public relations costs include the following:
(1) All advertising and public relations costs other than as specified in paragraphs (b) and (d) of this section;
(2) Costs of meetings, conventions, convocations, or other events related to other activities of the entity (see also § 200.432), including:
(i)

Costs of displays, demonstrations, and exhibits;

(ii) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special
events; and
(iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing
briefings;
(3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs;
(4) Costs of advertising and public relations designed solely to promote the non-Federal entity.
[78 FR 76808, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

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§ 200.422 Advisory councils.
Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal awarding agency or as an indirect
cost where allocable to Federal awards. See § 200.444, applicable to States, local governments, and Indian tribes.
[85 FR 49564, Aug. 13, 2020]

§ 200.423 Alcoholic beverages.
Costs of alcoholic beverages are unallowable.

§ 200.424 Alumni/ae activities.
Costs incurred by IHEs for, or in support of, alumni/ae activities are unallowable.

§ 200.425 Audit services.
(a) A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Single Audit Act Amendments
of 1996 (31 U.S.C. 7501-7507), as implemented by requirements of this part, are allowable. However, the following audit costs are
unallowable:
(1) Any costs when audits required by the Single Audit Act and subpart F of this part have not been conducted or have been conducted
but not in accordance therewith; and
(2) Any costs of auditing a non-Federal entity that is exempted from having an audit conducted under the Single Audit Act and subpart
F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity's fiscal year.
(b) The costs of a financial statement audit of a non-Federal entity that does not currently have a Federal award may be included in the
indirect cost pool for a cost allocation plan or indirect cost proposal.
(c) Pass-through entities may charge Federal awards for the cost of agreed-upon-procedures engagements to monitor subrecipients (in
accordance with subpart D, §§ 200.331-333) who are exempted from the requirements of the Single Audit Act and subpart F of this part.
This cost is allowable only if the agreed-upon-procedures engagements are:
(1) Conducted in accordance with GAGAS attestation standards;
(2) Paid for and arranged by the pass-through entity; and
(3) Limited in scope to one or more of the following types of compliance requirements: activities allowed or unallowed; allowable
costs/cost principles; eligibility; and reporting.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

§ 200.426 Bad debts.
Bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated) arising from uncollectable
accounts and other claims, are unallowable. Related collection costs, and related legal costs, arising from such debts after they have been
determined to be uncollectable are also unallowable. See also § 200.428.
[85 FR 49565, Aug. 13, 2020]

§ 200.427 Bonding costs.
(a) Bonding costs arise when the Federal awarding agency requires assurance against financial loss to itself or others by reason of the act or
default of the non-Federal entity. They arise also in instances where the non-Federal entity requires similar assurance, including: bonds as
bid, performance, payment, advance payment, infringement, and fidelity bonds for employees and officials.
(b) Costs of bonding required pursuant to the terms and conditions of the Federal award are allowable.
(c) Costs of bonding required by the non-Federal entity in the general conduct of its operations are allowable as an indirect cost to the extent
that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances.

§ 200.428 Collections of improper payments.
The costs incurred by a non-Federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. Amounts
collected may be used by the non-Federal entity in accordance with cash management standards set forth in § 200.305.
[85 FR 49565, Aug. 13, 2020]

§ 200.429 Commencement and convocation costs.
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For IHEs, costs incurred for commencements and convocations are unallowable, except as provided for in (B)(9) Student Administration and
Services, in appendix III to this part, as activity costs.
[85 FR 49565, Aug. 13, 2020]

§ 200.430 Compensation - personal services.
(a) General. Compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered
during the period of performance under the Federal award, including but not necessarily limited to wages and salaries. Compensation for
personal services may also include fringe benefits which are addressed in § 200.431. Costs of compensation are allowable to the extent
that they satisfy the specific requirements of this part, and that the total compensation for individual employees:
(1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied
to both Federal and non-Federal activities;
(2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the
requirements of Federal statute, where applicable; and
(3) Is determined and supported as provided in paragraph (i) of this section, when applicable.
(b) Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is
consistent with that paid for similar work in other activities of the non-Federal entity. In cases where the kinds of employees required for
Federal awards are not found in the other activities of the non-Federal entity, compensation will be considered reasonable to the extent
that it is comparable to that paid for similar work in the labor market in which the non-Federal entity competes for the kind of employees
involved.
(c) Professional activities outside the non-Federal entity. Unless an arrangement is specifically authorized by a Federal awarding agency, a
non-Federal entity must follow its written non-Federal entity-wide policies and practices concerning the permissible extent of
professional services that can be provided outside the non-Federal entity for non-organizational compensation. Where such non-Federal
entity-wide written policies do not exist or do not adequately define the permissible extent of consulting or other non-organizational
activities undertaken for extra outside pay, the Federal Government may require that the effort of professional staff working on Federal
awards be allocated between:
(1) Non-Federal entity activities, and
(2) Non-organizational professional activities. If the Federal awarding agency considers the extent of non-organizational professional
effort excessive or inconsistent with the conflicts-of-interest terms and conditions of the Federal award, appropriate arrangements
governing compensation will be negotiated on a case-by-case basis.
(d) Unallowable costs.
(1) Costs which are unallowable under other sections of these principles must not be allowable under this section solely on the basis
that they constitute personnel compensation.
(2) The allowable compensation for certain employees is subject to a ceiling in accordance with statute. For the amount of the ceiling
for cost-reimbursement contracts, the covered compensation subject to the ceiling, the covered employees, and other relevant
provisions, see 10 U.S.C. 2324(e)(1)(P), and 41 U.S.C. 1127 and 4304(a)(16). For other types of Federal awards, other statutory
ceilings may apply.
(e) Special considerations. Special considerations in determining allowability of compensation will be given to any change in a non-Federal
entity's compensation policy resulting in a substantial increase in its employees' level of compensation (particularly when the change
was concurrent with an increase in the ratio of Federal awards to other activities) or any change in the treatment of allowability of
specific types of compensation due to changes in Federal policy.
(f) Incentive compensation. Incentive compensation to employees based on cost reduction, or efficient performance, suggestion awards,
safety awards, etc., is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or
accrued pursuant to an agreement entered into in good faith between the non-Federal entity and the employees before the services were
rendered, or pursuant to an established plan followed by the non-Federal entity so consistently as to imply, in effect, an agreement to
make such payment.
(g) Nonprofit organizations. For compensation to members of nonprofit organizations, trustees, directors, associates, officers, or the
immediate families thereof, determination must be made that such compensation is reasonable for the actual personal services
rendered rather than a distribution of earnings in excess of costs. This may include director's and executive committee member's fees,
incentive awards, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost-of-living differentials.
(h) Institutions of Higher Education (IHEs).
(1) Certain conditions require special consideration and possible limitations in determining allowable personnel compensation costs
under Federal awards. Among such conditions are the following:
(i)

Allowable activities. Charges to Federal awards may include reasonable amounts for activities contributing and directly related
to work under an agreement, such as delivering special lectures about specific aspects of the ongoing activity, writing reports
and articles, developing and maintaining protocols (human, animals, etc.), managing substances/chemicals, managing and

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securing project-specific data, coordinating research subjects, participating in appropriate seminars, consulting with
colleagues and graduate students, and attending meetings and conferences.
(ii) Incidental activities. Incidental activities for which supplemental compensation is allowable under written institutional policy
(at a rate not to exceed institutional base salary) need not be included in the records described in paragraph (i) of this section
to directly charge payments of incidental activities, such activities must either be specifically provided for in the Federal award
budget or receive prior written approval by the Federal awarding agency.

(2) Salary basis. Charges for work performed on Federal awards by faculty members during the academic year are allowable at the IBS
rate. Except as noted in paragraph (h)(1)(ii) of this section, in no event will charges to Federal awards, irrespective of the basis of
computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an
institution. IBS is defined as the annual compensation paid by an IHE for an individual's appointment, whether that individual's time
is spent on research, instruction, administration, or other activities. IBS excludes any income that an individual earns outside of
duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member's salary to
a Federal award must not exceed the proportionate share of the IBS for the period during which the faculty member worked on the
award.
(3) Intra-Institution of Higher Education (IHE) consulting. Intra-IHE consulting by faculty should be undertaken as an IHE responsibility
requiring no compensation in addition to IBS. However, in unusual cases where consultation is across departmental lines or
involves a separate or remote operation, and the work performed by the faculty member is in addition to his or her regular
responsibilities, any charges for such work representing additional compensation above IBS are allowable provided that such
consulting arrangements are specifically provided for in the Federal award or approved in writing by the Federal awarding agency.
(4) Extra Service Pay normally represents overload compensation, subject to institutional compensation policies for services above and
beyond IBS. Where extra service pay is a result of Intra-IHE consulting, it is subject to the same requirements of paragraph (b)
above. It is allowable if all of the following conditions are met:
(i)

The non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those
working on Federal awards.

(ii) The non-Federal entity establishes a consistent written definition of work covered by IBS which is specific enough to determine
conclusively when work beyond that level has occurred. This may be described in appointment letters or other
documentations.
(iii) The supplementation amount paid is commensurate with the IBS rate of pay and the amount of additional work performed.
See paragraph (h)(2) of this section.
(iv) The salaries, as supplemented, fall within the salary structure and pay ranges established by and documented in writing or
otherwise applicable to the non-Federal entity.
(v) The total salaries charged to Federal awards including extra service pay are subject to the Standards of Documentation as
described in paragraph (i) of this section.
(5) Periods outside the academic year.
(i)

Except as specified for teaching activity in paragraph (h)(5)(ii) of this section, charges for work performed by faculty members
on Federal awards during periods not included in the base salary period will be at a rate not in excess of the IBS.

(ii) Charges for teaching activities performed by faculty members on Federal awards during periods not included in IBS period will
be based on the normal written policy of the IHE governing compensation to faculty members for teaching assignments during
such periods.
(6) Part-time faculty. Charges for work performed on Federal awards by faculty members having only part-time appointments will be
determined at a rate not in excess of that regularly paid for part-time assignments.
(7) Sabbatical leave costs. Rules for sabbatical leave are as follow:
(i)

Costs of leaves of absence by employees for performance of graduate work or sabbatical study, travel, or research are
allowable provided the IHE has a uniform written policy on sabbatical leave for persons engaged in instruction and persons
engaged in research. Such costs will be allocated on an equitable basis among all related activities of the IHE.

(ii) Where sabbatical leave is included in fringe benefits for which a cost is determined for assessment as a direct charge, the
aggregate amount of such assessments applicable to all work of the institution during the base period must be reasonable in
relation to the IHE's actual experience under its sabbatical leave policy.
(8) Salary rates for non-faculty members. Non-faculty full-time professional personnel may also earn “extra service pay” in accordance
with the non-Federal entity's written policy and consistent with paragraph (h)(1)(i) of this section.
(i)

Standards for Documentation of Personnel Expenses
(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These
records must:
(i)

Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable,
and properly allocated;

(ii) Be incorporated into the official records of the non-Federal entity;

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(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of
compensated activities (for IHE, this per the IHE's definition of IBS);
(iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may
include the use of subsidiary records as defined in the non-Federal entity's written policy;
(v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for
treatment of incidental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works
on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity;
two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or
indirect cost activity.
(viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to
Federal awards, but may be used for interim accounting purposes, provided that:
(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed;
(B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are
identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between
workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the
longer term; and
(C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a
Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged
to the Federal award is accurate, allowable, and properly allocated.
(ix) Because practices vary as to the activity constituting a full workload (for IHEs, IBS), records may reflect categories of activities
expressed as a percentage distribution of total activities.
(x) It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting.
When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to
costs is therefore not always feasible, nor is it expected.

(2) For records which meet the standards required in paragraph (i)(1) of this section, the non-Federal entity will not be required to
provide additional support or documentation for the work performed, other than that referenced in paragraph (i)(3) of this section.
(3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges
for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must
also be supported by records indicating the total number of hours worked each day.
(4) Salaries and wages of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in
the same manner as salaries and wages claimed for reimbursement from Federal awards.
(5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal
awards may be used in place of or in addition to the records described in paragraph (1) if approved by the cognizant agency for
indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or
other quantifiable measures of work performed.
(i)

Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the
Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable
statistical sampling standards including:
(A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample
results except as provided in paragraph (i)(5)(iii) of this section;
(B) The entire time period involved must be covered by the sample; and
(C) The results must be statistically valid and applied to the period being sampled.

(ii) Allocating charges for the sampled employees' supervisors, clerical and support staffs, based on the results of the sampled
employees, will be acceptable.
(iii) Less than full compliance with the statistical sampling standards noted in subsection (5)(i) may be accepted by the cognizant
agency for indirect costs if it concludes that the amounts to be allocated to Federal awards will be minimal, or if it concludes
that the system proposed by the non-Federal entity will result in lower costs to Federal awards than a system which complies
with the standards.
(6) Cognizant agencies for indirect costs are encouraged to approve alternative proposals based on outcomes and milestones for
program performance where these are clearly documented. Where approved by the Federal cognizant agency for indirect costs,
these plans are acceptable as an alternative to the requirements of paragraph (i)(1) of this section.

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(7) For Federal awards of similar purpose activity or instances of approved blended funding, a non-Federal entity may submit
performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performanceoriented metrics, provided that such plans are approved in advance by all involved Federal awarding agencies. In these instances,
the non-Federal entity must submit a request for waiver of the requirements based on documentation that describes the method of
charging costs, relates the charging of costs to the specific activity that is applicable to all fund sources, and is based on
quantifiable measures of the activity in relation to time charged.
(8) For a non-Federal entity where the records do not meet the standards described in this section, the Federal Government may require
personnel activity reports, including prescribed certifications, or equivalent documentation that support the records as required in
this section.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13, 2020]

§ 200.431 Compensation - fringe benefits.
(a) General. Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular
salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee
insurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are
allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established
policy of the non-Federal entity.
(b) Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the
job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar
benefits, are allowable if all of the following criteria are met:
(1) They are provided under established written leave policies;
(2) The costs are equitably allocated to all related activities, including Federal awards; and,
(3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or
specified grouping of employees.
(i)

When a non-Federal entity uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is
taken and paid for. Payments for unused leave when an employee retires or terminates employment are allowable in the year
of payment.

(ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is
earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount
accrued or funded.
(c) Fringe benefits. The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health,
unemployment, and worker's compensation insurance (except as indicated in § 200.447); pension plan costs (see paragraph (i) of this
section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits,
must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the
individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged
as direct or indirect costs in accordance with the non-Federal entity's accounting practices.
(d) Cost objectives. Fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individual employees or by
allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. When the allocation method is used,
separate allocations must be made to selective groupings of employees, unless the non-Federal entity demonstrates that costs in
relationship to salaries and wages do not differ significantly for different groups of employees.
(e) Insurance. See also § 200.447(d)(1) and (2).
(1) Provisions for a reserve under a self-insurance program for unemployment compensation or workers' compensation are allowable
to the extent that the provisions represent reasonable estimates of the liabilities for such compensation, and the types of coverage,
extent of coverage, and rates and premiums would have been allowable had insurance been purchased to cover the risks. However,
provisions for self-insured liabilities which do not become payable for more than one year after the provision is made must not
exceed the present value of the liability.
(2) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibility are allowable only
to the extent that the insurance represents additional compensation. The costs of such insurance when the non-Federal entity is
named as beneficiary are unallowable.
(3) Actual claims paid to or on behalf of employees or former employees for workers' compensation, unemployment compensation,
severance pay, and similar employee benefits (e.g., post-retirement health benefits), are allowable in the year of payment provided
that the non-Federal entity follows a consistent costing policy.
(f) Automobiles. That portion of automobile costs furnished by the non-Federal entity that relates to personal use by employees (including
transportation to and from work) is unallowable as fringe benefit or indirect (F&A) costs regardless of whether the cost is reported as
taxable income to the employees.
(g) Pension plan costs. Pension plan costs which are incurred in accordance with the established policies of the non-Federal entity are
allowable, provided that:

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(1) Such policies meet the test of reasonableness.
(2) The methods of cost allocation are not discriminatory.
(3) Except for State and Local Governments, the cost assigned to each fiscal year should be determined in accordance with GAAP.
(4) The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However,
increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 calendar days
after each quarter of the year to which such costs are assignable are unallowable. Non-Federal entity may elect to follow the “Cost
Accounting Standard for Composition and Measurement of Pension Costs” (48 CFR 9904.412).
(5) Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income Security Act (ERISA) of 1974 (29
U.S.C. 1301-1461) are allowable. Late payment charges on such premiums are unallowable. Excise taxes on accumulated funding
deficiencies and other penalties imposed under ERISA are unallowable.
(6) Pension plan costs may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with
established written policies of the non-Federal entity.
(i)

For pension plans financed on a pay-as-you-go method, allowable costs will be limited to those representing actual payments
to retirees or their beneficiaries.

(ii) Pension costs calculated using an actuarial cost-based method recognized by GAAP are allowable for a given fiscal year if they
are funded for that year within six months after the end of that year. Costs funded after the six-month period (or a later period
agreed to by the cognizant agency for indirect costs) are allowable in the year funded. The cognizant agency for indirect costs
may agree to an extension of the six-month period if an appropriate adjustment is made to compensate for the timing of the
charges to the Federal Government and related Federal reimbursement and the non-Federal entity's contribution to the pension
fund. Adjustments may be made by cash refund or other equitable procedures to compensate the Federal Government for the
time value of Federal reimbursements in excess of contributions to the pension fund.
(iii) Amounts funded by the non-Federal entity in excess of the actuarially determined amount for a fiscal year may be used as the
non-Federal entity's contribution in future periods.
(iv) When a non-Federal entity converts to an acceptable actuarial cost method, as defined by GAAP, and funds pension costs in
accordance with this method, the unfunded liability at the time of conversion is allowable if amortized over a period of years in
accordance with GAAP.
(v) The Federal Government must receive an equitable share of any previously allowed pension costs (including earnings thereon)
which revert or inure to the non-Federal entity in the form of a refund, withdrawal, or other credit.
(h) Post-retirement health. Post-retirement health plans (PRHP) refers to costs of health insurance or health services not included in a
pension plan covered by paragraph (g) of this section for retirees and their spouses, dependents, and survivors. PRHP costs may be
computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies of the
non-Federal entity.
(1) For PRHP financed on a pay-as-you-go method, allowable costs will be limited to those representing actual payments to retirees or
their beneficiaries.
(2) PRHP costs calculated using an actuarial cost method recognized by GAAP are allowable if they are funded for that year within six
months after the end of that year. Costs funded after the six-month period (or a later period agreed to by the cognizant agency) are
allowable in the year funded. The Federal cognizant agency for indirect costs may agree to an extension of the six-month period if
an appropriate adjustment is made to compensate for the timing of the charges to the Federal Government and related Federal
reimbursements and the non-Federal entity's contributions to the PRHP fund. Adjustments may be made by cash refund, reduction
in current year's PRHP costs, or other equitable procedures to compensate the Federal Government for the time value of Federal
reimbursements in excess of contributions to the PRHP fund.
(3) Amounts funded in excess of the actuarially determined amount for a fiscal year may be used as the non-Federal entity contribution
in a future period.
(4) When a non-Federal entity converts to an acceptable actuarial cost method and funds PRHP costs in accordance with this method,
the initial unfunded liability attributable to prior years is allowable if amortized over a period of years in accordance with GAAP, or, if
no such GAAP period exists, over a period negotiated with the cognizant agency for indirect costs.
(5) To be allowable in the current year, the PRHP costs must be paid either to:
(i)

An insurer or other benefit provider as current year costs or premiums, or

(ii) An insurer or trustee to maintain a trust fund or reserve for the sole purpose of providing post-retirement benefits to retirees
and other beneficiaries.
(6) The Federal Government must receive an equitable share of any amounts of previously allowed post-retirement benefit costs
(including earnings thereon) which revert or inure to the non-Federal entity in the form of a refund, withdrawal, or other credit.
(i)

Severance pay.
(1) Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular salaries and wages, by nonFederal entities to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in
each case, it is required by

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(i)

Law;

(ii) Employer-employee agreement;
(iii) Established policy that constitutes, in effect, an implied agreement on the non-Federal entity's part; or
(iv) Circumstances of the particular employment.
(2) Costs of severance payments are divided into two categories as follows:
(i)

Actual normal turnover severance payments must be allocated to all activities; or, where the non-Federal entity provides for a
reserve for normal severances, such method will be acceptable if the charge to current operations is reasonable in light of
payments actually made for normal severances over a representative past period, and if amounts charged are allocated to all
activities of the non-Federal entity.

(ii) Measurement of costs of abnormal or mass severance pay by means of an accrual will not achieve equity to both parties.
Thus, accruals for this purpose are not allowable. However, the Federal Government recognizes its responsibility to participate,
to the extent of its fair share, in any specific payment. Prior approval by the Federal awarding agency or cognizant agency for
indirect cost, as appropriate, is required.
(3) Costs incurred in certain severance pay packages which are in an amount in excess of the normal severance pay paid by the nonFederal entity to an employee upon termination of employment and are paid to the employee contingent upon a change in
management control over, or ownership of, the non-Federal entity's assets, are unallowable.
(4) Severance payments to foreign nationals employed by the non-Federal entity outside the United States, to the extent that the
amount exceeds the customary or prevailing practices for the non-Federal entity in the United States, are unallowable, unless they
are necessary for the performance of Federal programs and approved by the Federal awarding agency.
(5) Severance payments to foreign nationals employed by the non-Federal entity outside the United States due to the termination of the
foreign national as a result of the closing of, or curtailment of activities by, the non-Federal entity in that country, are unallowable,
unless they are necessary for the performance of Federal programs and approved by the Federal awarding agency.
(j)

For IHEs only.
(1) Fringe benefits in the form of undergraduate and graduate tuition or remission of tuition for individual employees are allowable,
provided such benefits are granted in accordance with established non-Federal entity policies, and are distributed to all non-Federal
entity activities on an equitable basis. Tuition benefits for family members other than the employee are unallowable.
(2) Fringe benefits in the form of tuition or remission of tuition for individual employees not employed by IHEs are limited to the tax-free
amount allowed per section 127 of the Internal Revenue Code as amended.
(3) IHEs may offer employees tuition waivers or tuition reductions, provided that the benefit does not discriminate in favor of highly
compensated employees. Employees can exercise these benefits at other institutions according to institutional policy. See §
200.466, for treatment of tuition remission provided to students.

(k) Fringe benefit programs and other benefit costs. For IHEs whose costs are paid by state or local governments, fringe benefit programs
(such as pension costs and FICA) and any other benefits costs specifically incurred on behalf of, and in direct benefit to, the non-Federal
entity, are allowable costs of such non-Federal entities whether or not these costs are recorded in the accounting records of the nonFederal entities, subject to the following:
(1) The costs meet the requirements of Basic Considerations in §§ 200.402 through 200.411;
(2) The costs are properly supported by approved cost allocation plans in accordance with applicable Federal cost accounting
principles; and
(3) The costs are not otherwise borne directly or indirectly by the Federal Government.
[85 FR 49565, Aug. 13, 2020]

§ 200.432 Conferences.
A conference is defined as a meeting, retreat, seminar, symposium, workshop or event whose primary purpose is the dissemination of technical
information beyond the non-Federal entity and is necessary and reasonable for successful performance under the Federal award. Allowable
conference costs paid by the non-Federal entity as a sponsor or host of the conference may include rental of facilities, speakers' fees, costs of
meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions
of the Federal award. As needed, the costs of identifying, but not providing, locally available dependent-care resources are allowable. Conference
hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner
that minimizes costs to the Federal award. The Federal awarding agency may authorize exceptions where appropriate for programs including
Indian tribes, children, and the elderly. See also §§ 200.438, 200.456, and 200.475.
[85 FR 49567, Aug. 13, 2020]

§ 200.433 Contingency provisions.
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(a) Contingency is that part of a budget estimate of future costs (typically of large construction projects, IT systems, or other items as
approved by the Federal awarding agency) which is associated with possible events or conditions arising from causes the precise
outcome of which is indeterminable at the time of estimate, and that experience shows will likely result, in aggregate, in additional costs
for the approved activity or project. Amounts for major project scope changes, unforeseen risks, or extraordinary events may not be
included.
(b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be explicitly included in budget
estimates, to the extent they are necessary to improve the precision of those estimates. Amounts must be estimated using broadlyaccepted cost estimating methodologies, specified in the budget documentation of the Federal award, and accepted by the Federal
awarding agency. As such, contingency amounts are to be included in the Federal award. In order for actual costs incurred to be
allowable, they must comply with the cost principles and other requirements in this part (see also §§ 200.300 and 200.403 of this part);
be necessary and reasonable for proper and efficient accomplishment of project or program objectives, and be verifiable from the nonFederal entity's records.
(c) Payments made by the Federal awarding agency to the non-Federal entity's “contingency reserve” or any similar payment made for events
the occurrence of which cannot be foretold with certainty as to the time or intensity, or with an assurance of their happening, are
unallowable, except as noted in §§ 200.431 and 200.447.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020]

§ 200.434 Contributions and donations.
(a) Costs of contributions and donations, including cash, property, and services, from the non-Federal entity to other entities, are
unallowable.
(b) The value of services and property donated to the non-Federal entity may not be charged to the Federal award either as a direct or
indirect (F&A) cost. The value of donated services and property may be used to meet cost sharing or matching requirements (see §
200.306). Depreciation on donated assets is permitted in accordance with § 200.436, as long as the donated property is not counted
towards cost sharing or matching requirements.
(c) Services donated or volunteered to the non-Federal entity may be furnished to a non-Federal entity by professional and technical
personnel, consultants, and other skilled and unskilled labor. The value of these services may not be charged to the Federal award either
as a direct or indirect cost. However, the value of donated services may be used to meet cost sharing or matching requirements in
accordance with the provisions of § 200.306.
(d) To the extent feasible, services donated to the non-Federal entity will be supported by the same methods used to support the allocability
of regular personnel services.
(e) The following provisions apply to nonprofit organizations. The value of services donated to the nonprofit organization utilized in the
performance of a direct cost activity must be considered in the determination of the non-Federal entity's indirect cost rate(s) and,
accordingly, must be allocated a proportionate share of applicable indirect costs when the following circumstances exist:
(1) The aggregate value of the services is material;
(2) The services are supported by a significant amount of the indirect costs incurred by the non-Federal entity;
(i)

In those instances where there is no basis for determining the fair market value of the services rendered, the non-Federal entity
and the cognizant agency for indirect costs must negotiate an appropriate allocation of indirect cost to the services.

(ii) Where donated services directly benefit a project supported by the Federal award, the indirect costs allocated to the services
will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the Federal award or
used to meet cost sharing or matching requirements.
(f) Fair market value of donated services must be computed as described in § 200.306.
(g) Personal Property and Use of Space.
(1) Donated personal property and use of space may be furnished to a non-Federal entity. The value of the personal property and space
may not be charged to the Federal award either as a direct or indirect cost.
(2) The value of the donations may be used to meet cost sharing or matching share requirements under the conditions described in §
200.300 of this part. The value of the donations must be determined in accordance with § 200.300. Where donations are treated as
indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020]

§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements.
(a) Definitions for the purposes of this section.
(1) Conviction means a judgment or conviction of a criminal offense by any court of competent jurisdiction, whether entered upon
verdict or a plea, including a conviction due to a plea of nolo contendere.

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(2) Costs include the services of in-house or private counsel, accountants, consultants, or others engaged to assist the non-Federal
entity before, during, and after commencement of a judicial or administrative proceeding, that bear a direct relationship to the
proceeding.
(3) Fraud means:
(i)

Acts of fraud or corruption or attempts to defraud the Federal Government or to corrupt its agents,

(ii) Acts that constitute a cause for debarment or suspension (as specified in agency regulations), and
(iii) Acts which violate the False Claims Act (31 U.S.C. 3729-3732) or the Anti-kickback Act (41 U.S.C. 1320a-7b(b)).
(4) Penalty does not include restitution, reimbursement, or compensatory damages.
(5) Proceeding includes an investigation.
(b) Costs.
(1) Except as otherwise described herein, costs incurred in connection with any criminal, civil or administrative proceeding (including
filing of a false certification) commenced by the Federal Government, a state, local government, or foreign government, or joined by
the Federal Government (including a proceeding under the False Claims Act), against the non-Federal entity, (or commenced by third
parties or a current or former employee of the non-Federal entity who submits a whistleblower complaint of reprisal in accordance
with 10 U.S.C. 2409 or 41 U.S.C. 4712), are not allowable if the proceeding:
(i)

Relates to a violation of, or failure to comply with, a Federal, state, local or foreign statute, regulation or the terms and
conditions of the Federal award, by the non-Federal entity (including its agents and employees); and

(ii) Results in any of the following dispositions:
(A) In a criminal proceeding, a conviction.
(B) In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of nonFederal entity liability.
(C) In the case of any civil or administrative proceeding, the disallowance of costs or the imposition of a monetary penalty, or
an order issued by the Federal awarding agency head or delegate to the non-Federal entity to take corrective action under
10 U.S.C. 2409 or 41 U.S.C. 4712.
(D) A final decision by an appropriate Federal official to debar or suspend the non-Federal entity, to rescind or void a Federal
award, or to terminate a Federal award by reason of a violation or failure to comply with a statute, regulation, or the terms
and conditions of the Federal award.
(E) A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in
paragraphs (b)(1)(ii)(A) through (D) of this section.
(2) If more than one proceeding involves the same alleged misconduct, the costs of all such proceedings are unallowable if any results
in one of the dispositions shown in paragraph (b) of this section.
(c) If a proceeding referred to in paragraph (b) of this section is commenced by the Federal Government and is resolved by consent or
compromise pursuant to an agreement by the non-Federal entity and the Federal Government, then the costs incurred may be allowed to
the extent specifically provided in such agreement.
(d) If a proceeding referred to in paragraph (b) of this section is commenced by a state, local or foreign government, the authorized Federal
official may allow the costs incurred if such authorized official determines that the costs were incurred as a result of:
(1) A specific term or condition of the Federal award, or
(2) Specific written direction of an authorized official of the Federal awarding agency.
(e) Costs incurred in connection with proceedings described in paragraph (b) of this section, which are not made unallowable by that
subsection, may be allowed but only to the extent that:
(1) The costs are reasonable and necessary in relation to the administration of the Federal award and activities required to deal with the
proceeding and the underlying cause of action;
(2) Payment of the reasonable, necessary, allocable and otherwise allowable costs incurred is not prohibited by any other provision(s)
of the Federal award;
(3) The costs are not recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise;
and,
(4) An authorized Federal official must determine the percentage of costs allowed considering the complexity of litigation, generally
accepted principles governing the award of legal fees in civil actions involving the United States, and such other factors as may be
appropriate. Such percentage must not exceed 80 percent. However, if an agreement reached under paragraph (c) of this section
has explicitly considered this 80 percent limitation and permitted a higher percentage, then the full amount of costs resulting from
that agreement are allowable.

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(f) Costs incurred by the non-Federal entity in connection with the defense of suits brought by its employees or ex-employees under section
2 of the Major Fraud Act of 1988 (18 U.S.C. 1031), including the cost of all relief necessary to make such employee whole, where the nonFederal entity was found liable or settled, are unallowable.
(g) Costs of prosecution of claims against the Federal Government, including appeals of final Federal agency decisions, are unallowable.
(h) Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent infringement litigation, are
unallowable unless otherwise provided for in the Federal award.
(i)

Costs which may be unallowable under this section, including directly associated costs, must be segregated and accounted for
separately. During the pendency of any proceeding covered by paragraphs (b) and (f) of this section, the Federal Government must
generally withhold payment of such costs. However, if in its best interests, the Federal Government may provide for conditional payment
upon provision of adequate security, or other adequate assurance, and agreement to repay all unallowable costs, plus interest, if the
costs are subsequently determined to be unallowable.

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014]

§ 200.436 Depreciation.
(a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use. The non-Federal entity may be
compensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accordance with GAAP,
provided that they are used, needed in the non-Federal entity's activities, and properly allocated to Federal awards. Such compensation
must be made by computing depreciation.
(b) The allocation for depreciation must be made in accordance with Appendices III through IX.
(c) Depreciation is computed applying the following rules. The computation of depreciation must be based on the acquisition cost of the
assets involved. For an asset donated to the non-Federal entity by a third party, its fair market value at the time of the donation must be
considered as the acquisition cost. Such assets may be depreciated or claimed as matching but not both. For the computation of
depreciation, the acquisition cost will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government, irrespective of where title was
originally vested or where it is presently located;
(3) Any portion of the cost of buildings and equipment contributed by or for the non-Federal entity that are already claimed as matching
or where law or agreement prohibits recovery;
(4) Any asset acquired solely for the performance of a non-Federal award; and
(d) When computing depreciation charges, the following must be observed:
(1) The period of useful service or useful life established in each case for usable capital assets must take into consideration such
factors as type of construction, nature of the equipment, technological developments in the particular area, historical data, and the
renewal and replacement policies followed for the individual items or classes of assets involved.
(2) The depreciation method used to charge the cost of an asset (or group of assets) to accounting periods must reflect the pattern of
consumption of the asset during its useful life. In the absence of clear evidence indicating that the expected consumption of the
asset will be significantly greater in the early portions than in the later portions of its useful life, the straight-line method must be
presumed to be the appropriate method. Depreciation methods once used may not be changed unless approved in advance by the
cognizant agency. The depreciation methods used to calculate the depreciation amounts for indirect (F&A) rate purposes must be
the same methods used by the non-Federal entity for its financial statements.
(3) The entire building, including the shell and all components, may be treated as a single asset and depreciated over a single useful
life. A building may also be divided into multiple components. Each component item may then be depreciated over its estimated
useful life. The building components must be grouped into three general components of a building: building shell (including
construction and design costs), building services systems (e.g., elevators, HVAC, plumbing system and heating and air-conditioning
system) and fixed equipment (e.g., sterilizers, casework, fume hoods, cold rooms and glassware/washers). In exceptional cases, a
cognizant agency may authorize a non-Federal entity to use more than these three groupings. When a non-Federal entity elects to
depreciate its buildings by its components, the same depreciation methods must be used for indirect (F&A) purposes and financial
statements purposes, as described in paragraphs (d)(1) and (2) of this section.
(4) No depreciation may be allowed on any assets that have outlived their depreciable lives.
(5) Where the depreciation method is introduced to replace the use allowance method, depreciation must be computed as if the asset
had been depreciated over its entire life (i.e., from the date the asset was acquired and ready for use to the date of disposal or
withdrawal from service). The total amount of use allowance and depreciation for an asset (including imputed depreciation
applicable to periods prior to the conversion from the use allowance method as well as depreciation after the conversion) may not
exceed the total acquisition cost of the asset.
(e) Charges for depreciation must be supported by adequate property records, and physical inventories must be taken at least once every
two years to ensure that the assets exist and are usable, used, and needed. Statistical sampling techniques may be used in taking these
inventories. In addition, adequate depreciation records showing the amount of depreciation must be maintained.

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[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.437 Employee health and welfare costs.
(a) Costs incurred in accordance with the non-Federal entity's documented policies for the improvement of working conditions, employeremployee relations, employee health, and employee performance are allowable.
(b) Such costs will be equitably apportioned to all activities of the non-Federal entity. Income generated from any of these activities will be
credited to the cost thereof unless such income has been irrevocably sent to employee welfare organizations.
(c) Losses resulting from operating food services are allowable only if the non-Federal entity's objective is to operate such services on a
break-even basis. Losses sustained because of operating objectives other than the above are allowable only:
(1) Where the non-Federal entity can demonstrate unusual circumstances; and
(2) With the approval of the cognizant agency for indirect costs.

§ 200.438 Entertainment costs.
Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific
costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the
Federal award or with prior written approval of the Federal awarding agency.

§ 200.439 Equipment and other capital expenditures.
(a) See § 200.1 for the definitions of capital expenditures, equipment, special purpose equipment, general purpose equipment, acquisition
cost, and capital assets.
(b) The following rules of allowability must apply to equipment and other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior
written approval of the Federal awarding agency or pass-through entity.
(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or
more have the prior written approval of the Federal awarding agency or pass-through entity.
(3) Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are
unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. See §
200.436, for rules on the allowability of depreciation on buildings, capital improvements, and equipment. See also § 200.465.
(4) When approved as a direct charge pursuant to paragraphs (b)(1) through (3) of this section, capital expenditures will be charged in
the period in which the expenditure is incurred, or as otherwise determined appropriate and negotiated with the Federal awarding
agency.
(5) The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing
to claim the otherwise allowable depreciation on the equipment, or by amortizing the amount to be written off over a period of years
negotiated with the Federal cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the non-Federal entity is instructed by the Federal awarding agency to otherwise dispose of or
transfer the equipment the costs of such disposal or transfer are allowable.
(7) Equipment and other capital expenditures are unallowable as indirect costs. See § 200.436.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.440 Exchange rates.
(a) Cost increases for fluctuations in exchange rates are allowable costs subject to the availability of funding. Prior approval of exchange
rate fluctuations is required only when the change results in the need for additional Federal funding, or the increased costs result in the
need to significantly reduce the scope of the project. The Federal awarding agency must however ensure that adequate funds are
available to cover currency fluctuations in order to avoid a violation of the Anti-Deficiency Act.
(b) The non-Federal entity is required to make reviews of local currency gains to determine the need for additional federal funding before the
expiration date of the Federal award. Subsequent adjustments for currency increases may be allowable only when the non-Federal entity
provides the Federal awarding agency with adequate source documentation from a commonly used source in effect at the time the
expense was made, and to the extent that sufficient Federal funds are available.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014]

§ 200.441 Fines, penalties, damages and other settlements.

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Costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and
regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written
approval of the Federal awarding agency. See also § 200.435.
[85 FR 49568, Aug. 13, 2020]

§ 200.442 Fund raising and investment management costs.
(a) Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar
expenses incurred to raise capital or obtain contributions are unallowable. Fund raising costs for the purposes of meeting the Federal
program objectives are allowable with prior written approval from the Federal awarding agency. Proposal costs are covered in § 200.460.
(b) Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable except when
associated with investments covering pension, self-insurance, or other funds which include Federal participation allowed by this part.
(c) Costs related to the physical custody and control of monies and securities are allowable.
(d) Both allowable and unallowable fund-raising and investment activities must be allocated as an appropriate share of indirect costs under
the conditions described in § 200.413.
[85 FR 49568, Aug. 13, 2020]

§ 200.443 Gains and losses on disposition of depreciable assets.
(a) Gains and losses on the sale, retirement, or other disposition of depreciable property must be included in the year in which they occur as
credits or charges to the asset cost grouping(s) in which the property was included. The amount of the gain or loss to be included as a
credit or charge to the appropriate asset cost grouping(s) is the difference between the amount realized on the property and the
undepreciated basis of the property.
(b) Gains and losses from the disposition of depreciable property must not be recognized as a separate credit or charge under the following
conditions:
(1) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under §§ 200.436 and
200.439.
(2) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in
determining the depreciation cost basis of the new item.
(3) A loss results from the failure to maintain permissible insurance, except as otherwise provided in § 200.447.
(4) Compensation for the use of the property was provided through use allowances in lieu of depreciation.
(5) Gains and losses arising from mass or extraordinary sales, retirements, or other dispositions must be considered on a case-by-case
basis.
(c) Gains or losses of any nature arising from the sale or exchange of property other than the property covered in paragraph (a) of this
section, e.g., land, must be excluded in computing Federal award costs.
(d) When assets acquired with Federal funds, in part or wholly, are disposed of, the distribution of the proceeds must be made in accordance
with §§ 200.310 through 200.316 of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.444 General costs of government.
(a) For states, local governments, and Indian Tribes, the general costs of government are unallowable (except as provided in § 200.475).
Unallowable costs include:
(1) Salaries and expenses of the Office of the Governor of a state or the chief executive of a local government or the chief executive of
an Indian tribe;
(2) Salaries and other expenses of a state legislature, tribal council, or similar local governmental body, such as a county supervisor,
city council, school board, etc., whether incurred for purposes of legislation or executive direction;
(3) Costs of the judicial branch of a government;
(4) Costs of prosecutorial activities unless treated as a direct cost to a specific program if authorized by statute or regulation (however,
this does not preclude the allowability of other legal activities of the Attorney General as described in § 200.435); and
(5) Costs of other general types of government services normally provided to the general public, such as fire and police, unless provided
for as a direct cost under a program statute or regulation.

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(b) For Indian tribes and Councils of Governments (COGs) (see definition for Local government in § 200.1 of this part), up to 50% of salaries
and expenses directly attributable to managing and operating Federal programs by the chief executive and his or her staff can be
included in the indirect cost calculation without documentation.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.445 Goods or services for personal use.
(a) Costs of goods or services for personal use of the non-Federal entity's employees are unallowable regardless of whether the cost is
reported as taxable income to the employees.
(b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses are only
allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs
must be approved in advance by a Federal awarding agency.

§ 200.446 Idle facilities and idle capacity.
(a) As used in this section the following terms have the meanings set forth in this section:
(1) Facilities means land and buildings or any portion thereof, equipment individually or collectively, or any other tangible capital asset,
wherever located, and whether owned or leased by the non-Federal entity.
(2) Idle facilities means completely unused facilities that are excess to the non-Federal entity's current needs.
(3) Idle capacity means the unused capacity of partially used facilities. It is the difference between:
(i)

That which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting
from time lost for repairs, setups, unsatisfactory materials, and other normal delays and;

(ii) The extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis should be
used if it can be shown that this amount of usage would normally be expected for the type of facility involved.
(4) Cost of idle facilities or idle capacity means costs such as maintenance, repair, housing, rent, and other related costs, e.g.,
insurance, interest, and depreciation. These costs could include the costs of idle public safety emergency facilities,
telecommunications, or information technology system capacity that is built to withstand major fluctuations in load, e.g.,
consolidated data centers.
(b) The costs of idle facilities are unallowable except to the extent that:
(1) They are necessary to meet workload requirements which may fluctuate and are allocated appropriately to all benefiting programs;
or
(2) Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes
in program requirements, efforts to achieve more economical operations, reorganization, termination, or other causes which could
not have been reasonably foreseen. Under the exception stated in this subsection, costs of idle facilities are allowable for a
reasonable period of time, ordinarily not to exceed one year, depending on the initiative taken to use, lease, or dispose of such
facilities.
(c) The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates
from period to period. Such costs are allowable, provided that the capacity is reasonably anticipated to be necessary to carry out the
purpose of the Federal award or was originally reasonable and is not subject to reduction or elimination by use on other Federal awards,
subletting, renting, or sale, in accordance with sound business, economic, or security practices. Widespread idle capacity throughout an
entire facility or among a group of assets having substantially the same function may be considered idle facilities.

§ 200.447 Insurance and indemnification.
(a) Costs of insurance required or approved and maintained, pursuant to the Federal award, are allowable.
(b) Costs of other insurance in connection with the general conduct of activities are allowable subject to the following limitations:
(1) Types and extent and cost of coverage are in accordance with the non-Federal entity's policy and sound business practice.
(2) Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to, Federal Government property are
unallowable except to the extent that the Federal awarding agency has specifically required or approved such costs.
(3) Costs allowed for business interruption or other similar insurance must exclude coverage of management fees.
(4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibilities are allowable
only to the extent that the insurance represents additional compensation (see § 200.431). The cost of such insurance when the
non-Federal entity is identified as the beneficiary is unallowable.
(5) Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the non-Federal entity's
materials or workmanship are unallowable.

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(6) Medical liability (malpractice) insurance. Medical liability insurance is an allowable cost of Federal research programs only to the
extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical
liability insurance costs must be treated as a direct cost and must be assigned to individual projects based on the manner in which
the insurer allocates the risk to the population covered by the insurance.
(c) Actual losses which could have been covered by permissible insurance (through a self-insurance program or otherwise) are unallowable,
unless expressly provided for in the Federal award. However, costs incurred because of losses not covered under nominal deductible
insurance coverage provided in keeping with sound management practice, and minor losses not covered by insurance, such as spoilage,
breakage, and disappearance of small hand tools, which occur in the ordinary course of operations, are allowable.
(d) Contributions to a reserve for certain self-insurance programs including workers' compensation, unemployment compensation, and
severance pay are allowable subject to the following provisions:
(1) The type of coverage and the extent of coverage and the rates and premiums would have been allowed had insurance (including
reinsurance) been purchased to cover the risks. However, provision for known or reasonably estimated self-insured liabilities, which
do not become payable for more than one year after the provision is made, must not exceed the discounted present value of the
liability. The rate used for discounting the liability must be determined by giving consideration to such factors as the non-Federal
entity's settlement rate for those liabilities and its investment rate of return.
(2) Earnings or investment income on reserves must be credited to those reserves.
(3)
(i)

Contributions to reserves must be based on sound actuarial principles using historical experience and reasonable
assumptions. Reserve levels must be analyzed and updated at least biennially for each major risk being insured and take into
account any reinsurance, coinsurance, etc. Reserve levels related to employee-related coverages will normally be limited to the
value of claims:
(A) Submitted and adjudicated but not paid;
(B) Submitted but not adjudicated; and
(C) Incurred but not submitted.

(ii) Reserve levels in excess of the amounts based on the above must be identified and justified in the cost allocation plan or
indirect cost rate proposal.
(4) Accounting records, actuarial studies, and cost allocations (or billings) must recognize any significant differences due to types of
insured risk and losses generated by the various insured activities or agencies of the non-Federal entity. If individual departments or
agencies of the non-Federal entity experience significantly different levels of claims for a particular risk, those differences are to be
recognized by the use of separate allocations or other techniques resulting in an equitable allocation.
(5) Whenever funds are transferred from a self-insurance reserve to other accounts (e.g., general fund or unrestricted account), refunds
must be made to the Federal Government for its share of funds transferred, including earned or imputed interest from the date of
transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect cost, claims
collection regulations.
(e) Insurance refunds must be credited against insurance costs in the year the refund is received.
(f) Indemnification includes securing the non-Federal entity against liabilities to third persons and other losses not compensated by
insurance or otherwise. The Federal Government is obligated to indemnify the non-Federal entity only to the extent expressly provided for
in the Federal award, except as provided in paragraph (c) of this section.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49568, Aug. 13, 2020]

§ 200.448 Intellectual property.
(a) Patent costs.
(1) The following costs related to securing patents and copyrights are allowable:
(i)

Costs of preparing disclosures, reports, and other documents required by the Federal award, and of searching the art to the
extent necessary to make such disclosures;

(ii) Costs of preparing documents and any other patent costs in connection with the filing and prosecution of a United States
patent application where title or royalty-free license is required by the Federal Government to be conveyed to the Federal
Government; and
(iii) General counseling services relating to patent and copyright matters, such as advice on patent and copyright laws, regulations,
clauses, and employee intellectual property agreements (See also § 200.459).
(2) The following costs related to securing patents and copyrights are unallowable:
(i)

Costs of preparing disclosures, reports, and other documents, and of searching the art to make disclosures not required by the
Federal award;

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(ii) Costs in connection with filing and prosecuting any foreign patent application, or any United States patent application, where
the Federal award does not require conveying title or a royalty-free license to the Federal Government.

(b) Royalties and other costs for use of patents and copyrights.
(1) Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a copyright, patent, or rights thereto,
necessary for the proper performance of the Federal award are allowable unless:
(i)

The Federal Government already has a license or the right to free use of the patent or copyright.

(ii) The patent or copyright has been adjudicated to be invalid, or has been administratively determined to be invalid.
(iii) The patent or copyright is considered to be unenforceable.
(iv) The patent or copyright is expired.
(2) Special care should be exercised in determining reasonableness where the royalties may have been arrived at as a result of lessthan-arm's-length bargaining, such as:
(i)

Royalties paid to persons, including corporations, affiliated with the non-Federal entity.

(ii) Royalties paid to unaffiliated parties, including corporations, under an agreement entered into in contemplation that a Federal
award would be made.
(iii) Royalties paid under an agreement entered into after a Federal award is made to a non-Federal entity.
(3) In any case involving a patent or copyright formerly owned by the non-Federal entity, the amount of royalty allowed must not exceed
the cost which would have been allowed had the non-Federal entity retained title thereto.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020]

§ 200.449 Interest.
(a) General. Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entity's own
funds, however represented, are unallowable. Financing costs (including interest) to acquire, construct, or replace capital assets are
allowable, subject to the conditions in this section.
(b) Capital assets.
(1) Capital assets is defined as noted in § 200.1 of this part. An asset cost includes (as applicable) acquisition costs, construction
costs, and other costs capitalized in accordance with GAAP.
(2) For non-Federal entity fiscal years beginning on or after January 1, 2016, intangible assets include patents and computer software.
For software development projects, only interest attributable to the portion of the project costs capitalized in accordance with GAAP
is allowable.
(c) Conditions for all non-Federal entities.
(1) The non-Federal entity uses the capital assets in support of Federal awards;
(2) The allowable asset costs to acquire facilities and equipment are limited to a fair market value available to the non-Federal entity
from an unrelated (arm's length) third party.
(3) The non-Federal entity obtains the financing via an arm's-length transaction (that is, a transaction with an unrelated third party); or
claims reimbursement of actual interest cost at a rate available via such a transaction.
(4) The non-Federal entity limits claims for Federal reimbursement of interest costs to the least expensive alternative. For example, a
lease contract that transfers ownership by the end of the contract may be determined less costly than purchasing through other
types of debt financing, in which case reimbursement must be limited to the amount of interest determined if leasing had been
used.
(5) The non-Federal entity expenses or capitalizes allowable interest cost in accordance with GAAP.
(6) Earnings generated by the investment of borrowed funds pending their disbursement for the asset costs are used to offset the
current period's allowable interest cost, whether that cost is expensed or capitalized. Earnings subject to being reported to the
Federal Internal Revenue Service under arbitrage requirements are excludable.
(7) The following conditions must apply to debt arrangements over $1 million to purchase or construct facilities, unless the non-Federal
entity makes an initial equity contribution to the purchase of 25 percent or more. For this purpose, “initial equity contribution” means
the amount or value of contributions made by the non-Federal entity for the acquisition of facilities prior to occupancy.
(i)

The non-Federal entity must reduce claims for reimbursement of interest cost by an amount equal to imputed interest earnings
on excess cash flow attributable to the portion of the facility used for Federal awards.

(ii) The non-Federal entity must impute interest on excess cash flow as follows:

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(A) Annually, the non-Federal entity must prepare a cumulative (from the inception of the project) report of monthly cash
inflows and outflows, regardless of the funding source. For this purpose, inflows consist of Federal reimbursement for
depreciation, amortization of capitalized construction interest, and annual interest cost. Outflows consist of initial equity
contributions, debt principal payments (less the pro-rata share attributable to the cost of land), and interest payments.
(B) To compute monthly cash inflows and outflows, the non-Federal entity must divide the annual amounts determined in
step (i) by the number of months in the year (usually 12) that the building is in service.
(C) For any month in which cumulative cash inflows exceed cumulative outflows, interest must be calculated on the excess
inflows for that month and be treated as a reduction to allowable interest cost. The rate of interest to be used must be the
three-month Treasury bill closing rate as of the last business day of that month.

(8) Interest attributable to a fully depreciated asset is unallowable.
(d) Additional conditions for states, local governments and Indian tribes. For costs to be allowable, the non-Federal entity must have incurred
the interest costs for buildings after October 1, 1980, or for land and equipment after September 1, 1995.
(1) The requirement to offset interest earned on borrowed funds against current allowable interest cost (paragraph (c)(5), above) also
applies to earnings on debt service reserve funds.
(2) The non-Federal entity will negotiate the amount of allowable interest cost related to the acquisition of facilities with asset costs of
$1 million or more, as outlined in paragraph (c)(7) of this section. For this purpose, a non-Federal entity must consider only cash
inflows and outflows attributable to that portion of the real property used for Federal awards.
(e) Additional conditions for IHEs. For costs to be allowable, the IHE must have incurred the interest costs after July 1, 1982, in connection
with acquisitions of capital assets that occurred after that date.
(f) Additional condition for nonprofit organizations. For costs to be allowable, the nonprofit organization incurred the interest costs after
September 29, 1995, in connection with acquisitions of capital assets that occurred after that date.
(g) The interest allowability provisions of this section do not apply to a nonprofit organization subject to “full coverage” under the Cost
Accounting Standards (CAS), as defined at 48 CFR 9903.201-2(a). The non-Federal entity's Federal awards are instead subject to CAS
414 (48 CFR 9904.414), “Cost of Money as an Element of the Cost of Facilities Capital”, and CAS 417 (48 CFR 9904.417), “Cost of Money
as an Element of the Cost of Capital Assets Under Construction”.
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13, 2020]

§ 200.450 Lobbying.
(a) The cost of certain influencing activities associated with obtaining grants, contracts, or cooperative agreements, or loans is an
unallowable cost. Lobbying with respect to certain grants, contracts, cooperative agreements, and loans is governed by relevant statutes,
including among others, the provisions of 31 U.S.C. 1352, as well as the common rule, “New Restrictions on Lobbying” published on
February 26, 1990, including definitions, and the Office of Management and Budget “Governmentwide Guidance for New Restrictions on
Lobbying” and notices published on December 20, 1989, June 15, 1990, January 15, 1992, and January 19, 1996.
(b) Executive lobbying costs. Costs incurred in attempting to improperly influence either directly or indirectly, an employee or officer of the
executive branch of the Federal Government to give consideration or to act regarding a Federal award or a regulatory matter are
unallowable. Improper influence means any influence that induces or tends to induce a Federal employee or officer to give consideration
or to act regarding a Federal award or regulatory matter on any basis other than the merits of the matter.
(c) In addition to the above, the following restrictions are applicable to nonprofit organizations and IHEs:
(1) Costs associated with the following activities are unallowable:
(i)

Attempts to influence the outcomes of any Federal, state, or local election, referendum, initiative, or similar procedure, through
in-kind or cash contributions, endorsements, publicity, or similar activity;

(ii) Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or
other organization established for the purpose of influencing the outcomes of elections in the United States;
(iii) Any attempt to influence:
(A) The introduction of Federal or state legislation;
(B) The enactment or modification of any pending Federal or state legislation through communication with any member or
employee of the Congress or state legislature (including efforts to influence state or local officials to engage in similar
lobbying activity);
(C) The enactment or modification of any pending Federal or state legislation by preparing, distributing, or using publicity or
propaganda, or by urging members of the general public, or any segment thereof, to contribute to or participate in any
mass demonstration, march, rally, fund raising drive, lobbying campaign or letter writing or telephone campaign; or
(D) Any government official or employee in connection with a decision to sign or veto enrolled legislation;

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(iv) Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information
regarding legislation, and analyzing the effect of legislation, when such activities are carried on in support of or in knowing
preparation for an effort to engage in unallowable lobbying.

(2) The following activities are excepted from the coverage of paragraph (c)(1) of this section:
(i)

Technical and factual presentations on topics directly related to the performance of a grant, contract, or other agreement
(through hearing testimony, statements, or letters to the Congress or a state legislature, or subdivision, member, or cognizant
staff member thereof), in response to a documented request (including a Congressional Record notice requesting testimony or
statements for the record at a regularly scheduled hearing) made by the non-Federal entity's member of congress, legislative
body or a subdivision, or a cognizant staff member thereof, provided such information is readily obtainable and can be readily
put in deliverable form, and further provided that costs under this section for travel, lodging or meals are unallowable unless
incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a written request for such presentation
made by the Chairman or Ranking Minority Member of the Committee or Subcommittee conducting such hearings;

(ii) Any lobbying made unallowable by paragraph (c)(1)(iii) of this section to influence state legislation in order to directly reduce
the cost, or to avoid material impairment of the non-Federal entity's authority to perform the grant, contract, or other
agreement; or
(iii) Any activity specifically authorized by statute to be undertaken with funds from the Federal award.
(iv) Any activity excepted from the definitions of “lobbying” or “influencing legislation” by the Internal Revenue Code provisions that
require nonprofit organizations to limit their participation in direct and “grass roots” lobbying activities in order to retain their
charitable deduction status and avoid punitive excise taxes, I.R.C. §§ 501(c)(3), 501(h), 4911(a), including:
(A) Nonpartisan analysis, study, or research reports;
(B) Examinations and discussions of broad social, economic, and similar problems; and
(C) Information provided upon request by a legislator for technical advice and assistance, as defined by I.R.C. § 4911(d)(2)
and 26 CFR 56.4911-2(c)(1)-(c)(3).
(v) When a non-Federal entity seeks reimbursement for indirect (F&A) costs, total lobbying costs must be separately identified in
the indirect (F&A) cost rate proposal, and thereafter treated as other unallowable activity costs in accordance with the
procedures of § 200.413.
(vi) The non-Federal entity must submit as part of its annual indirect (F&A) cost rate proposal a certification that the requirements
and standards of this section have been complied with. (See also § 200.415.)
(vii)
(A) Time logs, calendars, or similar records are not required to be created for purposes of complying with the record keeping
requirements in § 200.302 with respect to lobbying costs during any particular calendar month when:
(1) The employee engages in lobbying (as defined in paragraphs (c)(1) and (c)(2) of this section) 25 percent or less of
the employee's compensated hours of employment during that calendar month; and
(2) Within the preceding five-year period, the non-Federal entity has not materially misstated allowable or unallowable
costs of any nature, including legislative lobbying costs.
(B) When conditions in paragraph (c)(2)(vii)(A)(1) and (2) of this section are met, non-Federal entities are not required to
establish records to support the allowability of claimed costs in addition to records already required or maintained. Also,
when conditions in paragraphs (c)(2)(vii)(A)(1) and (2) of this section are met, the absence of time logs, calendars, or
similar records will not serve as a basis for disallowing costs by contesting estimates of lobbying time spent by
employees during a calendar month.
(viii) The Federal awarding agency must establish procedures for resolving in advance, in consultation with OMB, any significant
questions or disagreements concerning the interpretation or application of this section. Any such advance resolutions must be
binding in any subsequent settlements, audits, or investigations with respect to that grant or contract for purposes of
interpretation of this part, provided, however, that this must not be construed to prevent a contractor or non-Federal entity from
contesting the lawfulness of such a determination.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.451 Losses on other awards or contracts.
Any excess of costs over income under any other award or contract of any nature is unallowable. This includes, but is not limited to, the nonFederal entity's contributed portion by reason of cost-sharing agreements or any under-recoveries through negotiation of flat amounts for indirect
(F&A) costs. Also, any excess of costs over authorized funding levels transferred from any award or contract to another award or contract is
unallowable. All losses are not allowable indirect (F&A) costs and are required to be included in the appropriate indirect cost rate base for
allocation of indirect costs.

§ 200.452 Maintenance and repair costs.
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Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including
Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life,
but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings
and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable
to the extent not paid through rental or other agreements.
[85 FR 49569, Aug. 13, 2020]

§ 200.453 Materials and supplies costs, including costs of computing devices.
(a) Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are allowable.
(b) Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or
stockrooms must be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied.
Incoming transportation charges are a proper part of materials and supplies costs.
(c) Materials and supplies used for the performance of a Federal award may be charged as direct costs. In the specific case of computing
devices, charging as direct costs is allowable for devices that are essential and allocable, but not solely dedicated, to the performance of
a Federal award.
(d) Where federally-donated or furnished materials are used in performing the Federal award, such materials will be used without charge.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014]

§ 200.454 Memberships, subscriptions, and professional activity costs.
(a) Costs of the non-Federal entity's membership in business, technical, and professional organizations are allowable.
(b) Costs of the non-Federal entity's subscriptions to business, professional, and technical periodicals are allowable.
(c) Costs of membership in any civic or community organization are allowable with prior approval by the Federal awarding agency or passthrough entity.
(d) Costs of membership in any country club or social or dining club or organization are unallowable.
(e) Costs of membership in organizations whose primary purpose is lobbying are unallowable. See also § 200.450.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.455 Organization costs.
Costs such as incorporation fees, brokers' fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment
counselor, whether or not employees of the non-Federal entity in connection with establishment or reorganization of an organization, are
unallowable except with prior approval of the Federal awarding agency.

§ 200.456 Participant support costs.
Participant support costs as defined in § 200.1 are allowable with the prior approval of the Federal awarding agency.
[85 FR 49569, Aug. 13, 2020]

§ 200.457 Plant and security costs.
Necessary and reasonable expenses incurred for protection and security of facilities, personnel, and work products are allowable. Such costs
include, but are not limited to, wages and uniforms of personnel engaged in security activities; equipment; barriers; protective (non-military) gear,
devices, and equipment; contractual security services; and consultants. Capital expenditures for plant security purposes are subject to § 200.439.
[85 FR 49569, Aug. 13, 2020]

§ 200.458 Pre-award costs.
Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to the negotiation and in
anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are
allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of
the Federal awarding agency. If charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise
specified by the Federal awarding agency or pass-through entity.
[85 FR 49569, Aug. 13, 2020]

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§ 200.459 Professional service costs.
(a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special
skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when
reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In
addition, legal and related services are limited under § 200.435.
(b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily
determinative. However, the following factors are relevant:
(1) The nature and scope of the service rendered in relation to the service required.
(2) The necessity of contracting for the service, considering the non-Federal entity's capability in the particular area.
(3) The past pattern of such costs, particularly in the years prior to Federal awards.
(4) The impact of Federal awards on the non-Federal entity's business (i.e., what new problems have arisen).
(5) Whether the proportion of Federal work to the non-Federal entity's total business is such as to influence the non-Federal entity in
favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work
under Federal awards.
(6) Whether the service can be performed more economically by direct employment rather than contracting.
(7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally
funded activities.
(8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of
compensation, and termination provisions).
(c) In addition to the factors in paragraph (b) of this section, to be allowable, retainer fees must be supported by evidence of bona fide
services available or rendered.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.460 Proposal costs.
Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the
development of data necessary to support the non-Federal entity's bids or proposals. Proposal costs of the current accounting period of both
successful and unsuccessful bids and proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the
non-Federal entity. No proposal costs of past accounting periods will be allocable to the current period.

§ 200.461 Publication and printing costs.
(a) Publication costs for electronic and print media, including distribution, promotion, and general handling are allowable. If these costs are
not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the non-Federal
entity.
(b) Page charges for professional journal publications are allowable where:
(1) The publications report work supported by the Federal Government; and
(2) The charges are levied impartially on all items published by the journal, whether or not under a Federal award.
(3) The non-Federal entity may charge the Federal award during closeout for the costs of publication or sharing of research results if
the costs are not incurred during the period of performance of the Federal award. If charged to the award, these costs must be
charged to the final budget period of the award, unless otherwise specified by the Federal awarding agency.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.462 Rearrangement and reconversion costs.
(a) Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements
and alterations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Federal
awarding agency or pass-through entity.
(b) Costs incurred in the restoration or rehabilitation of the non-Federal entity's facilities to approximately the same condition existing
immediately prior to commencement of Federal awards, less costs related to normal wear and tear, are allowable.

§ 200.463 Recruiting costs.

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(a) Subject to paragraphs (b) and (c) of this section, and provided that the size of the staff recruited and maintained is in keeping with
workload requirements, costs of “help wanted” advertising, operating costs of an employment office necessary to secure and maintain
an adequate staff, costs of operating an aptitude and educational testing program, travel costs of employees while engaged in recruiting
personnel, travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of
new employees, are allowable to the extent that such costs are incurred pursuant to the non-Federal entity's standard recruitment
program. Where the non-Federal entity uses employment agencies, costs not in excess of standard commercial rates for such services
are allowable.
(b) Special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel that do not meet the test of
reasonableness or do not conform with the established practices of the non-Federal entity, are unallowable.
(c) Where relocation costs incurred incident to recruitment of a new employee have been funded in whole or in part to a Federal award, and
the newly hired employee resigns for reasons within the employee's control within 12 months after hire, the non-Federal entity will be
required to refund or credit the Federal share of such relocation costs to the Federal Government. See also § 200.464.
(d) Short-term, travel visa costs (as opposed to longer-term, immigration visas) are generally allowable expenses that may be proposed as a
direct cost. Since short-term visas are issued for a specific period and purpose, they can be clearly identified as directly connected to
work performed on a Federal award. For these costs to be directly charged to a Federal award, they must:
(1) Be critical and necessary for the conduct of the project;
(2) Be allowable under the applicable cost principles;
(3) Be consistent with the non-Federal entity's cost accounting practices and non-Federal entity policy; and
(4) Meet the definition of “direct cost” as described in the applicable cost principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020]

§ 200.464 Relocation costs of employees.
(a) Relocation costs are costs incident to the permanent change of duty assignment (for an indefinite period or for a stated period of not
less than 12 months) of an existing employee or upon recruitment of a new employee. Relocation costs are allowable, subject to the
limitations described in paragraphs (b), (c), and (d) of this section, provided that:
(1) The move is for the benefit of the employer.
(2) Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer.
(3) The reimbursement does not exceed the employee's actual (or reasonably estimated) expenses.
(b) Allowable relocation costs for current employees are limited to the following:
(1) The costs of transportation of the employee, members of his or her immediate family and his household, and personal effects to the
new location.
(2) The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging
during the transition period, up to maximum period of 30 calendar days.
(3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the employee's former home. These costs,
together with those described in (4), are limited to 8 per cent of the sales price of the employee's former home.
(4) The continuing costs of ownership (for up to six months) of the vacant former home after the settlement or lease date of the
employee's new permanent home, such as maintenance of buildings and grounds (exclusive of fixing-up expenses), utilities, taxes,
and property insurance.
(5) Other necessary and reasonable expenses normally incident to relocation, such as the costs of canceling an unexpired lease,
transportation of personal property, and purchasing insurance against loss of or damages to personal property. The cost of
canceling an unexpired lease is limited to three times the monthly rental.
(c) Allowable relocation costs for new employees are limited to those described in paragraphs (b)(1) and (2) of this section. When relocation
costs incurred incident to the recruitment of new employees have been charged to a Federal award and the employee resigns for reasons
within the employee's control within 12 months after hire, the non-Federal entity must refund or credit the Federal Government for its
share of the cost. If dependents are not permitted at the location for any reason and the costs do not include costs of transporting
household goods, the costs of travel to an overseas location must be considered travel costs in accordance with § 200.474 Travel costs,
and not this relocations costs of employees (See also § 200.464).
(d) The following costs related to relocation are unallowable:
(1) Fees and other costs associated with acquiring a new home.
(2) A loss on the sale of a former home.
(3) Continuing mortgage principal and interest payments on a home being sold.
(4) Income taxes paid by an employee related to reimbursed relocation costs.

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[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49570, Aug. 13, 2020]

§ 200.465 Rental costs of real property and equipment.
(a) Subject to the limitations described in paragraphs (b) through (d) of this section, rental costs are allowable to the extent that the rates are
reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available;
and the type, life expectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to
determine if circumstances have changed and other options are available.
(b) Rental costs under “sale and lease back” arrangements are allowable only up to the amount that would be allowed had the non-Federal
entity continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance.
(c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount (as explained in paragraph (b) of this section). For
this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement is able to control or substantially
influence the actions of the other. Such leases include, but are not limited to those between:
(1) Divisions of the non-Federal entity;
(2) The non-Federal entity under common control through common officers, directors, or members; and
(3) The non-Federal entity and a director, trustee, officer, or key employee of the non-Federal entity or an immediate family member,
either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For example, the
non-Federal entity may establish a separate corporation for the sole purpose of owning property and leasing it back to the nonFederal entity.
(4) Family members include one party with any of the following relationships to another party:
(i)

Spouse, and parents thereof;

(ii) Children, and spouses thereof;
(iii) Parents, and spouses thereof;
(iv) Siblings, and spouses thereof;
(v) Grandparents and grandchildren, and spouses thereof;
(vi) Domestic partner and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and
(vii) Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.
(5) Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as
explained in paragraph (b) of this section) that would be allowed had the non-Federal entity purchased the property on the date the
lease agreement was executed. The provisions of GAAP must be used to determine whether a lease is a capital lease. Interest
costs related to capital leases are allowable to the extent they meet the criteria in § 200.449 Interest. Unallowable costs include
amounts paid for profit, management fees, and taxes that would not have been incurred had the non-Federal entity purchased the
property.
(6) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or
residential real estate, for purposes such as the home office workspace is unallowable.
(d) Rental costs under leases which are required to be accounted for as a financed purchase under GASB standards or a finance lease under
FASB standards under GAAP are allowable only up to the amount (as explained in paragraph (b) of this section) that would be allowed
had the non-Federal entity purchased the property on the date the lease agreement was executed. Interest costs related to these leases
are allowable to the extent they meet the criteria in § 200.449. Unallowable costs include amounts paid for profit, management fees, and
taxes that would not have been incurred had the non-Federal entity purchased the property.
(e) Rental or lease payments are allowable under lease contracts where the non-Federal entity is required to recognize an intangible right-touse lease asset (per GASB) or right of use operating lease asset (per FASB) for purposes of financial reporting in accordance with GAAP.
(f) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential
real estate, for purposes such as the home office workspace is unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.466 Scholarships and student aid costs.
(a) Costs of scholarships, fellowships, and other programs of student aid at IHEs are allowable only when the purpose of the Federal award
is to provide training to selected participants and the charge is approved by the Federal awarding agency. However, tuition remission and
other forms of compensation paid as, or in lieu of, wages to students performing necessary work are allowable provided that:
(1) The individual is conducting activities necessary to the Federal award;
(2) Tuition remission and other support are provided in accordance with established policy of the IHE and consistently provided in a like
manner to students in return for similar activities conducted under Federal awards as well as other activities; and

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(3) During the academic period, the student is enrolled in an advanced degree program at a non-Federal entity or affiliated institution
and the activities of the student in relation to the Federal award are related to the degree program;
(4) The tuition or other payments are reasonable compensation for the work performed and are conditioned explicitly upon the
performance of necessary work; and
(5) It is the IHE's practice to similarly compensate students under Federal awards as well as other activities.
(b) Charges for tuition remission and other forms of compensation paid to students as, or in lieu of, salaries and wages must be subject to
the reporting requirements in § 200.430, and must be treated as direct or indirect cost in accordance with the actual work being
performed. Tuition remission may be charged on an average rate basis. See also § 200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.467 Selling and marketing costs.
Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as
direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award.
[85 FR 49570, Aug. 13, 2020]

§ 200.468 Specialized service facilities.
(a) The costs of services provided by highly complex or specialized facilities operated by the non-Federal entity, such as computing facilities,
wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either paragraph (b) or (c) of this
section, and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under § 200.406.
(b) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the
basis of a schedule of rates or established methodology that:
(1) Does not discriminate between activities under Federal awards and other activities of the non-Federal entity, including usage by the
non-Federal entity for internal purposes, and
(2) Is designed to recover only the aggregate costs of the services. The costs of each service must consist normally of both its direct
costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration
over/under-applied costs of the previous period(s).
(c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs.
(d) Under some extraordinary circumstances, where it is in the best interest of the Federal Government and the non-Federal entity to
establish alternative costing arrangements, such arrangements may be worked out with the Federal cognizant agency for indirect costs.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.469 Student activity costs.
Costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically
provided for in the Federal award.

§ 200.470 Taxes (including Value Added Tax).
(a) For states, local governments and Indian tribes:
(1) Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that disproportionately affect
Federal programs or changes in tax policies that disproportionately affect Federal programs.
(2) Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the Federal Government are
allowable.
(3) This provision does not restrict the authority of the Federal awarding agency to identify taxes where Federal participation is
inappropriate. Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the
cognizant agency for indirect costs may accept a reasonable approximation thereof.
(b) For nonprofit organizations and IHEs:
(1) In general, taxes which the non-Federal entity is required to pay and which are paid or accrued in accordance with GAAP, and
payments made to local governments in lieu of taxes which are commensurate with the local government services received are
allowable, except for:
(i)

Taxes from which exemptions are available to the non-Federal entity directly or which are available to the non-Federal entity
based on an exemption afforded the Federal Government and, in the latter case, when the Federal awarding agency makes
available the necessary exemption certificates,

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(ii) Special assessments on land which represent capital improvements, and
(iii) Federal income taxes.

(2) Any refund of taxes, and any payment to the non-Federal entity of interest thereon, which were allowed as Federal award costs, will
be credited either as a cost reduction or cash refund, as appropriate, to the Federal Government. However, any interest actually paid
or credited to an non-Federal entity incident to a refund of tax, interest, and penalty will be paid or credited to the Federal
Government only to the extent that such interest accrued over the period during which the non-Federal entity has been reimbursed
by the Federal Government for the taxes, interest, and penalties.
(c) Value Added Tax (VAT) Foreign taxes charged for the purchase of goods or services that a non-Federal entity is legally required to pay in
country is an allowable expense under Federal awards. Foreign tax refunds or applicable credits under Federal awards refer to receipts,
or reduction of expenditures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect
costs. To the extent that such credits accrued or received by the non-Federal entity relate to allowable cost, these costs must be credited
to the Federal awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the non-Federal entity
may reduce the Federal share of costs by the amount of the foreign tax reimbursement, or where Federal award has not expired, use the
foreign government tax refund for approved activities under the Federal award with prior approval of the Federal awarding agency.

§ 200.471 Telecommunication costs and video surveillance costs.
(a) Costs incurred for telecommunications and video surveillance services or equipment such as phones, internet, video surveillance, cloud
servers are allowable except for the following circumstances:
(b) Obligating or expending covered telecommunications and video surveillance services or equipment or services as described in § 200.216
to:
(1) Procure or obtain, extend or renew a contract to procure or obtain;
(2) Enter into a contract (or extend or renew a contract) to procure; or
(3) Obtain the equipment, services, or systems.
[85 FR 49570, Aug. 13, 2020]

§ 200.472 Termination costs.
Termination of a Federal award generally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have
arisen had the Federal award not been terminated. Cost principles covering these items are set forth in this section. They are to be used in
conjunction with the other provisions of this part in termination situations.
(a) The cost of items reasonably usable on the non-Federal entity's other work must not be allowable unless the non-Federal entity submits
evidence that it would not retain such items at cost without sustaining a loss. In deciding whether such items are reasonably usable on
other work of the non-Federal entity, the Federal awarding agency should consider the non-Federal entity's plans and orders for current
and scheduled activity. Contemporaneous purchases of common items by the non-Federal entity must be regarded as evidence that
such items are reasonably usable on the non-Federal entity's other work. Any acceptance of common items as allocable to the
terminated portion of the Federal award must be limited to the extent that the quantities of such items on hand, in transit, and on order
are in excess of the reasonable quantitative requirements of other work.
(b) If in a particular case, despite all reasonable efforts by the non-Federal entity, certain costs cannot be discontinued immediately after the
effective date of termination, such costs are generally allowable within the limitations set forth in this part, except that any such costs
continuing after termination due to the negligent or willful failure of the non-Federal entity to discontinue such costs must be
unallowable.
(c) Loss of useful value of special tooling, machinery, and equipment is generally allowable if:
(1) Such special tooling, special machinery, or equipment is not reasonably capable of use in the other work of the non-Federal entity,
(2) The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the Federal
awarding agency (see also § 200.313 (d)), and
(3) The loss of useful value for any one terminated Federal award is limited to that portion of the acquisition cost which bears the same
ratio to the total acquisition cost as the terminated portion of the Federal award bears to the entire terminated Federal award and
other Federal awards for which the special tooling, machinery, or equipment was acquired.
(d) Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance
of the terminated Federal award less the residual value of such leases, if:
(1) The amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the Federal
award and such further period as may be reasonable, and
(2) The non-Federal entity makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. There
also may be included the cost of alterations of such leased property, provided such alterations were necessary for the performance
of the Federal award, and of reasonable restoration required by the provisions of the lease.

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(e) Settlement expenses including the following are generally allowable:
(1) Accounting, legal, clerical, and similar costs reasonably necessary for:
(i)

The preparation and presentation to the Federal awarding agency of settlement claims and supporting data with respect to the
terminated portion of the Federal award, unless the termination is for cause (see subpart D, including §§ 200.339-200.343);
and

(ii) The termination and settlement of subawards.
(2) Reasonable costs for the storage, transportation, protection, and disposition of property provided by the Federal Government or
acquired or produced for the Federal award.
(f) Claims under subawards, including the allocable portion of claims which are common to the Federal award and to other work of the nonFederal entity, are generally allowable. An appropriate share of the non-Federal entity's indirect costs may be allocated to the amount of
settlements with contractors and/or subrecipients, provided that the amount allocated is otherwise consistent with the basic guidelines
contained in § 200.414. The indirect costs so allocated must exclude the same and similar costs claimed directly or indirectly as
settlement expenses.
[78 FR 78608, Dec. 26, 2013. Redesignated and amended at 85 FR 49570, Aug. 13, 2020]

§ 200.473 Training and education costs.
The cost of training and education provided for employee development is allowable.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020]

§ 200.474 Transportation costs.
Costs incurred for freight, express, cartage, postage, and other transportation services relating either to goods purchased, in process, or delivered,
are allowable. When such costs can readily be identified with the items involved, they may be charged directly as transportation costs or added to
the cost of such items. Where identification with the materials received cannot readily be made, inbound transportation cost may be charged to the
appropriate indirect (F&A) cost accounts if the non-Federal entity follows a consistent, equitable procedure in this respect. Outbound freight, if
reimbursable under the terms and conditions of the Federal award, should be treated as a direct cost.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020]

§ 200.475 Travel costs.
(a) General. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel
status on official business of the non-Federal entity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis
in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected
days of the trip, and results in charges consistent with those normally allowed in like circumstances in the non-Federal entity's nonfederally-funded activities and in accordance with non-Federal entity's written travel reimbursement policies. Notwithstanding the
provisions of § 200.444, travel costs of officials covered by that section are allowable with the prior written approval of the Federal
awarding agency or pass-through entity when they are specifically related to the Federal award.
(b) Lodging and subsistence. Costs incurred by employees and officers for travel, including costs of lodging, other subsistence, and
incidental expenses, must be considered reasonable and otherwise allowable only to the extent such costs do not exceed charges
normally allowed by the non-Federal entity in its regular operations as the result of the non-Federal entity's written travel policy. In
addition, if these costs are charged directly to the Federal award documentation must justify that:
(1) Participation of the individual is necessary to the Federal award; and
(2) The costs are reasonable and consistent with non-Federal entity's established travel policy.
(c)
(1) Temporary dependent care costs (as dependent is defined in 26 U.S.C. 152) above and beyond regular dependent care that directly
results from travel to conferences is allowable provided that:
(i)

The costs are a direct result of the individual's travel for the Federal award;

(ii) The costs are consistent with the non-Federal entity's documented travel policy for all entity travel; and
(iii) Are only temporary during the travel period.
(2) Travel costs for dependents are unallowable, except for travel of duration of six months or more with prior approval of the Federal
awarding agency. See also § 200.432.
(d) In the absence of an acceptable, written non-Federal entity policy regarding travel costs, the rates and amounts established under 5
U.S.C. 5701-11, (“Travel and Subsistence Expenses; Mileage Allowances”), or by the Administrator of General Services, or by the
President (or his or her designee) pursuant to any provisions of such subchapter must apply to travel under Federal awards (48 CFR

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31.205-46(a)).
(e) Commercial air travel.
(1) Airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are
unallowable except when such accommodations would:
(i)

Require circuitous routing;

(ii) Require travel during unreasonable hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that would offset the transportation savings; or
(v) Offer accommodations not reasonably adequate for the traveler's medical needs. The non-Federal entity must justify and
document these conditions on a case-by-case basis in order for the use of first-class or business-class airfare to be allowable
in such cases.
(2) Unless a pattern of avoidance is detected, the Federal Government will generally not question a non-Federal entity's determinations
that customary standard airfare or other discount airfare is unavailable for specific trips if the non-Federal entity can demonstrate
that such airfare was not available in the specific case.
(f) Air travel by other than commercial carrier. Costs of travel by non-Federal entity-owned, -leased, or -chartered aircraft include the cost of
lease, charter, operation (including personnel costs), maintenance, depreciation, insurance, and other related costs. The portion of such
costs that exceeds the cost of airfare as provided for in paragraph (d) of this section, is unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014. Redesignated and amended at 85 FR 49570, Aug. 13, 2020]

§ 200.476 Trustees.
Travel and subsistence costs of trustees (or directors) at IHEs and nonprofit organizations are allowable. See also § 200.475.
[85 FR 49571, Aug. 13, 2020]

Subpart F - Audit Requirements
General

§ 200.500 Purpose.
This part sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending
Federal awards.

Audits

§ 200.501 Audit requirements.
(a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must
have a single or program-specific audit conducted for that year in accordance with the provisions of this part.
(b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a
single audit conducted in accordance with § 200.514 except when it elects to have a program-specific audit conducted in accordance
with paragraph (c) of this section.
(c) Program-specific audit election. When an auditee expends Federal awards under only one Federal program (excluding R&D) and the
Federal program's statutes, regulations, or the terms and conditions of the Federal award do not require a financial statement audit of the
auditee, the auditee may elect to have a program-specific audit conducted in accordance with § 200.507. A program-specific audit may
not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal
agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in
advance a program-specific audit.
(d) Exemption when Federal awards expended are less than $750,000. A non-Federal entity that expends less than $750,000 during the nonFederal entity's fiscal year in Federal awards is exempt from Federal audit requirements for that year, except as noted in § 200.503, but
records must be available for review or audit by appropriate officials of the Federal agency, pass-through entity, and Government
Accountability Office (GAO).
(e) Federally Funded Research and Development Centers (FFRDC). Management of an auditee that owns or operates a FFRDC may elect to
treat the FFRDC as a separate entity for purposes of this part.
(f) Subrecipients and contractors. An auditee may simultaneously be a recipient, a subrecipient, and a contractor. Federal awards expended
as a recipient or a subrecipient are subject to audit under this part. The payments received for goods or services provided as a contractor
are not Federal awards. Section § 200.331 sets forth the considerations in determining whether payments constitute a Federal award or

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a payment for goods or services provided as a contractor.
(g) Compliance responsibility for contractors. In most cases, the auditee's compliance responsibility for contractors is only to ensure that the
procurement, receipt, and payment for goods and services comply with Federal statutes, regulations, and the terms and conditions of
Federal awards. Federal award compliance requirements normally do not pass through to contractors. However, the auditee is
responsible for ensuring compliance for procurement transactions which are structured such that the contractor is responsible for
program compliance or the contractor's records must be reviewed to determine program compliance. Also, when these procurement
transactions relate to a major program, the scope of the audit must include determining whether these transactions are in compliance
with Federal statutes, regulations, and the terms and conditions of Federal awards.
(h) For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass-through entity is responsible for establishing
requirements, as necessary, to ensure compliance by for-profit subrecipients. The agreement with the for-profit subrecipient must
describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance
for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring during the agreement, and post-award
audits. See also § 200.332.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020]

§ 200.502 Basis for determining Federal awards expended.
(a) Determining Federal awards expended. The determination of when a Federal award is expended must be based on when the activity
related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal
statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with
awards including grants, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, cooperative agreements, and direct
appropriations; the disbursement of funds to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the
receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or use of food commodities; the
disbursement of amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force.
(b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines must
be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of this
section:
(1) Value of new loans made or received during the audit period; plus
(2) Beginning of the audit period balance of loans from previous years for which the Federal Government imposes continuing
compliance requirements; plus
(3) Any interest subsidy, cash, or administrative cost allowance received.
(c) Loan and loan guarantees (loans) at IHEs. When loans are made to students of an IHE but the IHE does not make the loans, then only the
value of loans made during the audit period must be considered Federal awards expended in that audit period. The balance of loans for
previous audit periods is not included as Federal awards expended because the lender accounts for the prior balances.
(d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior years, are not considered
Federal awards expended under this part when the Federal statutes, regulations, and the terms and conditions of Federal awards
pertaining to such loans impose no continuing compliance requirements other than to repay the loans.
(e) Endowment funds. The cumulative balance of Federal awards for endowment funds that are federally restricted are considered Federal
awards expended in each audit period in which the funds are still restricted.
(f) Free rent. Free rent received by itself is not considered a Federal award expended under this part. However, free rent received as part of a
Federal award to carry out a Federal program must be included in determining Federal awards expended and subject to audit under this
part.
(g) Valuing non-cash assistance. Federal non-cash assistance, such as free rent, food commodities, donated property, or donated surplus
property, must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency.
(h) Medicare. Medicare payments to a non-Federal entity for providing patient care services to Medicare-eligible individuals are not
considered Federal awards expended under this part.
(i)

Medicaid. Medicaid payments to a subrecipient for providing patient care services to Medicaid-eligible individuals are not considered
Federal awards expended under this part unless a state requires the funds to be treated as Federal awards expended because
reimbursement is on a cost-reimbursement basis.

(j)

Certain loans provided by the National Credit Union Administration. For purposes of this part, loans made from the National Credit Union
Share Insurance Fund and the Central Liquidity Facility that are funded by contributions from insured non-Federal entities are not
considered Federal awards expended.

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014]

§ 200.503 Relation to other audit requirements.

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(a) An audit conducted in accordance with this part must be in lieu of any financial audit of Federal awards which a non-Federal entity is
required to undergo under any other Federal statute or regulation. To the extent that such audit provides a Federal agency with the
information it requires to carry out its responsibilities under Federal statute or regulation, a Federal agency must rely upon and use that
information.
(b) Notwithstanding subsection (a), a Federal agency, Inspectors General, or GAO may conduct or arrange for additional audits which are
necessary to carry out its responsibilities under Federal statute or regulation. The provisions of this part do not authorize any non-Federal
entity to constrain, in any manner, such Federal agency from carrying out or arranging for such additional audits, except that the Federal
agency must plan such audits to not be duplicative of other audits of Federal awards. Prior to commencing such an audit, the Federal
agency or pass-through entity must review the FAC for recent audits submitted by the non-Federal entity, and to the extent such audits
meet a Federal agency or pass-through entity's needs, the Federal agency or pass-through entity must rely upon and use such audits. Any
additional audits must be planned and performed in such a way as to build upon work performed, including the audit documentation,
sampling, and testing already performed, by other auditors.
(c) The provisions of this part do not limit the authority of Federal agencies to conduct, or arrange for the conduct of, audits and evaluations
of Federal awards, nor limit the authority of any Federal agency Inspector General or other Federal official. For example, requirements
that may be applicable under the FAR or CAS and the terms and conditions of a cost-reimbursement contract may include additional
applicable audits to be conducted or arranged for by Federal agencies.
(d) Federal agency to pay for additional audits. A Federal agency that conducts or arranges for additional audits must, consistent with other
applicable Federal statutes and regulations, arrange for funding the full cost of such additional audits.
(e) Request for a program to be audited as a major program. A Federal awarding agency may request that an auditee have a particular
Federal program audited as a major program in lieu of the Federal awarding agency conducting or arranging for the additional audits. To
allow for planning, such requests should be made at least 180 calendar days prior to the end of the fiscal year to be audited. The auditee,
after consultation with its auditor, should promptly respond to such a request by informing the Federal awarding agency whether the
program would otherwise be audited as a major program using the risk-based audit approach described in § 200.518 and, if not, the
estimated incremental cost. The Federal awarding agency must then promptly confirm to the auditee whether it wants the program
audited as a major program. If the program is to be audited as a major program based upon this Federal awarding agency request, and
the Federal awarding agency agrees to pay the full incremental costs, then the auditee must have the program audited as a major
program. A pass-through entity may use the provisions of this paragraph for a subrecipient.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49570, Aug. 13, 2020]

§ 200.504 Frequency of audits.
Except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part must be performed
annually. Any biennial audit must cover both years within the biennial period.
(a) A state, local government, or Indian tribe that is required by constitution or statute, in effect on January 1, 1987, to undergo its audits less
frequently than annually, is permitted to undergo its audits pursuant to this part biennially. This requirement must still be in effect for the
biennial period.
(b) Any nonprofit organization that had biennial audits for all biennial periods ending between July 1, 1992, and January 1, 1995, is permitted
to undergo its audits pursuant to this part biennially.

§ 200.505 Sanctions.
In cases of continued inability or unwillingness to have an audit conducted in accordance with this part, Federal agencies and pass-through entities
must take appropriate action as provided in § 200.339.
[85 FR 49571, Aug. 13, 2020]

§ 200.506 Audit costs.
See § 200.425.
[85 FR 49571, Aug. 13, 2020]

§ 200.507 Program-specific audits.
(a) Program-specific audit guide available. In some cases, a program-specific audit guide will be available to provide specific guidance to the
auditor with respect to internal controls, compliance requirements, suggested audit procedures, and audit reporting requirements. A
listing of current program-specific audit guides can be found in the compliance supplement, Part 8, Appendix VI, Program-Specific Audit
Guides, which includes a website where a copy of the guide can be obtained. When a current program-specific audit guide is available,
the auditor must follow GAGAS and the guide when performing a program-specific audit.
(b) Program-specific audit guide not available.

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(1) When a current program-specific audit guide is not available, the auditee and auditor must have basically the same responsibilities
for the Federal program as they would have for an audit of a major program in a single audit.
(2) The auditee must prepare the financial statement(s) for the Federal program that includes, at a minimum, a schedule of
expenditures of Federal awards for the program and notes that describe the significant accounting policies used in preparing the
schedule, a summary schedule of prior audit findings consistent with the requirements of § 200.511(b), and a corrective action plan
consistent with the requirements of § 200.511(c).
(3) The auditor must:
(i)

Perform an audit of the financial statement(s) for the Federal program in accordance with GAGAS;

(ii) Obtain an understanding of internal controls and perform tests of internal controls over the Federal program consistent with
the requirements of § 200.514(c) for a major program;
(iii) Perform procedures to determine whether the auditee has complied with Federal statutes, regulations, and the terms and
conditions of Federal awards that could have a direct and material effect on the Federal program consistent with the
requirements of § 200.514(d) for a major program;
(iv) Follow up on prior audit findings, perform procedures to assess the reasonableness of the summary schedule of prior audit
findings prepared by the auditee in accordance with the requirements of § 200.511, and report, as a current year audit finding,
when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior
audit finding; and
(v) Report any audit findings consistent with the requirements of § 200.516.
(4) The auditor's report(s) may be in the form of either combined or separate reports and may be organized differently from the manner
presented in this section. The auditor's report(s) must state that the audit was conducted in accordance with this part and include
the following:
(i)

An opinion (or disclaimer of opinion) as to whether the financial statement(s) of the Federal program is presented fairly in all
material respects in accordance with the stated accounting policies;

(ii) A report on internal control related to the Federal program, which must describe the scope of testing of internal control and the
results of the tests;
(iii) A report on compliance which includes an opinion (or disclaimer of opinion) as to whether the auditee complied with laws,
regulations, and the terms and conditions of Federal awards which could have a direct and material effect on the Federal
program; and
(iv) A schedule of findings and questioned costs for the Federal program that includes a summary of the auditor's results relative
to the Federal program in a format consistent with § 200.515(d)(1) and findings and questioned costs consistent with the
requirements of § 200.515(d)(3).
(c) Report submission for program-specific audits.
(1) The audit must be completed and the reporting required by paragraph (c)(2) or (c)(3) of this section submitted within the earlier of
30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period, unless a different period is
specified in a program-specific audit guide. Unless restricted by Federal law or regulation, the auditee must make report copies
available for public inspection. Auditees and auditors must ensure that their respective parts of the reporting package do not
include protected personally identifiable information.
(2) When a program-specific audit guide is available, the auditee must electronically submit to the FAC the data collection form
prepared in accordance with § 200.512(b), as applicable to a program-specific audit, and the reporting required by the programspecific audit guide.
(3) When a program-specific audit guide is not available, the reporting package for a program-specific audit must consist of the
financial statement(s) of the Federal program, a summary schedule of prior audit findings, and a corrective action plan as described
in paragraph (b)(2) of this section, and the auditor's report(s) described in paragraph (b)(4) of this section. The data collection form
prepared in accordance with § 200.512(b), as applicable to a program-specific audit, and one copy of this reporting package must
be electronically submitted to the FAC.
(d) Other sections of this part may apply. Program-specific audits are subject to:
(1) 200.500 Purpose through 200.503 Relation to other audit requirements, paragraph (d);
(2) 200.504 Frequency of audits through 200.506 Audit costs;
(3) 200.508 Auditee responsibilities through 200.509 Auditor selection;
(4) 200.511 Audit findings follow-up;
(5) 200.512 Report submission, paragraphs (e) through (h);
(6) 200.513 Responsibilities;
(7) 200.516 Audit findings through 200.517 Audit documentation;

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(8) 200.521 Management decision; and
(9) Other referenced provisions of this part unless contrary to the provisions of this section, a program-specific audit guide, or program
statutes and regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020]

Auditees

§ 200.508 Auditee responsibilities.
The auditee must:
(a) Procure or otherwise arrange for the audit required by this part in accordance with § 200.509, and ensure it is properly performed and
submitted when due in accordance with § 200.512.
(b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with § 200.510.
(c) Promptly follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a
corrective action plan in accordance with § 200.511(b) and (c), respectively.
(d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for
the auditor to perform the audit required by this part.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020]

§ 200.509 Auditor selection.
(a) Auditor procurement. In procuring audit services, the auditee must follow the procurement standards prescribed by the Procurement
Standards in §§ 200.317 through 200.327 of subpart D of this part or the FAR (48 CFR part 42), as applicable. In requesting proposals for
audit services, the objectives and scope of the audit must be made clear and the non-Federal entity must request a copy of the audit
organization's peer review report which the auditor is required to provide under GAGAS. Factors to be considered in evaluating each
proposal for audit services include the responsiveness to the request for proposal, relevant experience, availability of staff with
professional qualifications and technical abilities, the results of peer and external quality control reviews, and price. Whenever possible,
the auditee must make positive efforts to utilize small businesses, minority-owned firms, and women's business enterprises, in procuring
audit services as stated in § 200.321, or the FAR (48 CFR part 42), as applicable.
(b) Restriction on auditor preparing indirect cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may
not also be selected to perform the audit required by this part when the indirect costs recovered by the auditee during the prior year
exceeded $1 million. This restriction applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan
and any subsequent years in which the resulting indirect cost agreement or cost allocation plan is used to recover costs.
(c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they comply fully with the
requirements of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020; 86 FR 10440, Feb. 22, 2021]

§ 200.510 Financial statements.
(a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in
net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same organizational
unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity-wide financial statements may also
include departments, agencies, and other organizational units that have separate audits in accordance with § 200.514(a) and prepare
separate financial statements.
(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period
covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §
200.502. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through
entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list
the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must:
(1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal
programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended
must be shown either by individual Federal award or by Federal agency and major subdivision within the Federal agency. For
example, the National Institutes of Health is a major subdivision in the Department of Health and Human Services.
(2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the passthrough entity must be included.
(3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying
number when the Assistance Listings information is not available. For a cluster of programs also provide the total for the cluster.

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(4) Include the total amount provided to subrecipients from each Federal program.
(5) For loan or loan guarantee programs described in § 200.502(b), identify in the notes to the schedule the balances outstanding at the
end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the
schedule.
(6) Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the auditee
elected to use the 10% de minimis cost rate as covered in § 200.414.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49572, Aug. 13, 2020]

§ 200.511 Audit findings follow-up.
(a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must
prepare a summary schedule of prior audit findings. The auditee must also prepare a corrective action plan for current year audit
findings. The summary schedule of prior audit findings and the corrective action plan must include the reference numbers the auditor
assigns to audit findings under § 200.516(c). Since the summary schedule may include audit findings from multiple years, it must include
the fiscal year in which the finding initially occurred. The corrective action plan and summary schedule of prior audit findings must
include findings relating to the financial statements which are required to be reported in accordance with GAGAS.
(b) Summary schedule of prior audit findings. The summary schedule of prior audit findings must report the status of all audit findings
included in the prior audit's schedule of findings and questioned costs. The summary schedule must also include audit findings reported
in the prior audit's summary schedule of prior audit findings except audit findings listed as corrected in accordance with paragraph (b)(1)
of this section, or no longer valid or not warranting further action in accordance with paragraph (b)(3) of this section.
(1) When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was
taken.
(2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the
finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is
significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or passthrough entity's management decision, the summary schedule must provide an explanation.
(3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must
be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of
the following have occurred:
(i)

Two years have passed since the audit report in which the finding occurred was submitted to the FAC;

(ii) The Federal agency or pass-through entity is not currently following up with the auditee on the audit finding; and
(iii) A management decision was not issued.
(c) Corrective action plan. At the completion of the audit, the auditee must prepare, in a document separate from the auditor's findings
described in § 200.516, a corrective action plan to address each audit finding included in the current year auditor's reports. The corrective
action plan must provide the name(s) of the contact person(s) responsible for corrective action, the corrective action planned, and the
anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the
corrective action plan must include an explanation and specific reasons.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020]

§ 200.512 Report submission.
(a) General.
(1) The audit must be completed and the data collection form described in paragraph (b) of this section and reporting package
described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor's
report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the
reporting package is due the next business day.
(2) Unless restricted by Federal statutes or regulations, the auditee must make copies available for public inspection. Auditees and
auditors must ensure that their respective parts of the reporting package do not include protected personally identifiable
information.
(b) Data collection. The FAC is the repository of record for subpart F of this part reporting packages and the data collection form. All Federal
agencies, pass-through entities and others interested in a reporting package and data collection form must obtain it by accessing the
FAC.
(1) The auditee must submit required data elements described in Appendix X to Part 200, which state whether the audit was completed
in accordance with this part and provides information about the auditee, its Federal programs, and the results of the audit. The data
must include information available from the audit required by this part that is necessary for Federal agencies to use the audit to
ensure integrity for Federal programs. The data elements and format must be approved by OMB, available from the FAC, and include
collections of information from the reporting package described in paragraph (c) of this section. A senior level representative of the

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auditee (e.g., state controller, director of finance, chief executive officer, or chief financial officer) must sign a statement to be
included as part of the data collection that says that the auditee complied with the requirements of this part, the data were prepared
in accordance with this part (and the instructions accompanying the form), the reporting package does not include protected
personally identifiable information, the information included in its entirety is accurate and complete, and that the FAC is authorized
to make the reporting package and the form publicly available on a website.

(2) Exception for Indian Tribes and Tribal Organizations. An auditee that is an Indian tribe or a tribal organization (as defined in the
Indian Self-Determination, Education and Assistance Act (ISDEAA), 25 U.S.C. 450b(l)) may opt not to authorize the FAC to make the
reporting package publicly available on a Web site, by excluding the authorization for the FAC publication in the statement described
in paragraph (b)(1) of this section. If this option is exercised, the auditee becomes responsible for submitting the reporting package
directly to any pass-through entities through which it has received a Federal award and to pass-through entities for which the
summary schedule of prior audit findings reported the status of any findings related to Federal awards that the pass-through entity
provided. Unless restricted by Federal statute or regulation, if the auditee opts not to authorize publication, it must make copies of
the reporting package available for public inspection.
(3) Using the information included in the reporting package described in paragraph (c) of this section, the auditor must complete the
applicable data elements of the data collection form. The auditor must sign a statement to be included as part of the data
collection form that indicates, at a minimum, the source of the information included in the form, the auditor's responsibility for the
information, that the form is not a substitute for the reporting package described in paragraph (c) of this section, and that the
content of the form is limited to the collection of information prescribed by OMB.
(c) Reporting package. The reporting package must include the:
(1) Financial statements and schedule of expenditures of Federal awards discussed in § 200.510(a) and (b), respectively;
(2) Summary schedule of prior audit findings discussed in § 200.511(b);
(3) Auditor's report(s) discussed in § 200.515; and
(4) Corrective action plan discussed in § 200.511(c).
(d) Submission to FAC. The auditee must electronically submit to the FAC the data collection form described in paragraph (b) of this section
and the reporting package described in paragraph (c) of this section.
(e) Requests for management letters issued by the auditor. In response to requests by a Federal agency or pass-through entity, auditees must
submit a copy of any management letters issued by the auditor.
(f) Report retention requirements. Auditees must keep one copy of the data collection form described in paragraph (b) of this section and
one copy of the reporting package described in paragraph (c) of this section on file for three years from the date of submission to the
FAC.
(g) FAC responsibilities. The FAC must make available the reporting packages received in accordance with paragraph (c) of this section and
§ 200.507(c) to the public, except for Indian tribes exercising the option in (b)(2) of this section, and maintain a data base of completed
audits, provide appropriate information to Federal agencies, and follow up with known auditees that have not submitted the required data
collection forms and reporting packages.
(h) Electronic filing. Nothing in this part must preclude electronic submissions to the FAC in such manner as may be approved by OMB.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020]

Federal Agencies

§ 200.513 Responsibilities.
(a)
(1) Cognizant agency for audit responsibilities. A non-Federal entity expending more than $50 million a year in Federal awards must
have a cognizant agency for audit. The designated cognizant agency for audit must be the Federal awarding agency that provides
the predominant amount of funding directly (direct funding) (as listed on the Schedule of expenditures of Federal awards, see §
200.510(b)) to a non-Federal entity unless OMB designates a specific cognizant agency for audit. When the direct funding
represents less than 25 percent of the total expenditures (as direct and subawards) by the non-Federal entity, then the Federal
agency with the predominant amount of total funding is the designated cognizant agency for audit.
(2) To provide for continuity of cognizance, the determination of the predominant amount of direct funding must be based upon direct
Federal awards expended in the non-Federal entity's fiscal years ending in 2019, and every fifth year thereafter.
(3) Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency with cognizance for an auditee
may reassign cognizance to another Federal awarding agency that provides substantial funding and agrees to be the cognizant
agency for audit. Within 30 calendar days after any reassignment, both the old and the new cognizant agency for audit must provide
notice of the change to the FAC, the auditee, and, if known, the auditor. The cognizant agency for audit must:
(i)

Provide technical audit advice and liaison assistance to auditees and auditors.

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(ii) Obtain or conduct quality control reviews on selected audits made by non-Federal auditors, and provide the results to other
interested organizations. Cooperate and provide support to the Federal agency designated by OMB to lead a governmentwide
project to determine the quality of single audits by providing a reliable estimate of the extent that single audits conform to
applicable requirements, standards, and procedures; and to make recommendations to address noted audit quality issues,
including recommendations for any changes to applicable requirements, standards and procedures indicated by the results of
the project. The governmentwide project can rely on the current and on-going quality control review work performed by the
agencies, State auditors, and professional audit associations. This governmentwide audit quality project must be performed
once every 6 years (or at such other interval as determined by OMB), and the results must be public.
(iii) Promptly inform other affected Federal agencies and appropriate Federal law enforcement officials of any direct reporting by
the auditee or its auditor required by GAGAS or statutes and regulations.
(iv) Advise the community of independent auditors of any noteworthy or important factual trends related to the quality of audits
stemming from quality control reviews. Significant problems or quality issues consistently identified through quality control
reviews of audit reports must be referred to appropriate state licensing agencies and professional bodies.
(v) Advise the auditor, Federal awarding agencies, and, where appropriate, the auditee of any deficiencies found in the audits when
the deficiencies require corrective action by the auditor. When advised of deficiencies, the auditee must work with the auditor
to take corrective action. If corrective action is not taken, the cognizant agency for audit must notify the auditor, the auditee,
and applicable Federal awarding agencies and pass-through entities of the facts and make recommendations for follow-up
action. Major inadequacies or repetitive substandard performance by auditors must be referred to appropriate state licensing
agencies and professional bodies for disciplinary action.
(vi) Coordinate, to the extent practical, audits or reviews made by or for Federal agencies that are in addition to the audits made
pursuant to this part, so that the additional audits or reviews build upon rather than duplicate audits performed in accordance
with this part.
(vii) Coordinate a management decision for cross-cutting audit findings (see in § 200.1 of this part) that affect the Federal
programs of more than one agency when requested by any Federal awarding agency whose awards are included in the audit
finding of the auditee.
(viii) Coordinate the audit work and reporting responsibilities among auditors to achieve the most cost-effective audit.
(ix) Provide advice to auditees as to how to handle changes in fiscal years.

(b) Oversight agency for audit responsibilities. An auditee who does not have a designated cognizant agency for audit will be under the
general oversight of the Federal agency determined in accordance with § 200.1 oversight agency for audit. A Federal agency with
oversight for an auditee may reassign oversight to another Federal agency that agrees to be the oversight agency for audit. Within 30
calendar days after any reassignment, both the old and the new oversight agency for audit must provide notice of the change to the FAC,
the auditee, and, if known, the auditor. The oversight agency for audit:
(1) Must provide technical advice to auditees and auditors as requested.
(2) May assume all or some of the responsibilities normally performed by a cognizant agency for audit.
(c) Federal awarding agency responsibilities. The Federal awarding agency must perform the following for the Federal awards it makes (See
also the requirements of § 200.211):
(1) Ensure that audits are completed and reports are received in a timely manner and in accordance with the requirements of this part.
(2) Provide technical advice and counsel to auditees and auditors as requested.
(3) Follow-up on audit findings to ensure that the recipient takes appropriate and timely corrective action. As part of audit follow-up, the
Federal awarding agency must:
(i)

Issue a management decision as prescribed in § 200.521;

(ii) Monitor the recipient taking appropriate and timely corrective action;
(iii) Use cooperative audit resolution mechanisms (see the definition of cooperative audit resolution in § 200.1 of this part) to
improve Federal program outcomes through better audit resolution, follow-up, and corrective action; and
(iv) Develop a baseline, metrics, and targets to track, over time, the effectiveness of the Federal agency's process to follow-up on
audit findings and on the effectiveness of Single Audits in improving non-Federal entity accountability and their use by Federal
awarding agencies in making award decisions.
(4) Provide OMB annual updates to the compliance supplement and work with OMB to ensure that the compliance supplement focuses
the auditor to test the compliance requirements most likely to cause improper payments, fraud, waste, abuse or generate audit
finding for which the Federal awarding agency will take sanctions.
(5) Provide OMB with the name of a single audit accountable official from among the senior policy officials of the Federal awarding
agency who must be:
(i)

Responsible for ensuring that the agency fulfills all the requirements of paragraph (c) of this section and effectively uses the
single audit process to reduce improper payments and improve Federal program outcomes.

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(ii) Held accountable to improve the effectiveness of the single audit process based upon metrics as described in paragraph (c)(3)
(iv) of this section.
(iii) Responsible for designating the Federal agency's key management single audit liaison.

(6) Provide OMB with the name of a key management single audit liaison who must:
(i)

Serve as the Federal awarding agency's management point of contact for the single audit process both within and outside the
Federal Government.

(ii) Promote interagency coordination, consistency, and sharing in areas such as coordinating audit follow-up; identifying higherrisk non-Federal entities; providing input on single audit and follow-up policy; enhancing the utility of the FAC; and studying
ways to use single audit results to improve Federal award accountability and best practices.
(iii) Oversee training for the Federal awarding agency's program management personnel related to the single audit process.
(iv) Promote the Federal awarding agency's use of cooperative audit resolution mechanisms.
(v) Coordinate the Federal awarding agency's activities to ensure appropriate and timely follow-up and corrective action on audit
findings.
(vi) Organize the Federal cognizant agency for audit's follow-up on cross-cutting audit findings that affect the Federal programs of
more than one Federal awarding agency.
(vii) Ensure the Federal awarding agency provides annual updates of the compliance supplement to OMB.
(viii) Support the Federal awarding agency's single audit accountable official's mission.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020]

Auditors

§ 200.514 Scope of audit.
(a) General. The audit must be conducted in accordance with GAGAS. The audit must cover the entire operations of the auditee, or, at the
option of the auditee, such audit must include a series of audits that cover departments, agencies, and other organizational units that
expended or otherwise administered Federal awards during such audit period, provided that each such audit must encompass the
financial statements and schedule of expenditures of Federal awards for each such department, agency, and other organizational unit,
which must be considered to be a non-Federal entity. The financial statements and schedule of expenditures of Federal awards must be
for the same audit period.
(b) Financial statements. The auditor must determine whether the financial statements of the auditee are presented fairly in all material
respects in accordance with generally accepted accounting principles. The auditor must also determine whether the schedule of
expenditures of Federal awards is stated fairly in all material respects in relation to the auditee's financial statements as a whole.
(c) Internal control.
(1) The compliance supplement provides guidance on internal controls over Federal programs based upon the guidance in Standards
for Internal Control in the Federal Government issued by the Comptroller General of the United States and the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
(2) In addition to the requirements of GAGAS, the auditor must perform procedures to obtain an understanding of internal control over
Federal programs sufficient to plan the audit to support a low assessed level of control risk of noncompliance for major programs.
(3) Except as provided in paragraph (c)(4) of this section, the auditor must:
(i)

Plan the testing of internal control over compliance for major programs to support a low assessed level of control risk for the
assertions relevant to the compliance requirements for each major program; and

(ii) Perform testing of internal control as planned in paragraph (c)(3)(i) of this section.
(4) When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing
or detecting noncompliance, the planning and performing of testing described in paragraph (c)(3) of this section are not required for
those compliance requirements. However, the auditor must report a significant deficiency or material weakness in accordance with
§ 200.516, assess the related control risk at the maximum, and consider whether additional compliance tests are required because
of ineffective internal control.
(d) Compliance.
(1) In addition to the requirements of GAGAS, the auditor must determine whether the auditee has complied with Federal statutes,
regulations, and the terms and conditions of Federal awards that may have a direct and material effect on each of its major
programs.
(2) The principal compliance requirements applicable to most Federal programs and the compliance requirements of the largest
Federal programs are included in the compliance supplement.

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(3) For the compliance requirements related to Federal programs contained in the compliance supplement, an audit of these
compliance requirements will meet the requirements of this part. Where there have been changes to the compliance requirements
and the changes are not reflected in the compliance supplement, the auditor must determine the current compliance requirements
and modify the audit procedures accordingly. For those Federal programs not covered in the compliance supplement, the auditor
must follow the compliance supplement's guidance for programs not included in the supplement.
(4) When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing
or detecting noncompliance, the planning and performing of testing described in paragraph (c)(3) of this section are not required for
those compliance requirements. However, the auditor must report a significant deficiency or material weakness in accordance with
§ 200.516, assess the related control risk at the
(e) Audit follow-up. The auditor must follow-up on prior audit findings, perform procedures to assess the reasonableness of the summary
schedule of prior audit findings prepared by the auditee in accordance with § 200.511(b), and report, as a current year audit finding, when
the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding.
The auditor must perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current
year.
(f) Data collection form. As required in § 200.512(b)(3), the auditor must complete and sign specified sections of the data collection form.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020; 86 FR 10440, Feb. 22, 2021]

§ 200.515 Audit reporting.
The auditor's report(s) may be in the form of either combined or separate reports and may be organized differently from the manner presented in
this section. The auditor's report(s) must state that the audit was conducted in accordance with this part and include the following:
(a) Financial statements. The auditor must determine and provide an opinion (or disclaimer of opinion) whether the financial statements of
the auditee are presented fairly in all materials respects in accordance with generally accepted accounting principles (or a special
purpose framework such as cash, modified cash, or regulatory as required by state law). The auditor must also decide whether the
schedule of expenditures of Federal awards is stated fairly in all material respects in relation to the auditee's financial statements as a
whole.
(b) A report on internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award
agreements, noncompliance with which could have a material effect on the financial statements. This report must describe the scope of
testing of internal control and compliance and the results of the tests, and, where applicable, it will refer to the separate schedule of
findings and questioned costs described in paragraph (d) of this section.
(c) A report on compliance for each major program and a report on internal control over compliance. This report must describe the scope of
testing of internal control over compliance, include an opinion or disclaimer of opinion as to whether the auditee complied with Federal
statutes, regulations, and the terms and conditions of Federal awards which could have a direct and material effect on each major
program and refer to the separate schedule of findings and questioned costs described in paragraph (d) of this section.
(d) A schedule of findings and questioned costs which must include the following three components:
(1) A summary of the auditor's results, which must include:
(i)

The type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP (i.e.,
unmodified opinion, qualified opinion, adverse opinion, or disclaimer of opinion);

(ii) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal control were disclosed
by the audit of the financial statements;
(iii) A statement as to whether the audit disclosed any noncompliance that is material to the financial statements of the auditee;
(iv) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal control over major
programs were disclosed by the audit;
(v) The type of report the auditor issued on compliance for major programs (i.e., unmodified opinion, qualified opinion, adverse
opinion, or disclaimer of opinion);
(vi) A statement as to whether the audit disclosed any audit findings that the auditor is required to report under § 200.516(a);
(vii) An identification of major programs by listing each individual major program; however, in the case of a cluster of programs,
only the cluster name as shown on the Schedule of Expenditures of Federal Awards is required;
(viii) The dollar threshold used to distinguish between Type A and Type B programs, as described in § 200.518(b)(1) or (3) when a
recalculation of the Type A threshold is required for large loan or loan guarantees; and
(ix) A statement as to whether the auditee qualified as a low-risk auditee under § 200.520.
(2) Findings relating to the financial statements which are required to be reported in accordance with GAGAS.
(3) Findings and questioned costs for Federal awards which must include audit findings as defined in § 200.516(a).

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(i)

Audit findings (e.g., internal control findings, compliance findings, questioned costs, or fraud) that relate to the same issue
must be presented as a single audit finding. Where practical, audit findings should be organized by Federal agency or passthrough entity.

(ii) Audit findings that relate to both the financial statements and Federal awards, as reported under paragraphs (d)(2) and (d)(3)
of this section, respectively, must be reported in both sections of the schedule. However, the reporting in one section of the
schedule may be in summary form with a reference to a detailed reporting in the other section of the schedule.
(e) Nothing in this part precludes combining of the audit reporting required by this section with the reporting required by § 200.512(b) when
allowed by GAGAS and appendix X to this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020]

§ 200.516 Audit findings.
(a) Audit findings reported. The auditor must report the following as audit findings in a schedule of findings and questioned costs:
(1) Significant deficiencies and material weaknesses in internal control over major programs and significant instances of abuse relating
to major programs. The auditor's determination of whether a deficiency in internal control is a significant deficiency or a material
weakness for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program
identified in the Compliance Supplement.
(2) Material noncompliance with the provisions of Federal statutes, regulations, or the terms and conditions of Federal awards related
to a major program. The auditor's determination of whether a noncompliance with the provisions of Federal statutes, regulations, or
the terms and conditions of Federal awards is material for the purpose of reporting an audit finding is in relation to a type of
compliance requirement for a major program identified in the compliance supplement.
(3) Known questioned costs that are greater than $25,000 for a type of compliance requirement for a major program. Known
questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on
compliance, the auditor considers the best estimate of total costs questioned (likely questioned costs), not just the questioned
costs specifically identified (known questioned costs). The auditor must also report known questioned costs when likely questioned
costs are greater than $25,000 for a type of compliance requirement for a major program. In reporting questioned costs, the auditor
must include information to provide proper perspective for judging the prevalence and consequences of the questioned costs.
(4) Known questioned costs that are greater than $25,000 for a Federal program which is not audited as a major program. Except for
audit follow-up, the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the
auditor will normally not find questioned costs for a program that is not audited as a major program. However, if the auditor does
become aware of questioned costs for a Federal program that is not audited as a major program (e.g., as part of audit follow-up or
other audit procedures) and the known questioned costs are greater than $25,000, then the auditor must report this as an audit
finding.
(5) The circumstances concerning why the auditor's report on compliance for each major program is other than an unmodified opinion,
unless such circumstances are otherwise reported as audit findings in the schedule of findings and questioned costs for Federal
awards.
(6) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of
findings and questioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which
could compromise investigative or legal proceedings or to make an additional reporting when the auditor confirms that the fraud
was reported outside the auditor's reports under the direct reporting requirements of GAGAS.
(7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by
the auditee in accordance with § 200.511(b) materially misrepresents the status of any prior audit finding.
(b) Audit finding detail and clarity. Audit findings must be presented in sufficient detail and clarity for the auditee to prepare a corrective
action plan and take corrective action, and for Federal agencies and pass-through entities to arrive at a management decision. The
following specific information must be included, as applicable, in audit findings:
(1) Federal program and specific Federal award identification including the Assistance Listings title and number, Federal award
identification number and year, name of Federal agency, and name of the applicable pass-through entity. When information, such as
the Assistance Listings title and number or Federal award identification number, is not available, the auditor must provide the best
information available to describe the Federal award.
(2) The criteria or specific requirement upon which the audit finding is based, including the Federal statutes, regulations, or the terms
and conditions of the Federal awards. Criteria generally identify the required or desired state or expectation with respect to the
program or operation. Criteria provide a context for evaluating evidence and understanding findings.
(3) The condition found, including facts that support the deficiency identified in the audit finding.
(4) A statement of cause that identifies the reason or explanation for the condition or the factors responsible for the difference between
the situation that exists (condition) and the required or desired state (criteria), which may also serve as a basis for
recommendations for corrective action.

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(5) The possible asserted effect to provide sufficient information to the auditee and Federal agency, or pass-through entity in the case
of a subrecipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action. A statement of
the effect or potential effect should provide a clear, logical link to establish the impact or potential impact of the difference between
the condition and the criteria.
(6) Identification of questioned costs and how they were computed. Known questioned costs must be identified by applicable
Assistance Listings number(s) and applicable Federal award identification number(s).
(7) Information to provide proper perspective for judging the prevalence and consequences of the audit findings, such as whether the
audit findings represent an isolated instance or a systemic problem. Where appropriate, instances identified must be related to the
universe and the number of cases examined and be quantified in terms of dollar value. The auditor should report whether the
sampling was a statistically valid sample.
(8) Identification of whether the audit finding was a repeat of a finding in the immediately prior audit and if so any applicable prior year
audit finding numbers.
(9) Recommendations to prevent future occurrences of the deficiency identified in the audit finding.
(10) Views of responsible officials of the auditee.
(c) Reference numbers. Each audit finding in the schedule of findings and questioned costs must include a reference number in the format
meeting the requirements of the data collection form submission required by § 200.512(b) to allow for easy referencing of the audit
findings during follow-up.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49574, Aug. 13, 2020]

§ 200.517 Audit documentation.
(a) Retention of audit documentation. The auditor must retain audit documentation and reports for a minimum of three years after the date
of issuance of the auditor's report(s) to the auditee, unless the auditor is notified in writing by the cognizant agency for audit, oversight
agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the retention period. When the auditor is aware
that the Federal agency, pass-through entity, or auditee is contesting an audit finding, the auditor must contact the parties contesting the
audit finding for guidance prior to destruction of the audit documentation and reports.
(b) Access to audit documentation. Audit documentation must be made available upon request to the cognizant or oversight agency for audit
or its designee, cognizant agency for indirect cost, a Federal agency, or GAO at the completion of the audit, as part of a quality review, to
resolve audit findings, or to carry out oversight responsibilities consistent with the purposes of this part. Access to audit documentation
includes the right of Federal agencies to obtain copies of audit documentation, as is reasonable and necessary.

§ 200.518 Major program determination.
(a) General. The auditor must use a risk-based approach to determine which Federal programs are major programs. This risk-based
approach must include consideration of: current and prior audit experience, oversight by Federal agencies and pass-through entities, and
the inherent risk of the Federal program. The process in paragraphs (b) through (h) of this section must be followed.
(b) Step one.
(1) The auditor must identify the larger Federal programs, which must be labeled Type A programs. Type A programs are defined as
Federal programs with Federal awards expended during the audit period exceeding the levels outlined in the table in this paragraph
(b)(1):

Total Federal awards expended

Type A/B threshold

Equal to or exceed $750,000 but less than or equal to
$25 million

$750,000.

Exceed $25 million but less than or equal to $100
million

Total Federal awards expended
times .03.

Exceed $100 million but less than or equal to $1
billion

$3 million.

Exceed $1 billion but less than or equal to $10 billion

Total Federal awards expended
times .003.

Exceed $10 billion but less than or equal to $20 billion

$30 million.

Exceed $20 billion

Total Federal awards expended
times .0015.

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(2) Federal programs not labeled Type A under paragraph (b)(1) of this section must be labeled Type B programs.
(3) The inclusion of large loan and loan guarantees (loans) must not result in the exclusion of other programs as Type A programs.
When a Federal program providing loans exceeds four times the largest non-loan program it is considered a large loan program, and
the auditor must consider this Federal program as a Type A program and exclude its values in determining other Type A programs.
This recalculation of the Type A program is performed after removing the total of all large loan programs. For the purposes of this
paragraph a program is only considered to be a Federal program providing loans if the value of Federal awards expended for loans
within the program comprises fifty percent or more of the total Federal awards expended for the program. A cluster of programs is
treated as one program and the value of Federal awards expended under a loan program is determined as described in § 200.502.
(4) For biennial audits permitted under § 200.504, the determination of Type A and Type B programs must be based upon the Federal
awards expended during the two-year period.
(c) Step two.
(1) The auditor must identify Type A programs which are low-risk. In making this determination, the auditor must consider whether the
requirements in § 200.519(c), the results of audit follow-up, or any changes in personnel or systems affecting the program indicate
significantly increased risk and preclude the program from being low risk. For a Type A program to be considered low-risk, it must
have been audited as a major program in at least one of the two most recent audit periods (in the most recent audit period in the
case of a biennial audit), and, in the most recent audit period, the program must have not had:
(i)

Internal control deficiencies which were identified as material weaknesses in the auditor's report on internal control for major
programs as required under § 200.515(c);

(ii) A modified opinion on the program in the auditor's report on major programs as required under § 200.515(c); or
(iii) Known or likely questioned costs that exceed five percent of the total Federal awards expended for the program.
(2) Notwithstanding paragraph (c)(1) of this section, OMB may approve a Federal awarding agency's request that a Type A program
may not be considered low risk for a certain recipient. For example, it may be necessary for a large Type A program to be audited as
a major program each year at a particular recipient to allow the Federal awarding agency to comply with 31 U.S.C. 3515. The
Federal awarding agency must notify the recipient and, if known, the auditor of OMB's approval at least 180 calendar days prior to
the end of the fiscal year to be audited.
(d) Step three.
(1) The auditor must identify Type B programs which are high-risk using professional judgment and the criteria in § 200.519. However,
the auditor is not required to identify more high-risk Type B programs than at least one fourth the number of low-risk Type A
programs identified as low-risk under Step 2 (paragraph (c) of this section). Except for known material weakness in internal control
or compliance problems as discussed in § 200.519(b)(1) and (2) and (c)(1), a single criterion in risk would seldom cause a Type B
program to be considered high-risk. When identifying which Type B programs to risk assess, the auditor is encouraged to use an
approach which provides an opportunity for different high-risk Type B programs to be audited as major over a period of time.
(2) The auditor is not expected to perform risk assessments on relatively small Federal programs. Therefore, the auditor is only required
to perform risk assessments on Type B programs that exceed twenty-five percent (0.25) of the Type A threshold determined in Step
1 (paragraph (b) of this section).
(e) Step four. At a minimum, the auditor must audit all of the following as major programs:
(1) All Type A programs not identified as low risk under step two (paragraph (c)(1) of this section).
(2) All Type B programs identified as high-risk under step three (paragraph (d) of this section).
(3) Such additional programs as may be necessary to comply with the percentage of coverage rule discussed in paragraph (f) of this
section. This may require the auditor to audit more programs as major programs than the number of Type A programs.
(f) Percentage of coverage rule. If the auditee meets the criteria in § 200.520, the auditor need only audit the major programs identified in
Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal programs with Federal awards expended that, in aggregate,
all major programs encompass at least 20 percent (0.20) of total Federal awards expended. Otherwise, the auditor must audit the major
programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal programs with Federal awards
expended that, in aggregate, all major programs encompass at least 40 percent (0.40) of total Federal awards expended.
(g) Documentation of risk. The auditor must include in the audit documentation the risk analysis process used in determining major
programs.
(h) Auditor's judgment. When the major program determination was performed and documented in accordance with this Subpart, the
auditor's judgment in applying the risk-based approach to determine major programs must be presumed correct. Challenges by Federal
agencies and pass-through entities must only be for clearly improper use of the requirements in this part. However, Federal agencies and
pass-through entities may provide auditors guidance about the risk of a particular Federal program and the auditor must consider this
guidance in determining major programs in audits not yet completed.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020]

§ 200.519 Criteria for Federal program risk.
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(a) General. The auditor's determination should be based on an overall evaluation of the risk of noncompliance occurring that could be
material to the Federal program. The auditor must consider criteria, such as described in paragraphs (b), (c), and (d) of this section, to
identify risk in Federal programs. Also, as part of the risk analysis, the auditor may wish to discuss a particular Federal program with
auditee management and the Federal agency or pass-through entity.
(b) Current and prior audit experience.
(1) Weaknesses in internal control over Federal programs would indicate higher risk. Consideration should be given to the control
environment over Federal programs and such factors as the expectation of management's adherence to Federal statutes,
regulations, and the terms and conditions of Federal awards and the competence and experience of personnel who administer the
Federal programs.
(i)

A Federal program administered under multiple internal control structures may have higher risk. When assessing risk in a large
single audit, the auditor must consider whether weaknesses are isolated in a single operating unit (e.g., one college campus)
or pervasive throughout the entity.

(ii) When significant parts of a Federal program are passed through to subrecipients, a weak system for monitoring subrecipients
would indicate higher risk.
(2) Prior audit findings would indicate higher risk, particularly when the situations identified in the audit findings could have a significant
impact on a Federal program or have not been corrected.
(3) Federal programs not recently audited as major programs may be of higher risk than Federal programs recently audited as major
programs without audit findings.
(c) Oversight exercised by Federal agencies and pass-through entities.
(1) Oversight exercised by Federal agencies or pass-through entities could be used to assess risk. For example, recent monitoring or
other reviews performed by an oversight entity that disclosed no significant problems would indicate lower risk, whereas monitoring
that disclosed significant problems would indicate higher risk.
(2) Federal agencies, with the concurrence of OMB, may identify Federal programs that are higher risk. OMB will provide this
identification in the compliance supplement.
(d) Inherent risk of the Federal program.
(1) The nature of a Federal program may indicate risk. Consideration should be given to the complexity of the program and the extent to
which the Federal program contracts for goods and services. For example, Federal programs that disburse funds through third-party
contracts or have eligibility criteria may be of higher risk. Federal programs primarily involving staff payroll costs may have high risk
for noncompliance with requirements of § 200.430, but otherwise be at low risk.
(2) The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example, a new Federal program with
new or interim regulations may have higher risk than an established program with time-tested regulations. Also, significant changes
in Federal programs, statutes, regulations, or the terms and conditions of Federal awards may increase risk.
(3) The phase of a Federal program in its life cycle at the auditee may indicate risk. For example, during the first and last years that an
auditee participates in a Federal program, the risk may be higher due to start-up or closeout of program activities and staff.
(4) Type B programs with larger Federal awards expended would be of higher risk than programs with substantially smaller Federal
awards expended.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

§ 200.520 Criteria for a low-risk auditee.
An auditee that meets all of the following conditions for each of the preceding two audit periods must qualify as a low-risk auditee and be eligible
for reduced audit coverage in accordance with § 200.518.
(a) Single audits were performed on an annual basis in accordance with the provisions of this Subpart, including submitting the data
collection form and the reporting package to the FAC within the timeframe specified in § 200.512. A non-Federal entity that has biennial
audits does not qualify as a low-risk auditee.
(b) The auditor's opinion on whether the financial statements were prepared in accordance with GAAP, or a basis of accounting required by
state law, and the auditor's in relation to opinion on the schedule of expenditures of Federal awards were unmodified.
(c) There were no deficiencies in internal control which were identified as material weaknesses under the requirements of GAGAS.
(d) The auditor did not report a substantial doubt about the auditee's ability to continue as a going concern.
(e) None of the Federal programs had audit findings from any of the following in either of the preceding two audit periods in which they were
classified as Type A programs:
(1) Internal control deficiencies that were identified as material weaknesses in the auditor's report on internal control for major
programs as required under § 200.515(c);
(2) A modified opinion on a major program in the auditor's report on major programs as required under § 200.515(c); or

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(3) Known or likely questioned costs that exceeded five percent of the total Federal awards expended for a Type A program during the
audit period.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

Management Decisions

§ 200.521 Management decision.
(a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the
expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed
corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or passthrough entity may request additional information or documentation from the auditee, including a request for auditor assurance related
to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available
to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating
to the financial statements which are required to be reported in accordance with GAGAS.
(b) Federal agency. As provided in § 200.513(a)(3)(vii), the cognizant agency for audit must be responsible for coordinating a management
decision for audit findings that affect the programs of more than one Federal agency. As provided in § 200.513(c)(3)(i), a Federal
awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to non-Federal
entities.
(c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for
audit findings that relate to Federal awards it makes to subrecipients.
(d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so
within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as
possible and corrective action should begin no later than upon receipt of the audit report.
(e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in
accordance with § 200.516(c).
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

Appendix I to Part 200 - Full Text of Notice of Funding Opportunity
The full text of the notice of funding opportunity is organized in sections. The required format outlined in this appendix indicates immediately
following the title of each section whether that section is required in every announcement or is a Federal awarding agency option. The format is
designed so that similar types of information will appear in the same sections in announcements of different Federal funding opportunities.
Toward that end, there is text in each of the following sections to describe the types of information that a Federal awarding agency would include
in that section of an actual announcement.
A Federal awarding agency that wishes to include information that the format does not specifically discuss may address that subject in whatever
section(s) is most appropriate. For example, if a Federal awarding agency chooses to address performance goals in the announcement, it might do
so in the funding opportunity description, the application content, or the reporting requirements.
Similarly, when this format calls for a type of information to be in a particular section, a Federal awarding agency wishing to address that subject in
other sections may elect to repeat the information in those sections or use cross references between the sections (there should be hyperlinks for
cross-references in any electronic versions of the announcement). For example, a Federal awarding agency may want to include Section A
information about the types of non-Federal entities who are eligible to apply. The format specifies a standard location for that information in
Section C.1 but does not preclude repeating the information in Section A or creating a cross reference between Section A and C.1, as long as a
potential applicant can find the information quickly and easily from the standard location.
The sections of the full text of the announcement are described in the following paragraphs.

A. Program Description - Required
This section contains the full program description of the funding opportunity. It may be as long as needed to adequately communicate to
potential applicants the areas in which funding may be provided. It describes the Federal awarding agency's funding priorities or the
technical or focus areas in which the Federal awarding agency intends to provide assistance. As appropriate, it may include any program
history (e.g., whether this is a new program or a new or changed area of program emphasis). This section must include program goals
and objectives, a reference to the relevant Assistance Listings, a description of how the award will contribute to the achievement of the
program's goals and objectives, and the expected performance goals, indicators, targets, baseline data, data collection, and other
outcomes such Federal awarding agency expects to achieve, and may include examples of successful projects that have been funded
previously. This section also may include other information the Federal awarding agency deems necessary, and must at a minimum
include citations for authorizing statutes and regulations for the funding opportunity.

B. Federal Award Information - Required
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This section provides sufficient information to help an applicant make an informed decision about whether to submit a proposal.
Relevant information could include the total amount of funding that the Federal awarding agency expects to award through the
announcement; the expected performance indicators, targets, baseline data, and data collection; the anticipated number of Federal
awards; the expected amounts of individual Federal awards (which may be a range); the amount of funding per Federal award, on
average, experienced in previous years; and the anticipated start dates and periods of performance for new Federal awards. This section
also should address whether applications for renewal or supplementation of existing projects are eligible to compete with applications
for new Federal awards.
This section also must indicate the type(s) of assistance instrument (e.g., grant, cooperative agreement) that may be awarded if
applications are successful. If cooperative agreements may be awarded, this section either should describe the “substantial involvement”
that the Federal awarding agency expects to have or should reference where the potential applicant can find that information (e.g., in the
funding opportunity description in Section A. or Federal award administration information in Section D. If procurement contracts also
may be awarded, this must be stated.

C. Eligibility Information
This section addresses the considerations or factors that determine applicant or application eligibility. This includes the eligibility of
particular types of applicant organizations, any factors affecting the eligibility of the principal investigator or project director, and any
criteria that make particular projects ineligible. Federal agencies should make clear whether an applicant's failure to meet an eligibility
criterion by the time of an application deadline will result in the Federal awarding agency returning the application without review or, even
though an application may be reviewed, will preclude the Federal awarding agency from making a Federal award. Key elements to be
addressed are:
1.

Eligible Applicants - Required. Announcements must clearly identify the types of entities that are eligible to apply. If there are no
restrictions on eligibility, this section may simply indicate that all potential applicants are eligible. If there are restrictions on
eligibility, it is important to be clear about the specific types of entities that are eligible, not just the types that are ineligible. For
example, if the program is limited to nonprofit organizations subject to 26 U.S.C. 501(c)(3) of the tax code (26 U.S.C. 501(c)(3)), the
announcement should say so. Similarly, it is better to state explicitly that Native American tribal organizations are eligible than to
assume that they can unambiguously infer that from a statement that nonprofit organizations may apply. Eligibility also can be
expressed by exception, (e.g., open to all types of domestic applicants other than individuals). This section should refer to any
portion of Section D specifying documentation that must be submitted to support an eligibility determination (e.g., proof of 501(c)
(3) status as determined by the Internal Revenue Service or an authorizing tribal resolution). To the extent that any funding
restriction in Section D.6 could affect the eligibility of an applicant or project, the announcement must either restate that restriction
in this section or provide a cross-reference to its description in Section D.6.

2.

Cost Sharing or Matching - Required. Announcements must state whether there is required cost sharing, matching, or cost
participation without which an application would be ineligible (if cost sharing is not required, the announcement must explicitly say
so). Required cost sharing may be a certain percentage or amount, or may be in the form of contributions of specified items or
activities (e.g., provision of equipment). It is important that the announcement be clear about any restrictions on the types of cost
(e.g., in-kind contributions) that are acceptable as cost sharing. Cost sharing as an eligibility criterion includes requirements based
in statute or regulation, as described in § 200.306 of this Part. This section should refer to the appropriate portion(s) of section D.
stating any pre-award requirements for submission of letters or other documentation to verify commitments to meet cost-sharing
requirements if a Federal award is made.

3.

Other - Required, if applicable. If there are other eligibility criteria (i.e., criteria that have the effect of making an application or project
ineligible for Federal awards, whether referred to as “responsiveness” criteria, “go-no go” criteria, “threshold” criteria, or in other
ways), must be clearly stated and must include a reference to the regulation of requirement that describes the restriction, as
applicable. For example, if entities that have been found to be in violation of a particular Federal statute are ineligible, it is important
to say so. This section must also state any limit on the number of applications an applicant may submit under the announcement
and make clear whether the limitation is on the submitting organization, individual investigator/program director, or both. This
section should also address any eligibility criteria for beneficiaries or for program participants other than Federal award recipients.

D. Application and Submission Information
1.

Address to Request Application Package - Required. Potential applicants must be told how to get application forms, kits, or other
materials needed to apply (if this announcement contains everything needed, this section need only say so). An Internet address
where the materials can be accessed is acceptable. However, since high-speed Internet access is not yet universally available for
downloading documents, and applicants may have additional accessibility requirements, there also should be a way for potential
applicants to request paper copies of materials, such as a U.S. Postal Service mailing address, telephone or FAX number, Telephone
Device for the Deaf (TDD), Text Telephone (TTY) number, and/or Federal Information Relay Service (FIRS) number.

2.

Content and Form of Application Submission - Required. This section must identify the required content of an application and the
forms or formats that an applicant must use to submit it. If any requirements are stated elsewhere because they are general
requirements that apply to multiple programs or funding opportunities, this section should refer to where those requirements may
be found. This section also should include required forms or formats as part of the announcement or state where the applicant may
obtain them.
This section should specifically address content and form or format requirements for:

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i.

Pre-applications, letters of intent, or white papers required or encouraged (see Section D.4), including any limitations on the
number of pages or other formatting requirements similar to those for full applications.

ii.

The application as a whole. For all submissions, this would include any limitations on the number of pages, font size and
typeface, margins, paper size, number of copies, and sequence or assembly requirements. If electronic submission is
permitted or required, this could include special requirements for formatting or signatures.

iii.

Component pieces of the application (e.g., if all copies of the application must bear original signatures on the face page or the
program narrative may not exceed 10 pages). This includes any pieces that may be submitted separately by third parties (e.g.,
references or letters confirming commitments from third parties that will be contributing a portion of any required cost
sharing).

iv.

Information that successful applicants must submit after notification of intent to make a Federal award, but prior to a Federal
award. This could include evidence of compliance with requirements relating to human subjects or information needed to
comply with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321-4370h).

Unique entity identifier and System for Award Management (SAM) - Required. This paragraph must state clearly that each applicant
(unless the applicant is an individual or Federal awarding agency that is excepted from those requirements under 2 CFR 25.110(b)
or (c), or has an exception approved by the Federal awarding agency under 2 CFR 25.110(d)) is required to:
(i)

Be registered in SAM before submitting its application;

(ii) Provide a valid unique entity identifier in its application; and
(iii) Continue to maintain an active SAM registration with current information at all times during which it has an active Federal
award or an application or plan under consideration by a Federal awarding agency. It also must state that the Federal awarding
agency may not make a Federal award to an applicant until the applicant has complied with all applicable unique entity
identifier and SAM requirements and, if an applicant has not fully complied with the requirements by the time the Federal
awarding agency is ready to make a Federal award, the Federal awarding agency may determine that the applicant is not
qualified to receive a Federal award and use that determination as a basis for making a Federal award to another applicant.
4.

Submission Dates and Times - Required. Announcements must identify due dates and times for all submissions. This includes not
only the full applications but also any preliminary submissions (e.g., letters of intent, white papers, or pre-applications). It also
includes any other submissions of information before Federal award that are separate from the full application. If the funding
opportunity is a general announcement that is open for a period of time with no specific due dates for applications, this section
should say so. Note that the information on dates that is included in this section also must appear with other overview information
in a location preceding the full text of the announcement (see § 200.204 of this part).

5.

Intergovernmental Review - Required, if applicable. If the funding opportunity is subject to Executive Order 12372,
“Intergovernmental Review of Federal Programs,” the notice must say so and applicants must contact their state's Single Point of
Contact (SPOC) to find out about and comply with the state's process under Executive Order 12372, it may be useful to inform
potential applicants that the names and addresses of the SPOCs are listed in the Office of Management and Budget's website.

6.

Funding Restrictions - Required. Notices must include information on funding restrictions in order to allow an applicant to develop
an application and budget consistent with program requirements. Examples are whether construction is an allowable activity, if
there are any limitations on direct costs such as foreign travel or equipment purchases, and if there are any limits on indirect costs
(or facilities and administrative costs). Applicants must be advised if Federal awards will not allow reimbursement of pre-Federal
award costs.

7.

Other Submission Requirements - Required. This section must address any other submission requirements not included in the other
paragraphs of this section. This might include the format of submission, i.e., paper or electronic, for each type of required
submission. Applicants should not be required to submit in more than one format and this section should indicate whether they
may choose whether to submit applications in hard copy or electronically, may submit only in hard copy, or may submit only
electronically.
This section also must indicate where applications (and any pre-applications) must be submitted if sent by postal mail, electronic
means, or hand-delivery. For postal mail submission, this must include the name of an office, official, individual or function (e.g.,
application receipt center) and a complete mailing address. For electronic submission, this must include the URL or email address;
whether a password(s) is required; whether particular software or other electronic capabilities are required; what to do in the event
of system problems and a point of contact who will be available in the event the applicant experiences technical difficulties.[1]

E. Application Review Information
1.

Criteria - Required. This section must address the criteria that the Federal awarding agency will use to evaluate applications. This
includes the merit and other review criteria that evaluators will use to judge applications, including any statutory, regulatory, or other
preferences (e.g., minority status or Native American tribal preferences) that will be applied in the review process. These criteria are
distinct from eligibility criteria that are addressed before an application is accepted for review and any program policy or other
factors that are applied during the selection process, after the review process is completed. The intent is to make the application
process transparent so applicants can make informed decisions when preparing their applications to maximize fairness of the
process. The announcement should clearly describe all criteria, including any sub-criteria. If criteria vary in importance, the
announcement should specify the relative percentages, weights, or other means used to distinguish among them. For statutory,
regulatory, or other preferences, the announcement should provide a detailed explanation of those preferences with an explicit
indication of their effect (e.g., whether they result in additional points being assigned).

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If an applicant's proposed cost sharing will be considered in the review process (as opposed to being an eligibility criterion
described in Section C.2), the announcement must specifically address how it will be considered (e.g., to assign a certain number of
additional points to applicants who offer cost sharing, or to break ties among applications with equivalent scores after evaluation
against all other factors). If cost sharing will not be considered in the evaluation, the announcement should say so, so that there is
no ambiguity for potential applicants. Vague statements that cost sharing is encouraged, without clarification as to what that
means, are unhelpful to applicants. It also is important that the announcement be clear about any restrictions on the types of cost
(e.g., in-kind contributions) that are acceptable as cost sharing.

2.

Review and Selection Process - Required. This section may vary in the level of detail provided. The announcement must list any
program policy or other factors or elements, other than merit criteria, that the selecting official may use in selecting applications for
Federal award (e.g., geographical dispersion, program balance, or diversity). The Federal awarding agency may also include other
appropriate details. For example, this section may indicate who is responsible for evaluation against the merit criteria (e.g., peers
external to the Federal awarding agency or Federal awarding agency personnel) and/or who makes the final selections for Federal
awards. If there is a multi-phase review process (e.g., an external panel advising internal Federal awarding agency personnel who
make final recommendations to the deciding official), the announcement may describe the phases. It also may include: the number
of people on an evaluation panel and how it operates, the way reviewers are selected, reviewer qualifications, and the way that
conflicts of interest are avoided. With respect to electronic methods for providing information about funding opportunities or
accepting applicants' submissions of information, each Federal awarding agency is responsible for compliance with Section 508 of
the Rehabilitation Act of 1973 (29 U.S.C. 794d).
In addition, if the Federal awarding agency permits applicants to nominate suggested reviewers of their applications or suggest
those they feel may be inappropriate due to a conflict of interest, that information should be included in this section.

3.

For any Federal award under a notice of funding opportunity, if the Federal awarding agency anticipates that the total Federal share
will be greater than the simplified acquisition threshold on any Federal award under a notice of funding opportunity may include,
over the period of performance, this section must also inform applicants:
i.

That the Federal awarding agency, prior to making a Federal award with a total amount of Federal share greater than the
simplified acquisition threshold, is required to review and consider any information about the applicant that is in the
designated integrity and performance system accessible through SAM (currently FAPIIS) (see 41 U.S.C. 2313);

ii.

That an applicant, at its option, may review information in the designated integrity and performance systems accessible
through SAM and comment on any information about itself that a Federal awarding agency previously entered and is currently
in the designated integrity and performance system accessible through SAM;

iii.

That the Federal awarding agency will consider any comments by the applicant, in addition to the other information in the
designated integrity and performance system, in making a judgment about the applicant's integrity, business ethics, and record
of performance under Federal awards when completing the review of risk posed by applicants as described in § 200.206.

4.

Anticipated Announcement and Federal Award Dates - Optional. This section is intended to provide applicants with information they
can use for planning purposes. If there is a single application deadline followed by the simultaneous review of all applications, the
Federal awarding agency can include in this section information about the anticipated dates for announcing or notifying successful
and unsuccessful applicants and for having Federal awards in place. If applications are received and evaluated on a “rolling” basis
at different times during an extended period, it may be appropriate to give applicants an estimate of the time needed to process an
application and notify the applicant of the Federal awarding agency's decision.

F. Federal Award Administration Information
1.

Federal Award Notices - Required. This section must address what a successful applicant can expect to receive following selection.
If the Federal awarding agency's practice is to provide a separate notice stating that an application has been selected before it
actually makes the Federal award, this section would be the place to indicate that the letter is not an authorization to begin
performance (to the extent that it allows charging to Federal awards of pre-award costs at the non-Federal entity's own risk). This
section should indicate that the notice of Federal award signed by the grants officer (or equivalent) is the authorizing document, and
whether it is provided through postal mail or by electronic means and to whom. It also may address the timing, form, and content of
notifications to unsuccessful applicants. See also § 200.211.

2.

Administrative and National Policy Requirements - Required . This section must identify the usual administrative and national policy
requirements the Federal awarding agency's Federal awards may include. Providing this information lets a potential applicant
identify any requirements with which it would have difficulty complying if its application is successful. In those cases, early
notification about the requirements allows the potential applicant to decide not to apply or to take needed actions before receiving
the Federal award. The announcement need not include all of the terms and conditions of the Federal award, but may refer to a
document (with information about how to obtain it) or Internet site where applicants can see the terms and conditions. If this
funding opportunity will lead to Federal awards with some special terms and conditions that differ from the Federal awarding
agency's usual (sometimes called “general”) terms and conditions, this section should highlight those special terms and conditions.
Doing so will alert applicants that have received Federal awards from the Federal awarding agency previously and might not
otherwise expect different terms and conditions. For the same reason, the announcement should inform potential applicants about
special requirements that could apply to particular Federal awards after the review of applications and other information, based on
the particular circumstances of the effort to be supported (e.g., if human subjects were to be involved or if some situations may
justify special terms on intellectual property, data sharing or security requirements).

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3.

Reporting - Required. This section must include general information about the type (e.g., financial or performance), frequency, and
means of submission (paper or electronic) of post-Federal award reporting requirements. Highlight any special reporting
requirements for Federal awards under this funding opportunity that differ (e.g., by report type, frequency, form/format, or
circumstances for use) from what the Federal awarding agency's Federal awards usually require. Federal awarding agencies must
also describe in this section all relevant requirements such as those at 2 CFR 180.335 and 180.350.
If the Federal share of any Federal award may include more than $500,000 over the period of performance, this section must inform
potential applicants about the post award reporting requirements reflected in appendix XII to this part.

G. Federal Awarding Agency Contact(s) - Required
The announcement must give potential applicants a point(s) of contact for answering questions or helping with problems while the
funding opportunity is open. The intent of this requirement is to be as helpful as possible to potential applicants, so the Federal awarding
agency should consider approaches such as giving:
i.

Points of contact who may be reached in multiple ways (e.g., by telephone, FAX, and/or email, as well as regular mail).

ii.

A fax or email address that multiple people access, so that someone will respond even if others are unexpectedly absent during
critical periods.

iii.

Different contacts for distinct kinds of help (e.g., one for questions of programmatic content and a second for administrative
questions).

H. Other Information - Optional
This section may include any additional information that will assist a potential applicant. For example, the section might:
i.

Indicate whether this is a new program or a one-time initiative.

ii.

Mention related programs or other upcoming or ongoing Federal awarding agency funding opportunities for similar activities.

iii.

Include current Internet addresses for Federal awarding agency Web sites that may be useful to an applicant in understanding the
program.

iv.

Alert applicants to the need to identify proprietary information and inform them about the way the Federal awarding agency will
handle it.

v.

Include certain routine notices to applicants (e.g., that the Federal Government is not obligated to make any Federal award as a
result of the announcement or that only grants officers can bind the Federal Government to the expenditure of funds).

[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 43310, July 22, 2015; 85 FR 49575, Aug. 13, 2020]
FOOTNOTES -
APPENDIX I TO PART 200
[1]

With respect to electronic methods for providing information about funding opportunities or accepting applicants' submissions of
information, each Federal awarding agency is responsible for compliance with Section 508 of the Rehabilitation Act of 1973 (29 U.S.C.
794d).

Appendix II to Part 200 - Contract Provisions for Non-Federal Entity Contracts Under Federal Awards
In addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal
award must contain provisions covering the following, as applicable.
(A) Contracts for more than the simplified acquisition threshold, which is the inflation adjusted amount determined by the Civilian Agency
Acquisition Council and the Defense Acquisition Regulations Council (Councils) as authorized by 41 U.S.C. 1908, must address
administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such
sanctions and penalties as appropriate.
(B) All contracts in excess of $10,000 must address termination for cause and for convenience by the non-Federal entity including the
manner by which it will be effected and the basis for settlement.
(C) Equal Employment Opportunity. Except as otherwise provided under 41 CFR Part 60, all contracts that meet the definition of “federally
assisted construction contract” in 41 CFR Part 60-1.3 must include the equal opportunity clause provided under 41 CFR 60-1.4(b), in
accordance with Executive Order 11246, “Equal Employment Opportunity” (30 FR 12319, 12935, 3 CFR Part, 1964-1965 Comp., p. 339), as
amended by Executive Order 11375, “Amending Executive Order 11246 Relating to Equal Employment Opportunity,” and implementing
regulations at 41 CFR part 60, “Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor.”
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in
excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 31413144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions Applicable to
Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay
wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary

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of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of
the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or
subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal entity must report all suspected or
reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland “AntiKickback” Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part 3, “Contractors and Subcontractors
on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States”). The Act provides that each
contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or
repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-Federal entity must report
all suspected or reported violations to the Federal awarding agency.
(E) Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708). Where applicable, all contracts awarded by the non-Federal entity
in excess of $100,000 that involve the employment of mechanics or laborers must include a provision for compliance with 40 U.S.C.
3702 and 3704, as supplemented by Department of Labor regulations (29 CFR Part 5). Under 40 U.S.C. 3702 of the Act, each contractor
must be required to compute the wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in excess
of the standard work week is permissible provided that the worker is compensated at a rate of not less than one and a half times the
basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to
construction work and provide that no laborer or mechanic must be required to work in surroundings or under working conditions which
are unsanitary, hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily
available on the open market, or contracts for transportation or transmission of intelligence.
(F) Rights to Inventions Made Under a Contract or Agreement. If the Federal award meets the definition of “funding agreement” under 37 CFR
§ 401.2 (a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit organization regarding
the substitution of parties, assignment or performance of experimental, developmental, or research work under that “funding agreement,”
the recipient or subrecipient must comply with the requirements of 37 CFR Part 401, “Rights to Inventions Made by Nonprofit
Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements,” and any implementing
regulations issued by the awarding agency.
(G) Clean Air Act (42 U.S.C. 7401-7671q.) and the Federal Water Pollution Control Act (33 U.S.C. 1251-1387), as amended - Contracts and
subgrants of amounts in excess of $150,000 must contain a provision that requires the non-Federal award to agree to comply with all
applicable standards, orders or regulations issued pursuant to the Clean Air Act (42 U.S.C. 7401-7671q) and the Federal Water Pollution
Control Act as amended (33 U.S.C. 1251-1387). Violations must be reported to the Federal awarding agency and the Regional Office of
the Environmental Protection Agency (EPA).
(H) Debarment and Suspension (Executive Orders 12549 and 12689) - A contract award (see 2 CFR 180.220) must not be made to parties
listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR
180 that implement Executive Orders 12549 (3 CFR part 1986 Comp., p. 189) and 12689 (3 CFR part 1989 Comp., p. 235), “Debarment
and Suspension.” SAM Exclusions contains the names of parties debarred, suspended, or otherwise excluded by agencies, as well as
parties declared ineligible under statutory or regulatory authority other than Executive Order 12549.
(I)

Byrd Anti-Lobbying Amendment (31 U.S.C. 1352) - Contractors that apply or bid for an award exceeding $100,000 must file the required
certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay any person or
organization for influencing or attempting to influence an officer or employee of any agency, a member of Congress, officer or employee
of Congress, or an employee of a member of Congress in connection with obtaining any Federal contract, grant or any other award
covered by 31 U.S.C. 1352. Each tier must also disclose any lobbying with non-Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the non-Federal award.

(J) See § 200.323.
(K) See § 200.216.
(L) See § 200.322.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 85 FR 49577, Aug. 13, 2020]

Appendix III to Part 200 - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of
Higher Education (IHEs)

A. General
This appendix provides criteria for identifying and computing indirect (or indirect (F&A)) rates at IHEs (institutions). Indirect (F&A) costs
are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular
sponsored project, an instructional activity, or any other institutional activity. See subsection B.1 for a discussion of the components of
indirect (F&A) costs.

1. Major Functions of an Institution
Refers to instruction, organized research, other sponsored activities and other institutional activities as defined in this section:
a.

Instruction means the teaching and training activities of an institution. Except for research training as provided in subsection b,
this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a
non-credit basis, and whether they are offered through regular academic departments or separate divisions, such as a summer

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school division or an extension division. Also considered part of this major function are departmental research, and, where
agreed to, university research.
(1) Sponsored instruction and training means specific instructional or training activity established by grant, contract, or
cooperative agreement. For purposes of the cost principles, this activity may be considered a major function even though
an institution's accounting treatment may include it in the instruction function.
(2) Departmental research means research, development and scholarly activities that are not organized research and,
consequently, are not separately budgeted and accounted for. Departmental research, for purposes of this document, is
not considered as a major function, but as a part of the instruction function of the institution.
(3) Only mandatory cost sharing or cost sharing specifically committed in the project budget must be included in the
organized research base for computing the indirect (F&A) cost rate or reflected in any allocation of indirect costs. Salary
costs above statutory limits are not considered cost sharing.
b.

Organized research means all research and development activities of an institution that are separately budgeted and
accounted for. It includes:
(1) Sponsored research means all research and development activities that are sponsored by Federal and non-Federal
agencies and organizations. This term includes activities involving the training of individuals in research techniques
(commonly called research training) where such activities utilize the same facilities as other research and development
activities and where such activities are not included in the instruction function.
(2) University research means all research and development activities that are separately budgeted and accounted for by the
institution under an internal application of institutional funds. University research, for purposes of this document, must be
combined with sponsored research under the function of organized research.

c.

Other sponsored activities means programs and projects financed by Federal and non-Federal agencies and organizations
which involve the performance of work other than instruction and organized research. Examples of such programs and
projects are health service projects and community service programs. However, when any of these activities are undertaken by
the institution without outside support, they may be classified as other institutional activities.

d.

Other institutional activities means all activities of an institution except for instruction, departmental research, organized
research, and other sponsored activities, as defined in this section; indirect (F&A) cost activities identified in this Appendix
paragraph B, Identification and assignment of indirect (F&A) costs; and specialized services facilities described in § 200.468
of this part.

2. Criteria for Distribution
a.

Base period. A base period for distribution of indirect (F&A) costs is the period during which the costs are incurred. The base
period normally should coincide with the fiscal year established by the institution, but in any event the base period should be
so selected as to avoid inequities in the distribution of costs.

b.

Need for cost groupings. The overall objective of the indirect (F&A) cost allocation process is to distribute the indirect (F&A)
costs described in Section B, Identification and assignment of indirect (F&A) costs, to the major functions of the institution in
proportions reasonably consistent with the nature and extent of their use of the institution's resources. In order to achieve this
objective, it may be necessary to provide for selective distribution by establishing separate groupings of cost within one or
more of the indirect (F&A) cost categories referred to in subsection B.1. In general, the cost groupings established within a
category should constitute, in each case, a pool of those items of expense that are considered to be of like nature in terms of
their relative contribution to (or degree of remoteness from) the particular cost objectives to which distribution is appropriate.
Cost groupings should be established considering the general guides provided in subsection c of this section. Each such pool
or cost grouping should then be distributed individually to the related cost objectives, using the distribution base or method
most appropriate in light of the guidelines set forth in subsection d of this section.

c.

General considerations on cost groupings. The extent to which separate cost groupings and selective distribution would be
appropriate at an institution is a matter of judgment to be determined on a case-by-case basis. Typical situations which may
warrant the establishment of two or more separate cost groupings (based on account classification or analysis) within an
indirect (F&A) cost category include but are not limited to the following:
(1) If certain items or categories of expense relate solely to one of the major functions of the institution or to less than all
functions, such expenses should be set aside as a separate cost grouping for direct assignment or selective allocation in
accordance with the guides provided in subsections b and d.
(2) If any types of expense ordinarily treated as general administration or departmental administration are charged to Federal
awards as direct costs, expenses applicable to other activities of the institution when incurred for the same purposes in
like circumstances must, through separate cost groupings, be excluded from the indirect (F&A) costs allocable to those
Federal awards and included in the direct cost of other activities for cost allocation purposes.
(3) If it is determined that certain expenses are for the support of a service unit or facility whose output is susceptible of
measurement on a workload or other quantitative basis, such expenses should be set aside as a separate cost grouping
for distribution on such basis to organized research, instructional, and other activities at the institution or within the
department.

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(4) If activities provide their own purchasing, personnel administration, building maintenance or similar service, the
distribution of general administration and general expenses, or operation and maintenance expenses to such activities
should be accomplished through cost groupings which include only that portion of central indirect (F&A) costs (such as
for overall management) which are properly allocable to such activities.
(5) If the institution elects to treat fringe benefits as indirect (F&A) charges, such costs should be set aside as a separate
cost grouping for selective distribution to related cost objectives.
(6) The number of separate cost groupings within a category should be held within practical limits, after taking into
consideration the materiality of the amounts involved and the degree of precision attainable through less selective
methods of distribution.
d.

Selection of distribution method.
(1) Actual conditions must be taken into account in selecting the method or base to be used in distributing individual cost
groupings. The essential consideration in selecting a base is that it be the one best suited for assigning the pool of costs
to cost objectives in accordance with benefits derived; with a traceable cause-and-effect relationship; or with logic and
reason, where neither benefit nor a cause-and-effect relationship is determinable.
(2) If a cost grouping can be identified directly with the cost objective benefitted, it should be assigned to that cost objective.
(3) If the expenses in a cost grouping are more general in nature, the distribution may be based on a cost analysis study
which results in an equitable distribution of the costs. Such cost analysis studies may take into consideration weighting
factors, population, or space occupied if appropriate. Cost analysis studies, however, must
(a) be appropriately documented in sufficient detail for subsequent review by the cognizant agency for indirect costs,
(b) distribute the costs to the related cost objectives in accordance with the relative benefits derived,
(c) be statistically sound,
(d) be performed specifically at the institution at which the results are to be used, and
(e) be reviewed periodically, but not less frequently than rate negotiations, updated if necessary, and used consistently.
Any assumptions made in the study must be stated and explained. The use of cost analysis studies and periodic
changes in the method of cost distribution must be fully justified.
(4) If a cost analysis study is not performed, or if the study does not result in an equitable distribution of the costs, the
distribution must be made in accordance with the appropriate base cited in Section B, unless one of the following
conditions is met:
(a) It can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or
that a more readily available base would not increase the costs charged to Federal awards, or
(b) The institution qualifies for, and elects to use, the simplified method for computing indirect (F&A) cost rates
described in Section D.
(5) Notwithstanding subsection (3), effective July 1, 1998, a cost analysis or base other than that in Section B must not be
used to distribute utility or student services costs. Instead, subsection B.4.c, may be used in the recovery of utility costs.

e.

Order of distribution.
(1) Indirect (F&A) costs are the broad categories of costs discussed in Section B.1.
(2) Depreciation, interest expenses, operation and maintenance expenses, and general administrative and general expenses
should be allocated in that order to the remaining indirect (F&A) cost categories as well as to the major functions and
specialized service facilities of the institution. Other cost categories may be allocated in the order determined to be most
appropriate by the institutions. When cross allocation of costs is made as provided in subsection (3), this order of
allocation does not apply.
(3) Normally an indirect (F&A) cost category will be considered closed once it has been allocated to other cost objectives,
and costs may not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect
(F&A) cost categories may be used if such allocation will result in a more equitable allocation of costs. If a cross
allocation is used, an appropriate modification to the composition of the indirect (F&A) cost categories described in
Section B is required.

B. Identification and Assignment of Indirect (F&A) Costs
1. Definition of Facilities and Administration
See § 200.414 which provides the basis for these indirect cost requirements.

2. Depreciation

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a.

The expenses under this heading are the portion of the costs of the institution's buildings, capital improvements to land and
buildings, and equipment which are computed in accordance with § 200.436.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated in the
following manner:
(1) Depreciation on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment
used in such buildings, must be assigned to that function.
(2) Depreciation on buildings used for more than one function, and on capital improvements and equipment used in such
buildings, must be allocated to the individual functions performed in each building on the basis of usable square feet of space,
excluding common areas such as hallways, stairwells, and rest rooms.
(3) Depreciation on buildings, capital improvements and equipment related to space (e.g., individual rooms, laboratories) used
jointly by more than one function (as determined by the users of the space) must be treated as follows. The cost of each
jointly used unit of space must be allocated to benefitting functions on the basis of:
(a) The employee full-time equivalents (FTEs) or salaries and wages of those individual functions benefitting from the use of
that space; or
(b) Institution-wide employee FTEs or salaries and wages applicable to the benefitting major functions (see Section A.1) of
the institution.
(4) Depreciation on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like, not
included in the cost of buildings, must be allocated to user categories of students and employees on a full-time equivalent
basis. The amount allocated to the student category must be assigned to the instruction function of the institution. The
amount allocated to the employee category must be further allocated to the major functions of the institution in proportion to
the salaries and wages of all employees applicable to those functions.

3. Interest
Interest on debt associated with certain buildings, equipment and capital improvements, as defined in § 200.449, must be classified as
an expenditure under the category Facilities. These costs must be allocated in the same manner as the depreciation on the buildings,
equipment and capital improvements to which the interest relates.

4. Operation and Maintenance Expenses
a.

The expenses under this heading are those that have been incurred for the administration, supervision, operation, maintenance,
preservation, and protection of the institution's physical plant. They include expenses normally incurred for such items as janitorial
and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance
and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety;
hazardous waste disposal; property, liability and all other insurance relating to property; space and capital leasing; facility planning
and management; and central receiving. The operation and maintenance expense category should also include its allocable share
of fringe benefit costs, depreciation, and interest costs.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated in the
same manner as described in subsection 2.b for depreciation.

c.

A utility cost adjustment of up to 1.3 percentage points may be included in the negotiated indirect cost rate of the IHE for organized
research, per the computation alternatives in paragraphs (c)(1) and (2) of this section:
(1) Where space is devoted to a single function and metering allows unambiguous measurement of usage related to that space,
costs must be assigned to the function located in that space.
(2) Where space is allocated to different functions and metering does not allow unambiguous measurement of usage by function,
costs must be allocated as follows:
(i)

Utilities costs should be apportioned to functions in the same manner as depreciation, based on the calculated difference
between the site or building actual square footage for monitored research laboratory space (site, building, floor, or room),
and a separate calculation prepared by the IHE using the “effective square footage” described in subsection (c)(2)(ii) of
this section.

(ii) “Effective square footage” allocated to research laboratory space must be calculated as the actual square footage times
the relative energy utilization index (REUI) posted on the OMB Web site at the time of a rate determination.
A.

This index is the ratio of a laboratory energy use index (lab EUI) to the corresponding index for overall average
college or university space (college EUI).

B.

In July 2012, values for these two indices (taken respectively from the Lawrence Berkeley Laboratory “Labs for the
21st Century” benchmarking tool and the US Department of Energy “Buildings Energy Databook” and were 310
kBtu/sq ft-yr. and 155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain currency, OMB
will adjust the EUI numbers from time to time (no more often than annually nor less often than every 5 years), using
reliable and publicly disclosed data. Current values of both the EUIs and the REUI will be posted on the OMB
website.

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5. General Administration and General Expenses
a.

The expenses under this heading are those that have been incurred for the general executive and administrative offices of
educational institutions and other expenses of a general character which do not relate solely to any major function of the institution;
i.e., solely to
(1) instruction,
(2) organized research,
(3) other sponsored activities, or
(4) other institutional activities. The general administration and general expense category should also include its allocable share
of fringe benefit costs, operation and maintenance expense, depreciation, and interest costs. Examples of general
administration and general expenses include: Those expenses incurred by administrative offices that serve the entire
university system of which the institution is a part; central offices of the institution such as the President's or Chancellor's
office, the offices for institution-wide financial management, business services, budget and planning, personnel management,
and safety and risk management; the office of the General Counsel; and the operations of the central administrative
management information systems. General administration and general expenses must not include expenses incurred within
non-university-wide deans' offices, academic departments, organized research units, or similar organizational units. (See
subsection 6.)

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be grouped first
according to common major functions of the institution to which they render services or provide benefits. The aggregate expenses
of each group must then be allocated to serviced or benefitted functions on the modified total cost basis. Modified total costs
consist of the same elements as those in Section C.2. When an activity included in this indirect (F&A) cost category provides a
service or product to another institution or organization, an appropriate adjustment must be made to either the expenses or the
basis of allocation or both, to assure a proper allocation of costs.

6. Departmental Administration Expenses
a.

The expenses under this heading are those that have been incurred for administrative and supporting services that benefit common
or joint departmental activities or objectives in academic deans' offices, academic departments and divisions, and organized
research units. Organized research units include such units as institutes, study centers, and research centers. Departmental
administration expenses are subject to the following limitations.
(1) Academic deans' offices. Salaries and operating expenses are limited to those attributable to administrative functions.
(2) Academic departments:
(a) Salaries and fringe benefits attributable to the administrative work (including bid and proposal preparation) of faculty
(including department heads) and other professional personnel conducting research and/or instruction, must be allowed
at a rate of 3.6 percent of modified total direct costs. This category does not include professional business or
professional administrative officers. This allowance must be added to the computation of the indirect (F&A) cost rate for
major functions in Section C; the expenses covered by the allowance must be excluded from the departmental
administration cost pool. No documentation is required to support this allowance.
(b) Other administrative and supporting expenses incurred within academic departments are allowable provided they are
treated consistently in like circumstances. This would include expenses such as the salaries of secretarial and clerical
staffs, the salaries of administrative officers and assistants, travel, office supplies, stockrooms, and the like.
(3) Other fringe benefit costs applicable to the salaries and wages included in subsections (1) and (2) are allowable, as well as an
appropriate share of general administration and general expenses, operation and maintenance expenses, and depreciation.
(4) Federal agencies may authorize reimbursement of additional costs for department heads and faculty only in exceptional cases
where an institution can demonstrate undue hardship or detriment to project performance.

b.

The following guidelines apply to the determination of departmental administrative costs as direct or indirect (F&A) costs.
(1) In developing the departmental administration cost pool, special care should be exercised to ensure that costs incurred for the
same purpose in like circumstances are treated consistently as either direct or indirect (F&A) costs. For example, salaries of
technical staff, laboratory supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs, travel
costs, and specialized shop costs must be treated as direct costs wherever identifiable to a particular cost objective. Direct
charging of these costs may be accomplished through specific identification of individual costs to benefitting cost objectives,
or through recharge centers or specialized service facilities, as appropriate under the circumstances. See §§ 200.413(c) and
200.468.
(2) Items such as office supplies, postage, local telephone costs, and memberships must normally be treated as indirect (F&A)
costs.

c.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated as follows:
(1) The administrative expenses of the dean's office of each college and school must be allocated to the academic departments
within that college or school on the modified total cost basis.

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(2) The administrative expenses of each academic department, and the department's share of the expenses allocated in
subsection (1) must be allocated to the appropriate functions of the department on the modified total cost basis.

7. Sponsored Projects Administration
a.

The expenses under this heading are limited to those incurred by a separate organization(s) established primarily to administer
sponsored projects, including such functions as grant and contract administration (Federal and non-Federal), special security,
purchasing, personnel, administration, and editing and publishing of research and other reports. They include the salaries and
expenses of the head of such organization, assistants, and immediate staff, together with the salaries and expenses of personnel
engaged in supporting activities maintained by the organization, such as stock rooms, print shops, and the like. This category also
includes an allocable share of fringe benefit costs, general administration and general expenses, operation and maintenance
expenses, and depreciation. Appropriate adjustments will be made for services provided to other functions or organizations.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated to the
major functions of the institution under which the sponsored projects are conducted on the basis of the modified total cost of
sponsored projects.

c.

An appropriate adjustment must be made to eliminate any duplicate charges to Federal awards when this category includes similar
or identical activities as those included in the general administration and general expense category or other indirect (F&A) cost
items, such as accounting, procurement, or personnel administration.

8. Library Expenses
a.

The expenses under this heading are those that have been incurred for the operation of the library, including the cost of books and
library materials purchased for the library, less any items of library income that qualify as applicable credits under § 200.406. The
library expense category should also include the fringe benefits applicable to the salaries and wages included therein, an
appropriate share of general administration and general expense, operation and maintenance expense, and depreciation. Costs
incurred in the purchases of rare books (museum-type books) with no value to Federal awards should not be allocated to them.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated first on the
basis of primary categories of users, including students, professional employees, and other users.
(1) The student category must consist of full-time equivalent students enrolled at the institution, regardless of whether they earn
credits toward a degree or certificate.
(2) The professional employee category must consist of all faculty members and other professional employees of the institution,
on a full-time equivalent basis. This category may also include post-doctorate fellows and graduate students.
(3) The other users category must consist of a reasonable factor as determined by institutional records to account for all other
users of library facilities.

c.

Amount allocated in paragraph b of this section must be assigned further as follows:
(1) The amount in the student category must be assigned to the instruction function of the institution.
(2) The amount in the professional employee category must be assigned to the major functions of the institution in proportion to
the salaries and wages of all faculty members and other professional employees applicable to those functions.
(3) The amount in the other users category must be assigned to the other institutional activities function of the institution.

9. Student Administration and Services
a.

The expenses under this heading are those that have been incurred for the administration of student affairs and for services to
students, including expenses of such activities as deans of students, admissions, registrar, counseling and placement services,
student advisers, student health and infirmary services, catalogs, and commencements and convocations. The salaries of members
of the academic staff whose responsibilities to the institution require administrative work that benefits sponsored projects may also
be included to the extent that the portion charged to student administration is determined in accordance with subpart E of this Part.
This expense category also includes the fringe benefit costs applicable to the salaries and wages included therein, an appropriate
share of general administration and general expenses, operation and maintenance, interest expense, and depreciation.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses in this category must be allocated to the instruction
function, and subsequently to Federal awards in that function.

10. Offset for Indirect (F&A) Expenses Otherwise Provided for by the Federal Government
a.

The items to be accumulated under this heading are the reimbursements and other payments from the Federal Government which
are made to the institution to support solely, specifically, and directly, in whole or in part, any of the administrative or service
activities described in subsections 2 through 9.

b.

The items in this group must be treated as a credit to the affected individual indirect (F&A) cost category before that category is
allocated to benefitting functions.

C. Determination and Application of Indirect (F&A) Cost Rate or Rates
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1. Indirect (F&A) Cost Pools
a.
(1) Subject to subsection b, the separate categories of indirect (F&A) costs allocated to each major function of the institution as
prescribed in Section B, must be aggregated and treated as a common pool for that function. The amount in each pool must
be divided by the distribution base described in subsection 2 to arrive at a single indirect (F&A) cost rate for each function.
(2) The rate for each function is used to distribute indirect (F&A) costs to individual Federal awards of that function. Since a
common pool is established for each major function of the institution, a separate indirect (F&A) cost rate would be established
for each of the major functions described in Section A.1 under which Federal awards are carried out.
(3) Each institution's indirect (F&A) cost rate process must be appropriately designed to ensure that Federal sponsors do not in
any way subsidize the indirect (F&A) costs of other sponsors, specifically activities sponsored by industry and foreign
governments. Accordingly, each allocation method used to identify and allocate the indirect (F&A) cost pools, as described in
Sections A.2 and B.2 through B.9, must contain the full amount of the institution's modified total costs or other appropriate
units of measurement used to make the computations. In addition, the final rate distribution base (as defined in subsection 2)
for each major function (organized research, instruction, etc., as described in Section A.1 functions of an institution) must
contain all the programs or activities which utilize the indirect (F&A) costs allocated to that major function. At the time an
indirect (F&A) cost proposal is submitted to a cognizant agency for indirect costs, each institution must describe the process it
uses to ensure that Federal funds are not used to subsidize industry and foreign government funded programs.

2. The Distribution Basis
Indirect (F&A) costs must be distributed to applicable Federal awards and other benefitting activities within each major function (see
section A.1) on the basis of modified total direct costs (MTDC), consisting of all salaries and wages, fringe benefits, materials and
supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period covered by the subaward). MTDC is
defined in § 200.1. For this purpose, an indirect (F&A) cost rate should be determined for each of the separate indirect (F&A) cost pools
developed pursuant to subsection 1. The rate in each case should be stated as the percentage which the amount of the particular
indirect (F&A) cost pool is of the modified total direct costs identified with such pool.

3. Negotiated Lump Sum for Indirect (F&A) Costs
A negotiated fixed amount in lieu of indirect (F&A) costs may be appropriate for self-contained, off-campus, or primarily subcontracted
activities where the benefits derived from an institution's indirect (F&A) services cannot be readily determined. Such negotiated indirect
(F&A) costs will be treated as an offset before allocation to instruction, organized research, other sponsored activities, and other
institutional activities. The base on which such remaining expenses are allocated should be appropriately adjusted.

4. Predetermined Rates for Indirect (F&A) Costs
Public Law 87-638 (76 Stat. 437) as amended (41 U.S.C. 4708) authorizes the use of predetermined rates in determining the “indirect
costs” (indirect (F&A) costs) applicable under research agreements with educational institutions. The stated objectives of the law are to
simplify the administration of cost-type research and development contracts (including grants) with educational institutions, to facilitate
the preparation of their budgets, and to permit more expeditious closeout of such contracts when the work is completed. In view of the
potential advantages offered by this procedure, negotiation of predetermined rates for indirect (F&A) costs for a period of two to four
years should be the norm in those situations where the cost experience and other pertinent facts available are deemed sufficient to
enable the parties involved to reach an informed judgment as to the probable level of indirect (F&A) costs during the ensuing accounting
periods.

5. Negotiated Fixed Rates and Carry-Forward Provisions
When a fixed rate is negotiated in advance for a fiscal year (or other time period), the over- or under-recovery for that year may be
included as an adjustment to the indirect (F&A) cost for the next rate negotiation. When the rate is negotiated before the carry-forward
adjustment is determined, the carry-forward amount may be applied to the next subsequent rate negotiation. When such adjustments are
to be made, each fixed rate negotiated in advance for a given period will be computed by applying the expected indirect (F&A) costs
allocable to Federal awards for the forecast period plus or minus the carry-forward adjustment (over- or under-recovery) from the prior
period, to the forecast distribution base. Unrecovered amounts under lump-sum agreements or cost-sharing provisions of prior years
must not be carried forward for consideration in the new rate negotiation. There must, however, be an advance understanding in each
case between the institution and the cognizant agency for indirect costs as to whether these differences will be considered in the rate
negotiation rather than making the determination after the differences are known. Further, institutions electing to use this carry-forward
provision may not subsequently change without prior approval of the cognizant agency for indirect costs. In the event that an institution
returns to a post-determined rate, any over- or under-recovery during the period in which negotiated fixed rates and carry-forward
provisions were followed will be included in the subsequent post-determined rates. Where multiple rates are used, the same procedure
will be applicable for determining each rate.

6. Provisional and Final Rates for Indirect (F&A) Costs

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Where the cognizant agency for indirect costs determines that cost experience and other pertinent facts do not justify the use of
predetermined rates, or a fixed rate with a carry-forward, or if the parties cannot agree on an equitable rate, a provisional rate must be
established. To prevent substantial overpayment or underpayment, the provisional rate may be adjusted by the cognizant agency for
indirect costs during the institution's fiscal year. Predetermined or fixed rates may replace provisional rates at any time prior to the close
of the institution's fiscal year. If a provisional rate is not replaced by a predetermined or fixed rate prior to the end of the institution's fiscal
year, a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs incurred for
the period involved.

7. Fixed Rates for the Life of the Sponsored Agreement
a.

Except as provided in paragraph (c)(1) of § 200.414, Federal agencies must use the negotiated rates in effect at the time of the
initial award throughout the life of the Federal award. Award levels for Federal awards may not be adjusted in future years as a
result of changes in negotiated rates. “Negotiated rates” per the rate agreement include final, fixed, and predetermined rates and
exclude provisional rates. “Life” for the purpose of this subsection means each competitive segment of a project. A competitive
segment is a period of years approved by the Federal awarding agency at the time of the Federal award. If negotiated rate
agreements do not extend through the life of the Federal award at the time of the initial award, then the negotiated rate for the last
year of the Federal award must be extended through the end of the life of the Federal award.

b.

Except as provided in § 200.414, when an educational institution does not have a negotiated rate with the Federal Government at
the time of an award (because the educational institution is a new recipient or the parties cannot reach agreement on a rate), the
provisional rate used at the time of the award must be adjusted once a rate is negotiated and approved by the cognizant agency for
indirect costs.

8. Limitation on Reimbursement of Administrative Costs
a.

Notwithstanding the provisions of subsection C.1.a, the administrative costs charged to Federal awards awarded or amended
(including continuation and renewal awards) with effective dates beginning on or after the start of the institution's first fiscal year
which begins on or after October 1, 1991, must be limited to 26% of modified total direct costs (as defined in subsection 2) for the
total of General Administration and General Expenses, Departmental Administration, Sponsored Projects Administration, and
Student Administration and Services (including their allocable share of depreciation, interest costs, operation and maintenance
expenses, and fringe benefits costs, as provided by Section B, and all other types of expenditures not listed specifically under one of
the subcategories of facilities in Section B.

b.

Institutions should not change their accounting or cost allocation methods if the effect is to change the charging of a particular type
of cost from F&A to direct, or to reclassify costs, or increase allocations from the administrative pools identified in paragraph B.1 of
this Appendix to the other F&A cost pools or fringe benefits. Cognizant agencies for indirect cost are authorized to allow changes
where an institution's charging practices are at variance with acceptable practices followed by a substantial majority of other
institutions.

9. Alternative Method for Administrative Costs
a.

Notwithstanding the provisions of subsection C.1.a, an institution may elect to claim a fixed allowance for the “Administration”
portion of indirect (F&A) costs. The allowance could be either 24% of modified total direct costs or a percentage equal to 95% of the
most recently negotiated fixed or predetermined rate for the cost pools included under “Administration” as defined in Section B.1,
whichever is less. Under this alternative, no cost proposal need be prepared for the “Administration” portion of the indirect (F&A)
cost rate nor is further identification or documentation of these costs required (see subsection c). Where a negotiated indirect
(F&A) cost agreement includes this alternative, an institution must make no further charges for the expenditure categories
described in Section B.5, Section B.6, Section B.7, and Section B.9.

b.

In negotiations of rates for subsequent periods, an institution that has elected the option of subsection a may continue to exercise it
at the same rate without further identification or documentation of costs.

c.

If an institution elects to accept a threshold rate as defined in subsection a of this section, it is not required to perform a detailed
analysis of its administrative costs. However, in order to compute the facilities components of its indirect (F&A) cost rate, the
institution must reconcile its indirect (F&A) cost proposal to its financial statements and make appropriate adjustments and
reclassifications to identify the costs of each major function as defined in Section A.1, as well as to identify and allocate the
facilities components. Administrative costs that are not identified as such by the institution's accounting system (such as those
incurred in academic departments) will be classified as instructional costs for purposes of reconciling indirect (F&A) cost proposals
to financial statements and allocating facilities costs.

10. Individual Rate Components
In order to provide mutually agreed-upon information for management purposes, each indirect (F&A) cost rate negotiation or
determination must include development of a rate for each indirect (F&A) cost pool as well as the overall indirect (F&A) cost rate.

11. Negotiation and Approval of Indirect (F&A) Rate
a.

Cognizant agency for indirect costs is defined in Subpart A.

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(1) Cost negotiation cognizance is assigned to the Department of Health and Human Services (HHS) or the Department of
Defense's Office of Naval Research (DOD), normally depending on which of the two agencies (HHS or DOD) provides more
funds directly to the educational institution for the most recent three years. Information on funding must be derived from
relevant data gathered by the National Science Foundation. In cases where neither HHS nor DOD provides Federal funding
directly to an educational institution, the cognizant agency for indirect costs assignment must default to HHS.
Notwithstanding the method for cognizance determination described in this section, other arrangements for cognizance of a
particular educational institution may also be based in part on the types of research performed at the educational institution
and must be decided based on mutual agreement between HHS and DOD. Where a non-Federal entity only receives funds as a
subrecipient, see § 200.332.
(2) After cognizance is established, it must continue for a five-year period.

b.

Acceptance of rates. See § 200.414.

c.

Correcting deficiencies. The cognizant agency for indirect costs must negotiate changes needed to correct systems deficiencies
relating to accountability for Federal awards. Cognizant agencies for indirect costs must address the concerns of other affected
agencies, as appropriate, and must negotiate special rates for Federal agencies that are required to limit recovery of indirect costs
by statute.

d.

Resolving questioned costs. The cognizant agency for indirect costs must conduct any necessary negotiations with an educational
institution regarding amounts questioned by audit that are due the Federal Government related to costs covered by a negotiated
agreement.

e.

Reimbursement. Reimbursement to cognizant agencies for indirect costs for work performed under this Part may be made by
reimbursement billing under the Economy Act, 31 U.S.C. 1535.

f.

Procedure for establishing facilities and administrative rates must be established by one of the following methods:
(1) Formal negotiation. The cognizant agency for indirect costs is responsible for negotiating and approving rates for an
educational institution on behalf of all Federal agencies. Federal awarding agencies that do not have cognizance for indirect
costs must notify the cognizant agency for indirect costs of specific concerns (i.e., a need to establish special cost rates)
which could affect the negotiation process. The cognizant agency for indirect costs must address the concerns of all
interested agencies, as appropriate. A pre-negotiation conference may be scheduled among all interested agencies, if
necessary. The cognizant agency for indirect costs must then arrange a negotiation conference with the educational
institution.
(2) Other than formal negotiation. The cognizant agency for indirect costs and educational institution may reach an agreement on
rates without a formal negotiation conference; for example, through correspondence or use of the simplified method described
in this section D of this Appendix.

g.

Formalizing determinations and agreements. The cognizant agency for indirect costs must formalize all determinations or
agreements reached with an educational institution and provide copies to other agencies having an interest. Determinations should
include a description of any adjustments, the actual amount, both dollar and percentage adjusted, and the reason for making
adjustments.

h.

Disputes and disagreements. Where the cognizant agency for indirect costs is unable to reach agreement with an educational
institution with regard to rates or audit resolution, the appeal system of the cognizant agency for indirect costs must be followed for
resolution of the disagreement.

12. Standard Format for Submission
For facilities and administrative (indirect (F&A)) rate proposals, educational institutions must use the standard format, shown in section
E of this appendix, to submit their indirect (F&A) rate proposal to the cognizant agency for indirect costs. The cognizant agency for
indirect costs may, on an institution-by-institution basis, grant exceptions from all or portions of Part II of the standard format
requirement. This requirement does not apply to educational institutions that use the simplified method for calculating indirect (F&A)
rates, as described in Section D of this Appendix.
As provided in section C.10 of this appendix, each F&A cost rate negotiation or determination must include development of a rate for
each F&A cost pool as well as the overall F&A rate.

D. Simplified Method for Small Institutions
1. General
a.

Where the total direct cost of work covered by this Part at an institution does not exceed $10 million in a fiscal year, the simplified
procedure described in subsections 2 or 3 may be used in determining allowable indirect (F&A) costs. Under this simplified
procedure, the institution's most recent annual financial report and immediately available supporting information must be utilized as
a basis for determining the indirect (F&A) cost rate applicable to all Federal awards. The institution may use either the salaries and
wages (see subsection 2) or modified total direct costs (see subsection 3) as the distribution basis.

b.

The simplified procedure should not be used where it produces results which appear inequitable to the Federal Government or the
institution. In any such case, indirect (F&A) costs should be determined through use of the regular procedure.

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2. Simplified Procedure - Salaries and Wages Base
a.

Establish the total amount of salaries and wages paid to all employees of the institution.

b.

Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and other costs specifically identified
as unallowable) which customarily are classified under the following titles or their equivalents:
(1) General administration and general expenses (exclusive of costs of student administration and services, student activities,
student aid, and scholarships).
(2) Operation and maintenance of physical plant and depreciation (after appropriate adjustment for costs applicable to other
institutional activities).
(3) Library.
(4) Department administration expenses, which will be computed as 20 percent of the salaries and expenses of deans and heads
of departments.
In those cases where expenditures classified under subsection (1) have previously been allocated to other institutional
activities, they may be included in the indirect (F&A) cost pool. The total amount of salaries and wages included in the indirect
(F&A) cost pool must be separately identified.

c.

Establish a salary and wage distribution base, determined by deducting from the total of salaries and wages as established in
subsection a from the amount of salaries and wages included under subsection b.

d.

Establish the indirect (F&A) cost rate, determined by dividing the amount in the indirect (F&A) cost pool, subsection b, by the amount
of the distribution base, subsection c.

e.

Apply the indirect (F&A) cost rate to direct salaries and wages for individual agreements to determine the amount of indirect (F&A)
costs allocable to such agreements.

3. Simplified Procedure - Modified Total Direct Cost Base
a.

Establish the total costs incurred by the institution for the base period.

b.

Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and other costs specifically identified
as unallowable) which customarily are classified under the following titles or their equivalents:
(1) General administration and general expenses (exclusive of costs of student administration and services, student activities,
student aid, and scholarships).
(2) Operation and maintenance of physical plant and depreciation (after appropriate adjustment for costs applicable to other
institutional activities).
(3) Library.
(4) Department administration expenses, which will be computed as 20 percent of the salaries and expenses of deans and heads
of departments. In those cases where expenditures classified under subsection (1) have previously been allocated to other
institutional activities, they may be included in the indirect (F&A) cost pool. The modified total direct costs amount included in
the indirect (F&A) cost pool must be separately identified.

c.

Establish a modified total direct cost distribution base, as defined in Section C.2, The distribution basis, that consists of all
institution's direct functions.

d.

Establish the indirect (F&A) cost rate, determined by dividing the amount in the indirect (F&A) cost pool, subsection b, by the amount
of the distribution base, subsection c.

e.

Apply the indirect (F&A) cost rate to the modified total direct costs for individual agreements to determine the amount of indirect
(F&A) costs allocable to such agreements.

E. Documentation Requirements
The standard format for documentation requirements for indirect (indirect (F&A)) rate proposals for claiming costs under the regular method is
available on the OMB website.

F. Certification
1. Certification of Charges
To assure that expenditures for Federal awards are proper and in accordance with the agreement documents and approved project
budgets, the annual and/or final fiscal reports or vouchers requesting payment under the agreements will include a certification, signed
by an authorized official of the university, which reads “By signing this report, I certify to the best of my knowledge and belief that the
report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and intent set forth in

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the award documents. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject
me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code, Title 18, Section 1001
and Title 31, Sections 3729-3733 and 3801-3812)”.

2. Certification of Indirect (F&A) Costs
a.

Policy. Cognizant agencies must not accept a proposed indirect cost rate unless such costs have been certified by the educational
institution using the Certificate of indirect (F&A) Costs set forth in subsection F.2.c

b.

The certificate must be signed on behalf of the institution by the chief financial officer or an individual designated by an individual at
a level no lower than vice president or chief financial officer.
An indirect (F&A) cost rate is not binding upon the Federal Government if the most recent required proposal from the institution has
not been certified. Where it is necessary to establish indirect (F&A) cost rates, and the institution has not submitted a certified
proposal for establishing such rates in accordance with the requirements of this section, the Federal Government must unilaterally
establish such rates. Such rates may be based upon audited historical data or such other data that have been furnished to the
cognizant agency for indirect costs and for which it can be demonstrated that all unallowable costs have been excluded. When
indirect (F&A) cost rates are unilaterally established by the Federal Government because of failure of the institution to submit a
certified proposal for establishing such rates in accordance with this section, the rates established will be set at a level low enough
to ensure that potentially unallowable costs will not be reimbursed.

c.

Certificate. The certificate required by this section must be in the following form:

Certificate of Indirect (F&A) Costs
This is to certify that to the best of my knowledge and belief:
(1) I have reviewed the indirect (F&A) cost proposal submitted herewith;
(2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate for [identify period covered
by rate] are allowable in accordance with the requirements of the Federal agreement(s) to which they apply and with the cost
principles applicable to those agreements.
(3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation):
Public relations costs, contributions and donations, entertainment costs, fines and penalties, lobbying costs, and defense of
fraud proceedings; and
(4) All costs included in this proposal are properly allocable to Federal agreements on the basis of a beneficial or causal
relationship between the expenses incurred and the agreements to which they are allocated in accordance with applicable
requirements.
I declare that the foregoing is true and correct.
Institution of Higher Education:
Signature:
Name of Official:
Title:
Date of Execution:
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 80 FR 54409, Sept. 10, 2015; 85 FR 49577, Aug. 13, 2020]

Appendix IV to Part 200 - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit
Organizations

A. General
1.

Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular
final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in § 200.413(d).
After direct costs have been determined and assigned directly to awards or other work as appropriate, indirect costs are those
remaining to be allocated to benefitting cost objectives. A cost may not be allocated to a Federal award as an indirect cost if any
other cost incurred for the same purpose, in like circumstances, has been assigned to a Federal award as a direct cost.

2.

“Major nonprofit organizations” are defined in paragraph (a) of § 200.414. See indirect cost rate reporting requirements in sections
B.2.e and B.3.g of this Appendix.

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B. Allocation of Indirect Costs and Determination of Indirect Cost Rates
1. General
a.

If a nonprofit organization has only one major function, or where all its major functions benefit from its indirect costs to
approximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be
accomplished through simplified allocation procedures, as described in section B.2 of this Appendix.

b.

If an organization has several major functions which benefit from its indirect costs in varying degrees, allocation of indirect
costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to
benefitting functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to
each function are then distributed to individual Federal awards and other activities included in that function by means of an
indirect cost rate(s).

c.

The determination of what constitutes an organization's major functions will depend on its purpose in being; the types of
services it renders to the public, its clients, and its members; and the amount of effort it devotes to such activities as
fundraising, public information and membership activities.

d.

Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each
method should be used are described in section B.2 through B.5 of this Appendix.

e.

The base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for
allocation to work performed in that period. The base period normally should coincide with the organization's fiscal year but, in
any event, must be so selected as to avoid inequities in the allocation of the costs.

2. Simplified Allocation Method
a.

Where an organization's major functions benefit from its indirect costs to approximately the same degree, the allocation of
indirect costs may be accomplished by
(i)

separating the organization's total costs for the base period as either direct or indirect, and

(ii) dividing the total allowable indirect costs (net of applicable credits) by an equitable distribution base. The result of this
process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. The rate should be
expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method
should also be used where an organization has only one major function encompassing a number of individual projects or
activities, and may be used where the level of Federal awards to an organization is relatively small.
b.

Both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs. However, unallowable
costs which represent activities must be included in the direct costs under the conditions described in § 200.413(e).

c.

The distribution base may be total direct costs (excluding capital expenditures and other distorting items, such as subawards
for $25,000 or more), direct salaries and wages, or other base which results in an equitable distribution. The distribution base
must exclude participant support costs as defined in § 200.1.

d.

Except where a special rate(s) is required in accordance with section B.5 of this Appendix, the indirect cost rate developed
under the above principles is applicable to all Federal awards of the organization. If a special rate(s) is required, appropriate
modifications must be made in order to develop the special rate(s).

e.

For an organization that receives more than $10 million in direct Federal funding in a fiscal year, a breakout of the indirect cost
component into two broad categories, Facilities and Administration as defined in paragraph (a) of § 200.414, is required. The
rate in each case must be stated as the percentage which the amount of the particular indirect cost category (i.e., Facilities or
Administration) is of the distribution base identified with that category.

3. Multiple Allocation Base Method
a.

General. Where an organization's indirect costs benefit its major functions in varying degrees, indirect costs must be
accumulated into separate cost groupings, as described in subparagraph b. Each grouping must then be allocated individually
to benefitting functions by means of a base which best measures the relative benefits. The default allocation bases by cost
pool are described in section B.3.c of this Appendix.

b.

Identification of indirect costs. Cost groupings must be established so as to permit the allocation of each grouping on the
basis of benefits provided to the major functions. Each grouping must constitute a pool of expenses that are of like character
in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to
each function. The groupings are classified within the two broad categories: “Facilities” and “Administration,” as described in
section A.3 of this Appendix. The indirect cost pools are defined as follows:
(1) Depreciation. The expenses under this heading are the portion of the costs of the organization's buildings, capital
improvements to land and buildings, and equipment which are computed in accordance with § 200.436.

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(2) Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in
accordance with § 200.449.
(3) Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the
administration, operation, maintenance, preservation, and protection of the organization's physical plant. They include
expenses normally incurred for such items as: janitorial and utility services; repairs and ordinary or normal alterations of
buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities;
security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and
other insurance relating to property; space and capital leasing; facility planning and management; and central receiving.
The operation and maintenance expenses category must also include its allocable share of fringe benefit costs,
depreciation, and interest costs.
(4) General administration and general expenses. The expenses under this heading are those that have been incurred for the
overall general executive and administrative offices of the organization and other expenses of a general nature which do
not relate solely to any major function of the organization. This category must also include its allocable share of fringe
benefit costs, operation and maintenance expense, depreciation, and interest costs. Examples of this category include
central offices, such as the director's office, the office of finance, business services, budget and planning, personnel,
safety and risk management, general counsel, management information systems, and library costs.
In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like
circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff, project
supplies, project publication, telephone toll charges, computer costs, travel costs, and specialized services costs must be
treated as direct costs wherever identifiable to a particular program. The salaries and wages of administrative and pooled
clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate as described
in § 200.413. Items such as office supplies, postage, local telephone costs, periodicals and memberships should
normally be treated as indirect costs.
c.

Allocation bases. Actual conditions must be taken into account in selecting the base to be used in allocating the expenses in
each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best
suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect
relationship; or logic and reason, where neither the cause nor the effect of the relationship is determinable. When an allocation
can be made by assignment of a cost grouping directly to the function benefitted, the allocation must be made in that manner.
When the expenses in a cost grouping are more general in nature, the allocation must be made through the use of a selected
base which produces results that are equitable to both the Federal Government and the organization. The distribution must be
made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would
result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to
Federal awards. The results of special cost studies (such as an engineering utility study) must not be used to determine and
allocate the indirect costs to Federal awards.
(1) Depreciation. Depreciation expenses must be allocated in the following manner:
(a) Depreciation on buildings used exclusively in the conduct of a single function, and on capital improvements and
equipment used in such buildings, must be assigned to that function.
(b) Depreciation on buildings used for more than one function, and on capital improvements and equipment used in
such buildings, must be allocated to the individual functions performed in each building on the basis of usable
square feet of space, excluding common areas, such as hallways, stairwells, and restrooms.
(c) Depreciation on buildings, capital improvements and equipment related space (e.g., individual rooms, and
laboratories) used jointly by more than one function (as determined by the users of the space) must be treated as
follows. The cost of each jointly used unit of space must be allocated to the benefitting functions on the basis of:
(i)

the employees and other users on a full-time equivalent (FTE) basis or salaries and wages of those individual
functions benefitting from the use of that space; or

(ii) organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the
organization.
(d) Depreciation on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like,
not included in the cost of buildings, must be allocated to user categories on a FTE basis and distributed to major
functions in proportion to the salaries and wages of all employees applicable to the functions.
(2) Interest. Interest costs must be allocated in the same manner as the depreciation on the buildings, equipment and capital
equipment to which the interest relates.
(3) Operation and maintenance expenses. Operation and maintenance expenses must be allocated in the same manner as
the depreciation.
(4) General administration and general expenses. General administration and general expenses must be allocated to
benefitting functions based on modified total costs (MTC). The MTC is the modified total direct costs (MTDC), as
described in § 200.1, plus the allocated indirect cost proportion. The expenses included in this category could be grouped
first according to major functions of the organization to which they render services or provide benefits. The aggregate
expenses of each group must then be allocated to benefitting functions based on MTC.

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d.

Order of distribution.
(1) Indirect cost categories consisting of depreciation, interest, operation and maintenance, and general administration and
general expenses must be allocated in that order to the remaining indirect cost categories as well as to the major
functions of the organization. Other cost categories should be allocated in the order determined to be most appropriate
by the organization. This order of allocation does not apply if cross allocation of costs is made as provided in section
B.3.d.2 of this Appendix.
(2) Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and
costs must not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs
categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used,
an appropriate modification to the composition of the indirect cost categories is required.

e.

Application of indirect cost rate or rates. Except where a special indirect cost rate(s) is required in accordance with section B.5
of this Appendix, the separate groupings of indirect costs allocated to each major function must be aggregated and treated as
a common pool for that function. The costs in the common pool must then be distributed to individual Federal awards
included in that function by use of a single indirect cost rate.

f.

Distribution basis. Indirect costs must be distributed to applicable Federal awards and other benefitting activities within each
major function on the basis of MTDC (see definition in § 200.1).

g.

Individual Rate Components. An indirect cost rate must be determined for each separate indirect cost pool developed. The rate
in each case must be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base
identified with that pool. Each indirect cost rate negotiation or determination agreement must include development of the rate
for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools must be classified within two broad
categories: “Facilities” and “Administration,” as described in § 200.414(a).

4. Direct Allocation Method
a.

Some nonprofit organizations treat all costs as direct costs except general administration and general expenses. These
organizations generally separate their costs into three basic categories:
(i)

General administration and general expenses,

(ii) fundraising, and
(iii) other direct functions (including projects performed under Federal awards). Joint costs, such as depreciation, rental
costs, operation and maintenance of facilities, telephone expenses, and the like are prorated individually as direct costs
to each category and to each Federal award or other activity using a base most appropriate to the particular cost being
prorated.
b.

This method is acceptable, provided each joint cost is prorated using a base which accurately measures the benefits provided
to each Federal award or other activity. The bases must be established in accordance with reasonable criteria and be
supported by current data. This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary
Health and Welfare Organizations issued jointly by the National Health Council, Inc., the National Assembly of Voluntary Health
and Social Welfare Organizations, and the United Way of America.

c.

Under this method, indirect costs consist exclusively of general administration and general expenses. In all other respects, the
organization's indirect cost rates must be computed in the same manner as that described in section B.2 of this Appendix.

5. Special Indirect Cost Rates
In some instances, a single indirect cost rate for all activities of an organization or for each major function of the organization may
not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs
applicable to a particular segment of work. For this purpose, a particular segment of work may be that performed under a single
Federal award or it may consist of work under a group of Federal awards performed in a common environment. These factors may
include the physical location of the work, the level of administrative support required, the nature of the facilities or other resources
employed, the scientific disciplines or technical skills involved, the organizational arrangements used, or any combination thereof.
When a particular segment of work is performed in an environment which appears to generate a significantly different level of
indirect costs, provisions should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool
should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom
should be used, provided it is determined that (i) the rate differs significantly from that which would have been obtained under
sections B.2, B.3, and B.4 of this Appendix, and (ii) the volume of work to which the rate would apply is material.

C. Negotiation and Approval of Indirect Cost Rates
1. Definitions
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As used in this section, the following terms have the meanings set forth in this section:
a.

Cognizant agency for indirect costs means the Federal agency responsible for negotiating and approving indirect cost rates for
a nonprofit organization on behalf of all Federal agencies.

b.

Predetermined rate means an indirect cost rate, applicable to a specified current or future period, usually the organization's
fiscal year. The rate is based on an estimate of the costs to be incurred during the period. A predetermined rate is not subject
to adjustment.

c.

Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate, except that the difference
between the estimated costs and the actual costs of the period covered by the rate is carried forward as an adjustment to the
rate computation of a subsequent period.

d.

Final rate means an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. A
final rate is not subject to adjustment.

e.

Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified period which is used for funding,
interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a final rate for the period.

f.

Indirect cost proposal means the documentation prepared by an organization to substantiate its claim for the reimbursement
of indirect costs. This proposal provides the basis for the review and negotiation leading to the establishment of an
organization's indirect cost rate.

g.

Cost objective means a function, organizational subdivision, contract, Federal award, or other work unit for which cost data are
desired and for which provision is made to accumulate and measure the cost of processes, projects, jobs and capitalized
projects.

2. Negotiation and Approval of Rates
a.

Unless different arrangements are agreed to by the Federal agencies concerned, the Federal agency with the largest dollar
value of Federal awards directly funded to an organization will be designated as the cognizant agency for indirect costs for the
negotiation and approval of the indirect cost rates and, where necessary, other rates such as fringe benefit and computer
charge-out rates. Once an agency is assigned cognizance for a particular nonprofit organization, the assignment will not be
changed unless there is a shift in the dollar volume of the Federal awards directly funded to the organization for at least three
years. All concerned Federal agencies must be given the opportunity to participate in the negotiation process but, after a rate
has been agreed upon, it will be accepted by all Federal agencies. When a Federal agency has reason to believe that special
operating factors affecting its Federal awards necessitate special indirect cost rates in accordance with section B.5 of this
Appendix, it will, prior to the time the rates are negotiated, notify the cognizant agency for indirect costs. (See also § 200.414.)
If the nonprofit does not receive any funding from any Federal agency, the pass-through entity is responsible for the
negotiation of the indirect cost rates in accordance with § 200.332(a)(4).

b.

Except as otherwise provided in § 200.414(f), a nonprofit organization which has not previously established an indirect cost
rate with a Federal agency must submit its initial indirect cost proposal immediately after the organization is advised that a
Federal award will be made and, in no event, later than three months after the effective date of the Federal award.

c.

Unless approved by the cognizant agency for indirect costs in accordance with § 200.414(g), organizations that have
previously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency for indirect costs
within six months after the close of each fiscal year.

d.

A predetermined rate may be negotiated for use on Federal awards where there is reasonable assurance, based on past
experience and reliable projection of the organization's costs, that the rate is not likely to exceed a rate based on the
organization's actual costs.

e.

Fixed rates may be negotiated where predetermined rates are not considered appropriate. A fixed rate, however, must not be
negotiated if
(i)

all or a substantial portion of the organization's Federal awards are expected to expire before the carry-forward
adjustment can be made;

(ii) the mix of Federal and non-Federal work at the organization is too erratic to permit an equitable carry-forward adjustment;
or
(iii) the organization's operations fluctuate significantly from year to year.
f.

Provisional and final rates must be negotiated where neither predetermined nor fixed rates are appropriate. Predetermined or
fixed rates may replace provisional rates at any time prior to the close of the organization's fiscal year. If that event does not
occur, a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs
incurred for the period involved.

g.

The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs
and the nonprofit organization. The cognizant agency for indirect costs must make available copies of the agreement to all
concerned Federal agencies.

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h.

If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency for indirect costs and the nonprofit
organization, the dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect
costs.

i.

To the extent that problems are encountered among the Federal agencies in connection with the negotiation and approval
process, OMB will lend assistance as required to resolve such problems in a timely manner.

D. Certification of Indirect (F&A) Costs
(1) Required Certification. No proposal to establish indirect (F&A) cost rates must be acceptable unless such costs have been certified
by the nonprofit organization using the Certificate of Indirect (F&A) Costs set forth in section j. of this appendix. The certificate
must be signed on behalf of the organization by an individual at a level no lower than vice president or chief financial officer for the
organization.
(2) Each indirect cost rate proposal must be accompanied by a certification in the following form:

Certificate of Indirect (F&A) Costs
This is to certify that to the best of my knowledge and belief:
(1) I have reviewed the indirect (F&A) cost proposal submitted herewith;
(2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate for [identify period covered by
rate] are allowable in accordance with the requirements of the Federal awards to which they apply and with subpart E of this part.
(3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation): Public
relations costs, contributions and donations, entertainment costs, fines and penalties, lobbying costs, and defense of fraud
proceedings; and
(4) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship
between the expenses incurred and the Federal awards to which they are allocated in accordance with applicable requirements.
I declare that the foregoing is true and correct.
Nonprofit Organization:
Signature:
Name of Official:
Title:
Date of Execution:
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49579, Aug. 13, 2020]

Appendix V to Part 200 - State/Local Governmentwide Central Service Cost Allocation Plans

A. General
1.

Most governmental units provide certain services, such as motor pools, computer centers, purchasing, accounting, etc., to operating
agencies on a centralized basis. Since federally-supported awards are performed within the individual operating agencies, there
needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable
and consistent basis. The central service cost allocation plan provides that process. All costs and other data used to distribute the
costs included in the plan should be supported by formal accounting and other records that will support the propriety of the costs
assigned to Federal awards.

2.

Guidelines and illustrations of central service cost allocation plans are provided in a brochure published by the Department of
Health and Human Services entitled “A Guide for State, Local and Indian Tribal Governments: Cost Principles and Procedures for
Developing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government.” A copy of this brochure may
be obtained from the HHS Cost Allocation Services or at their website.

B. Definitions
1.

Agency or operating agency means an organizational unit or sub-division within a governmental unit that is responsible for the
performance or administration of Federal awards or activities of the governmental unit.

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2.

Allocated central services means central services that benefit operating agencies but are not billed to the agencies on a fee-forservice or similar basis. These costs are allocated to benefitted agencies on some reasonable basis. Examples of such services
might include general accounting, personnel administration, purchasing, etc.

3.

Billed central services means central services that are billed to benefitted agencies or programs on an individual fee-for-service or
similar basis. Typical examples of billed central services include computer services, transportation services, insurance, and fringe
benefits.

4.

Cognizant agency for indirect costs is defined in § 200.1. The determination of cognizant agency for indirect costs for states and
local governments is described in section F.1.

5.

Major local government means local government that receives more than $100 million in direct Federal awards subject to this Part.

C. Scope of the Central Service Cost Allocation Plans
The central service cost allocation plan will include all central service costs that will be claimed (either as a billed or an allocated cost)
under Federal awards and will be documented as described in section E. omitted from the plan will not be reimbursed.

D. Submission Requirements
1.

Each state will submit a plan to the Department of Health and Human Services for each year in which it claims central service costs
under Federal awards. The plan should include
(a) a projection of the next year's allocated central service cost (based either on actual costs for the most recently completed year
or the budget projection for the coming year), and
(b) a reconciliation of actual allocated central service costs to the estimated costs used for either the most recently completed
year or the year immediately preceding the most recently completed year.

2.

Each major local government is also required to submit a plan to its cognizant agency for indirect costs annually.

3.

All other local governments claiming central service costs must develop a plan in accordance with the requirements described in
this Part and maintain the plan and related supporting documentation for audit. These local governments are not required to submit
their plans for Federal approval unless they are specifically requested to do so by the cognizant agency for indirect costs. Where a
local government only receives funds as a subrecipient, the pass-through entity will be responsible for monitoring the subrecipient's
plan.

4.

All central service cost allocation plans will be prepared and, when required, submitted within six months prior to the beginning of
each of the governmental unit's fiscal years in which it proposes to claim central service costs. Extensions may be granted by the
cognizant agency for indirect costs on a case-by-case basis.

E. Documentation Requirements for Submitted Plans
The documentation requirements described in this section may be modified, expanded, or reduced by the cognizant agency for indirect
costs on a case-by-case basis. For example, the requirements may be reduced for those central services which have little or no impact
on Federal awards. Conversely, if a review of a plan indicates that certain additional information is needed, and will likely be needed in
future years, it may be routinely requested in future plan submissions. Items marked with an asterisk (*) should be submitted only once;
subsequent plans should merely indicate any changes since the last plan.

1. General
All proposed plans must be accompanied by the following: an organization chart sufficiently detailed to show operations including
the central service activities of the state/local government whether or not they are shown as benefitting from central service
functions; a copy of the Comprehensive Annual Financial Report (or a copy of the Executive Budget if budgeted costs are being
proposed) to support the allowable costs of each central service activity included in the plan; and, a certification (see subsection 4.)
that the plan was prepared in accordance with this Part, contains only allowable costs, and was prepared in a manner that treated
similar costs consistently among the various Federal awards and between Federal and non-Federal awards/activities.

2. Allocated Central Services
For each allocated central service*, the plan must also include the following: a brief description of the service, an identification of
the unit rendering the service and the operating agencies receiving the service, the items of expense included in the cost of the
service, the method used to distribute the cost of the service to benefitted agencies, and a summary schedule showing the
allocation of each service to the specific benefitted agencies. If any self-insurance funds or fringe benefits costs are treated as
allocated (rather than billed) central services, documentation discussed in subsections 3.b. and c. must also be included.

3. Billed Services
a.

General. The information described in this section must be provided for all billed central services, including internal service
funds, self-insurance funds, and fringe benefit funds.

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b.

Internal service funds.
(1) For each internal service fund or similar activity with an operating budget of $5 million or more, the plan must include: A
brief description of each service; a balance sheet for each fund based on individual accounts contained in the
governmental unit's accounting system; a revenue/expenses statement, with revenues broken out by source, e.g., regular
billings, interest earned, etc.; a listing of all non-operating transfers (as defined by GAAP) into and out of the fund; a
description of the procedures (methodology) used to charge the costs of each service to users, including how billing
rates are determined; a schedule of current rates; and, a schedule comparing total revenues (including imputed revenues)
generated by the service to the allowable costs of the service, as determined under this part, with an explanation of how
variances will be handled.
(2) Revenues must consist of all revenues generated by the service, including unbilled and uncollected revenues. If some
users were not billed for the services (or were not billed at the full rate for that class of users), a schedule showing the full
imputed revenues associated with these users must be provided. Expenses must be broken out by object cost categories
(e.g., salaries, supplies, etc.).

c.

Self-insurance funds. For each self-insurance fund, the plan must include: the fund balance sheet; a statement of revenue and
expenses including a summary of billings and claims paid by agency; a listing of all non-operating transfers into and out of the
fund; the type(s) of risk(s) covered by the fund (e.g., automobile liability, workers' compensation, etc.); an explanation of how
the level of fund contributions are determined, including a copy of the current actuarial report (with the actuarial assumptions
used) if the contributions are determined on an actuarial basis; and, a description of the procedures used to charge or allocate
fund contributions to benefitted activities. Reserve levels in excess of claims
(1) submitted and adjudicated but not paid,
(2) submitted but not adjudicated, and
(3) incurred but not submitted must be identified and explained.

d.

Fringe benefits. For fringe benefit costs, the plan must include: a listing of fringe benefits provided to covered employees, and
the overall annual cost of each type of benefit; current fringe benefit policies; and procedures used to charge or allocate the
costs of the benefits to benefitted activities. In addition, for pension and post-retirement health insurance plans, the following
information must be provided: the governmental unit's funding policies, e.g., legislative bills, trust agreements, or statemandated contribution rules, if different from actuarially determined rates; the pension plan's costs accrued for the year; the
amount funded, and date(s) of funding; a copy of the current actuarial report (including the actuarial assumptions); the plan
trustee's report; and, a schedule from the activity showing the value of the interest cost associated with late funding.

4. Required Certification
Each central service cost allocation plan will be accompanied by a certification in the following form:

CERTIFICATE OF COST ALLOCATION PLAN
This is to certify that I have reviewed the cost allocation plan submitted herewith and to the best of my knowledge and belief:
(1) All costs included in this proposal [identify date] to establish cost allocations or billings for [identify period covered by plan] are
allowable in accordance with the requirements of this Part and the Federal award(s) to which they apply. Unallowable costs
have been adjusted for in allocating costs as indicated in the cost allocation plan.
(2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship
between the expenses incurred and the Federal awards to which they are allocated in accordance with applicable
requirements. Further, the same costs that have been treated as indirect costs have not been claimed as direct costs. Similar
types of costs have been accounted for consistently.
I declare that the foregoing is true and correct.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:

F. Negotiation and Approval of Central Service Plans
1. Federal Cognizant Agency for Indirect Costs Assignments for Cost Negotiation
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In general, unless different arrangements are agreed to by the concerned Federal agencies, for central service cost allocation plans,
the cognizant agency responsible for review and approval is the Federal agency with the largest dollar value of total Federal awards
with a governmental unit. For indirect cost rates and departmental indirect cost allocation plans, the cognizant agency is the
Federal agency with the largest dollar value of direct Federal awards with a governmental unit or component, as appropriate. Once
designated as the cognizant agency for indirect costs, the Federal agency must remain so for a period of five years. In addition, the
following Federal agencies continue to be responsible for the indicated governmental entities:
Department of Health and Human Services - Public assistance and state-wide cost allocation plans for all states (including the
District of Columbia and Puerto Rico), state and local hospitals, libraries and health districts.
Department of the Interior - Indian tribal governments, territorial governments, and state and local park and recreational districts.
Department of Labor - State and local labor departments.
Department of Education - School districts and state and local education agencies.
Department of Agriculture - State and local agriculture departments.
Department of Transportation - State and local airport and port authorities and transit districts.
Department of Commerce - State and local economic development districts.
Department of Housing and Urban Development - State and local housing and development districts.
Environmental Protection Agency - State and local water and sewer districts.

2. Review
All proposed central service cost allocation plans that are required to be submitted will be reviewed, negotiated, and approved by
the cognizant agency for indirect costs on a timely basis. The cognizant agency for indirect costs will review the proposal within six
months of receipt of the proposal and either negotiate/approve the proposal or advise the governmental unit of the additional
documentation needed to support/evaluate the proposed plan or the changes required to make the proposal acceptable. Once an
agreement with the governmental unit has been reached, the agreement will be accepted and used by all Federal agencies, unless
prohibited or limited by statute. Where a Federal awarding agency has reason to believe that special operating factors affecting its
Federal awards necessitate special consideration, the funding agency will, prior to the time the plans are negotiated, notify the
cognizant agency for indirect costs.

3. Agreement
The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the
governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute or the
information upon which the plan was negotiated is later found to be materially incomplete or inaccurate. The results of the
negotiation must be made available to all Federal agencies for their use.

4. Adjustments
Negotiated cost allocation plans based on a proposal later found to have included costs that: (a) are unallowable (i) as specified by
law or regulation, (ii) as identified in subpart F, General Provisions for selected Items of Cost of this Part, or (iii) by the terms and
conditions of Federal awards, or (b) are unallowable because they are clearly not allocable to Federal awards, must be adjusted, or a
refund must be made at the option of the cognizant agency for indirect costs, including earned or imputed interest from the date of
transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs
regulations. Adjustments or cash refunds may include, at the option of the cognizant agency for indirect costs, earned or imputed
interest from the date of expenditure and delinquent debt interest, if applicable, chargeable in accordance with applicable cognizant
agency claims collection regulations. These adjustments or refunds are designed to correct the plans and do not constitute a
reopening of the negotiation.

G. Other Policies
1. Billed Central Service Activities
Each billed central service activity must separately account for all revenues (including imputed revenues) generated by the service,
expenses incurred to furnish the service, and profit/loss.

2. Working Capital Reserves
Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next.
Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital
reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60

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calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60
calendar days may be approved by the cognizant agency for indirect costs in exceptional cases.

3. Carry-Forward Adjustments of Allocated Central Service Costs
Allocated central service costs are usually negotiated and approved for a future fiscal year on a “fixed with carry-forward” basis.
Under this procedure, the fixed amounts for the future year covered by agreement are not subject to adjustment for that year.
However, when the actual costs of the year involved become known, the differences between the fixed amounts previously
approved and the actual costs will be carried forward and used as an adjustment to the fixed amounts established for a later year.
This “carry-forward” procedure applies to all central services whose costs were fixed in the approved plan. However, a carry-forward
adjustment is not permitted, for a central service activity that was not included in the approved plan, or for unallowable costs that
must be reimbursed immediately.

4. Adjustments of Billed Central Services
Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate
of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues
whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will
be made for the difference between the revenue and the allowable costs. These adjustments will be made through one of the
following adjustment methods: (a) a cash refund including earned or imputed interest from the date of transfer and debt interest, if
applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations to the Federal
Government for the Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c) adjustments
to future billing rates, or (d) adjustments to allocated central service costs. Adjustments to allocated central services will not be
permitted where the total amount of the adjustment for a particular service (Federal share and non-Federal) share exceeds
$500,000. Adjustment methods may include, at the option of the cognizant agency, earned or imputed interest from the date of
expenditure and delinquent debt interest, if applicable, chargeable in accordance with applicable cognizant agency claims collection
regulations.

5. Records Retention
All central service cost allocation plans and related documentation used as a basis for claiming costs under Federal awards must
be retained for audit in accordance with the records retention requirements contained in subpart D of this part.

6. Appeals
If a dispute arises in the negotiation of a plan between the cognizant agency for indirect costs and the governmental unit, the
dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect costs.

7. OMB Assistance
To the extent that problems are encountered among the Federal agencies or governmental units in connection with the negotiation and approval
process, OMB will lend assistance, as required, to resolve such problems in a timely manner.
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49581, Aug. 13, 2020]

Appendix VI to Part 200 - Public Assistance Cost Allocation Plans

A. General
Federally-financed programs administered by state public assistance agencies are funded predominately by the Department of Health
and Human Services (HHS). In support of its stewardship requirements, HHS has published requirements for the development,
documentation, submission, negotiation, and approval of public assistance cost allocation plans in Subpart E of 45 CFR Part 95. All
administrative costs (direct and indirect) are normally charged to Federal awards by implementing the public assistance cost allocation
plan. This Appendix extends these requirements to all Federal awarding agencies whose programs are administered by a state public
assistance agency. Major federally-financed programs typically administered by state public assistance agencies include: Temporary Aid
to Needy Families (TANF), Medicaid, Food Stamps, Child Support Enforcement, Adoption Assistance and Foster Care, and Social
Services Block Grant.

B. Definitions
1.

State public assistance agency means a state agency administering or supervising the administration of one or more public
assistance programs operated by the state as identified in Subpart E of 45 CFR Part 95. For the purpose of this Appendix, these
programs include all programs administered by the state public assistance agency.

2.

State public assistance agency costs means all costs incurred by, or allocable to, the state public assistance agency, except
expenditures for financial assistance, medical contractor payments, food stamps, and payments for services and goods provided
directly to program recipients.

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C. Policy
State public assistance agencies will develop, document and implement, and the Federal Government will review, negotiate, and approve,
public assistance cost allocation plans in accordance with Subpart E of 45 CFR Part 95. The plan will include all programs administered
by the state public assistance agency. Where a letter of approval or disapproval is transmitted to a state public assistance agency in
accordance with Subpart E, the letter will apply to all Federal agencies and programs. The remaining sections of this Appendix (except
for the requirement for certification) summarize the provisions of Subpart E of 45 CFR Part 95.

D. Submission, Documentation, and Approval of Public Assistance Cost Allocation Plans
1.

State public assistance agencies are required to promptly submit amendments to the cost allocation plan to HHS for review and
approval.

2.

Under the coordination process outlined in section E, affected Federal agencies will review all new plans and plan amendments and
provide comments, as appropriate, to HHS. The effective date of the plan or plan amendment will be the first day of the calendar
quarter following the event that required the amendment, unless another date is specifically approved by HHS. HHS, as the
cognizant agency for indirect costs acting on behalf of all affected Federal agencies, will, as necessary, conduct negotiations with
the state public assistance agency and will inform the state agency of the action taken on the plan or plan amendment.

E. Review of Implementation of Approved Plans
1.

Since public assistance cost allocation plans are of a narrative nature, the review during the plan approval process consists of
evaluating the appropriateness of the proposed groupings of costs (cost centers) and the related allocation bases. As such, the
Federal Government needs some assurance that the cost allocation plan has been implemented as approved. This is accomplished
by reviews by the Federal awarding agencies, single audits, or audits conducted by the cognizant agency for indirect costs.

2.

Where inappropriate charges affecting more than one Federal awarding agency are identified, the cognizant HHS cost negotiation
office will be advised and will take the lead in resolving the issue(s) as provided for in Subpart E of 45 CFR Part 95.

3.

If a dispute arises in the negotiation of a plan or from a disallowance involving two or more Federal awarding agencies, the dispute
must be resolved in accordance with the appeals procedures set out in 45 CFR Part 16. Disputes involving only one Federal
awarding agency will be resolved in accordance with the Federal awarding agency's appeal process.

4.

To the extent that problems are encountered among the Federal awarding agencies or governmental units in connection with the
negotiation and approval process, the Office of Management and Budget will lend assistance, as required, to resolve such problems
in a timely manner.

F. Unallowable Costs
Claims developed under approved cost allocation plans will be based on allowable costs as identified in this Part. Where unallowable costs have
been claimed and reimbursed, they will be refunded to the program that reimbursed the unallowable cost using one of the following methods: (a) a
cash refund, (b) offset to a subsequent claim, or (c) credits to the amounts charged to individual Federal awards. Cash refunds, offsets, and credits
may include at the option of the cognizant agency for indirect cost, earned or imputed interest from the date of expenditure and delinquent debt
interest, if applicable, chargeable in accordance with applicable cognizant agency for indirect cost claims collection regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49581, Aug. 13, 2020]

Appendix VII to Part 200 - States and Local Government and Indian Tribe Indirect Cost Proposals

A. General
1.

Indirect costs are those that have been incurred for common or joint purposes. These costs benefit more than one cost objective
and cannot be readily identified with a particular final cost objective without effort disproportionate to the results achieved. After
direct costs have been determined and assigned directly to Federal awards and other activities as appropriate, indirect costs are
those remaining to be allocated to benefitted cost objectives. A cost may not be allocated to a Federal award as an indirect cost if
any other cost incurred for the same purpose, in like circumstances, has been assigned to a Federal award as a direct cost.

2.

Indirect costs include
(a) the indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and
(b) the costs of central governmental services distributed through the central service cost allocation plan (as described in
Appendix V to this part) and not otherwise treated as direct costs.

3.

Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. A separate indirect cost rate(s) is usually
necessary for each department or agency of the governmental unit claiming indirect costs under Federal awards. Guidelines and
illustrations of indirect cost proposals are provided in a brochure published by the Department of Health and Human Services
entitled “A Guide for States and Local Government Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans
and Indirect Cost Rates for Grants and Contracts with the Federal Government.” A copy of this brochure may be obtained from HHS
Cost Allocation Services or at their website.

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4.

Because of the diverse characteristics and accounting practices of governmental units, the types of costs which may be classified
as indirect costs cannot be specified in all situations. However, typical examples of indirect costs may include certain state/localwide central service costs, general administration of the non-Federal entity accounting and personnel services performed within the
non-Federal entity, depreciation on buildings and equipment, the costs of operating and maintaining facilities.

5.

This Appendix does not apply to state public assistance agencies. These agencies should refer instead to Appendix VI to this part.

B. Definitions
1.

Base means the accumulated direct costs (normally either total direct salaries and wages or total direct costs exclusive of any
extraordinary or distorting expenditures) used to distribute indirect costs to individual Federal awards. The direct cost base selected
should result in each Federal award bearing a fair share of the indirect costs in reasonable relation to the benefits received from the
costs.

2.

Base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to
activities performed in that period. The base period normally should coincide with the governmental unit's fiscal year, but in any
event, must be so selected as to avoid inequities in the allocation of costs.

3.

Cognizant agency for indirect costs means the Federal agency responsible for reviewing and approving the governmental unit's
indirect cost rate(s) on the behalf of the Federal Government. The cognizant agency for indirect costs assignment is described in
Appendix V, section F.

4.

Final rate means an indirect cost rate applicable to a specified past period which is based on the actual allowable costs of the
period. A final audited rate is not subject to adjustment.

5.

Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate, except that the difference
between the estimated costs and the actual, allowable costs of the period covered by the rate is carried forward as an adjustment
to the rate computation of a subsequent period.

6.

Indirect cost pool is the accumulated costs that jointly benefit two or more programs or other cost objectives.

7.

Indirect cost rate is a device for determining in a reasonable manner the proportion of indirect costs each program should bear. It is
the ratio (expressed as a percentage) of the indirect costs to a direct cost base.

8.

Indirect cost rate proposal means the documentation prepared by a governmental unit or subdivision thereof to substantiate its
request for the establishment of an indirect cost rate.

9.

Predetermined rate means an indirect cost rate, applicable to a specified current or future period, usually the governmental unit's
fiscal year. This rate is based on an estimate of the costs to be incurred during the period. Except under very unusual
circumstances, a predetermined rate is not subject to adjustment. (Because of legal constraints, predetermined rates are not
permitted for Federal contracts; they may, however, be used for grants or cooperative agreements.) Predetermined rates may not be
used by governmental units that have not submitted and negotiated the rate with the cognizant agency for indirect costs. In view of
the potential advantages offered by this procedure, negotiation of predetermined rates for indirect costs for a period of two to four
years should be the norm in those situations where the cost experience and other pertinent facts available are deemed sufficient to
enable the parties involved to reach an informed judgment as to the probable level of indirect costs during the ensuing accounting
periods.

10. Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim
reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period.

C. Allocation of Indirect Costs and Determination of Indirect Cost Rates
1. General
a.

Where a governmental unit's department or agency has only one major function, or where all its major functions benefit from
the indirect costs to approximately the same degree, the allocation of indirect costs and the computation of an indirect cost
rate may be accomplished through simplified allocation procedures as described in subsection 2.

b.

Where a governmental unit's department or agency has several major functions which benefit from its indirect costs in varying
degrees, the allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then
are allocated individually to benefitted functions by means of a base which best measures the relative degree of benefit. The
indirect costs allocated to each function are then distributed to individual Federal awards and other activities included in that
function by means of an indirect cost rate(s).

c.

Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each
method should be used are described in subsections 2, 3 and 4.

2. Simplified Method
a.

Where a non-Federal entity's major functions benefit from its indirect costs to approximately the same degree, the allocation of
indirect costs may be accomplished by
(1) classifying the non-Federal entity's total costs for the base period as either direct or indirect, and

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(2) dividing the total allowable indirect costs (net of applicable credits) by an equitable distribution base. The result of this
process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. The rate should be
expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method
should also be used where a governmental unit's department or agency has only one major function encompassing a
number of individual projects or activities, and may be used where the level of Federal awards to that department or
agency is relatively small.
b.

Both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs. However, unallowable
costs must be included in the direct costs if they represent activities to which indirect costs are properly allocable.

c.

The distribution base may be
(1) total direct costs (excluding capital expenditures and other distorting items, such as pass-through funds, subcontracts in
excess of $25,000, participant support costs, etc.),
(2) direct salaries and wages, or
(3) another base which results in an equitable distribution.

3. Multiple Allocation Base Method
a.

Where a non-Federal entity's indirect costs benefit its major functions in varying degrees, such costs must be accumulated into
separate cost groupings. Each grouping must then be allocated individually to benefitted functions by means of a base which
best measures the relative benefits.

b.

The cost groupings should be established so as to permit the allocation of each grouping on the basis of benefits provided to
the major functions. Each grouping should constitute a pool of expenses that are of like character in terms of the functions
they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The
number of separate groupings should be held within practical limits, taking into consideration the materiality of the amounts
involved and the degree of precision needed.

c.

Actual conditions must be taken into account in selecting the base to be used in allocating the expenses in each grouping to
benefitted functions. When an allocation can be made by assignment of a cost grouping directly to the function benefitted, the
allocation must be made in that manner. When the expenses in a grouping are more general in nature, the allocation should be
made through the use of a selected base which produces results that are equitable to both the Federal Government and the
governmental unit. In general, any cost element or related factor associated with the governmental unit's activities is
potentially adaptable for use as an allocation base provided that:
(1) it can readily be expressed in terms of dollars or other quantitative measures (total direct costs, direct salaries and
wages, staff hours applied, square feet used, hours of usage, number of documents processed, population served, and
the like), and
(2) it is common to the benefitted functions during the base period.

d.

Except where a special indirect cost rate(s) is required in accordance with paragraph (C)(4) of this Appendix, the separate
groupings of indirect costs allocated to each major function must be aggregated and treated as a common pool for that
function. The costs in the common pool must then be distributed to individual Federal awards included in that function by use
of a single indirect cost rate.

e.

The distribution base used in computing the indirect cost rate for each function may be
(1) total direct costs (excluding capital expenditures and other distorting items such as pass-through funds, subawards in
excess of $25,000, participant support costs, etc.),
(2) direct salaries and wages, or
(3) another base which results in an equitable distribution. An indirect cost rate should be developed for each separate
indirect cost pool developed. The rate in each case should be stated as the percentage relationship between the
particular indirect cost pool and the distribution base identified with that pool.

4. Special Indirect Cost Rates
a.

In some instances, a single indirect cost rate for all activities of a non-Federal entity or for each major function of the agency
may not be appropriate. It may not take into account those different factors which may substantially affect the indirect costs
applicable to a particular program or group of programs. The factors may include the physical location of the work, the level of
administrative support required, the nature of the facilities or other resources employed, the organizational arrangements
used, or any combination thereof. When a particular Federal award is carried out in an environment which appears to generate
a significantly different level of indirect costs, provisions should be made for a separate indirect cost pool applicable to that
Federal award. The separate indirect cost pool should be developed during the course of the regular allocation process, and
the separate indirect cost rate resulting therefrom should be used, provided that:
(1) The rate differs significantly from the rate which would have been developed under paragraphs (C)(2) and (C)(3) of this
Appendix, and
(2) the Federal award to which the rate would apply is material in amount.

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b.

Where Federal statutes restrict the reimbursement of certain indirect costs, it may be necessary to develop a special rate for
the affected Federal award. Where a “restricted rate” is required, the same procedure for developing a non-restricted rate will
be used except for the additional step of the elimination from the indirect cost pool those costs for which the law prohibits
reimbursement.

D. Submission and Documentation of Proposals
1. Submission of Indirect Cost Rate Proposals
a.

All departments or agencies of the governmental unit desiring to claim indirect costs under Federal awards must prepare an
indirect cost rate proposal and related documentation to support those costs. The proposal and related documentation must
be retained for audit in accordance with the records retention requirements contained in § 200.334.

b.

A governmental department or agency unit that receives more than $35 million in direct Federal funding must submit its
indirect cost rate proposal to its cognizant agency for indirect costs. Other governmental department or agency must develop
an indirect cost proposal in accordance with the requirements of this Part and maintain the proposal and related supporting
documentation for audit. These governmental departments or agencies are not required to submit their proposals unless they
are specifically requested to do so by the cognizant agency for indirect costs. Where a non-Federal entity only receives funds
as a subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the subrecipient's indirect
costs.

c.

Each Indian tribal government desiring reimbursement of indirect costs must submit its indirect cost proposal to the
Department of the Interior (its cognizant agency for indirect costs).

d.

Indirect cost proposals must be developed (and, when required, submitted) within six months after the close of the
governmental unit's fiscal year, unless an exception is approved by the cognizant agency for indirect costs. If the proposed
central service cost allocation plan for the same period has not been approved by that time, the indirect cost proposal may be
prepared including an amount for central services that is based on the latest federally-approved central service cost allocation
plan. The difference between these central service amounts and the amounts ultimately approved will be compensated for by
an adjustment in a subsequent period.

2. Documentation of Proposals
The following must be included with each indirect cost proposal:
a.

The rates proposed, including subsidiary work sheets and other relevant data, cross referenced and reconciled to the financial
data noted in subsection b. Allocated central service costs will be supported by the summary table included in the approved
central service cost allocation plan. This summary table is not required to be submitted with the indirect cost proposal if the
central service cost allocation plan for the same fiscal year has been approved by the cognizant agency for indirect costs and
is available to the funding agency.

b.

A copy of the financial data (financial statements, comprehensive annual financial report, executive budgets, accounting
reports, etc.) upon which the rate is based. Adjustments resulting from the use of unaudited data will be recognized, where
appropriate, by the Federal cognizant agency for indirect costs in a subsequent proposal.

c.

The approximate amount of direct base costs incurred under Federal awards. These costs should be broken out between
salaries and wages and other direct costs.

d.

A chart showing the organizational structure of the agency during the period for which the proposal applies, along with a
functional statement(s) noting the duties and/or responsibilities of all units that comprise the agency. (Once this is submitted,
only revisions need be submitted with subsequent proposals.)

3. Required certification.
Each indirect cost rate proposal must be accompanied by a certification in the following form:

Certificate of Indirect Costs
This is to certify that I have reviewed the indirect cost rate proposal submitted herewith and to the best of my knowledge and belief:
(1) All costs included in this proposal [identify date] to establish billing or final indirect costs rates for [identify period covered by rate] are
allowable in accordance with the requirements of the Federal award(s) to which they apply and the provisions of this Part. Unallowable
costs have been adjusted for in allocating costs as indicated in the indirect cost proposal
(2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the
expenses incurred and the agreements to which they are allocated in accordance with applicable requirements. Further, the same costs
that have been treated as indirect costs have not been claimed as direct costs. Similar types of costs have been accounted for
consistently and the Federal Government will be notified of any accounting changes that would affect the predetermined rate.
I declare that the foregoing is true and correct.

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Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:

E. Negotiation and Approval of Rates
1.

Indirect cost rates will be reviewed, negotiated, and approved by the cognizant agency on a timely basis. Once a rate has been agreed
upon, it will be accepted and used by all Federal agencies unless prohibited or limited by statute. Where a Federal awarding agency has
reason to believe that special operating factors affecting its Federal awards necessitate special indirect cost rates, the funding agency
will, prior to the time the rates are negotiated, notify the cognizant agency for indirect costs.

2.

The use of predetermined rates, if allowed, is encouraged where the cognizant agency for indirect costs has reasonable assurance based
on past experience and reliable projection of the non-Federal entity's costs, that the rate is not likely to exceed a rate based on actual
costs. Long-term agreements utilizing predetermined rates extending over two or more years are encouraged, where appropriate.

3.

The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the
governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute, or the
information upon which the plan was negotiated is later found to be materially incomplete or inaccurate. The agreed upon rates must be
made available to all Federal agencies for their use.

4.

Refunds must be made if proposals are later found to have included costs that
(a) are unallowable
(i)

as specified by law or regulation,

(ii) as identified in § 200.420, or
(iii) by the terms and conditions of Federal awards, or
(b) are unallowable because they are clearly not allocable to Federal awards. These adjustments or refunds will be made regardless of
the type of rate negotiated (predetermined, final, fixed, or provisional).

F. Other Policies
1. Fringe Benefit Rates
If overall fringe benefit rates are not approved for the governmental unit as part of the central service cost allocation plan, these rates will
be reviewed, negotiated and approved for individual recipient agencies during the indirect cost negotiation process. In these cases, a
proposed fringe benefit rate computation should accompany the indirect cost proposal. If fringe benefit rates are not used at the
recipient agency level (i.e., the agency specifically identifies fringe benefit costs to individual employees), the governmental unit should
so advise the cognizant agency for indirect costs.

2. Billed Services Provided by the Recipient Agency
In some cases, governmental departments or agencies (components of the governmental unit) provide and bill for services similar to
those covered by central service cost allocation plans (e.g., computer centers). Where this occurs, the governmental departments or
agencies (components of the governmental unit)should be guided by the requirements in Appendix V relating to the development of
billing rates and documentation requirements, and should advise the cognizant agency for indirect costs of any billed services. Reviews
of these types of services (including reviews of costing/billing methodology, profits or losses, etc.) will be made on a case-by-case basis
as warranted by the circumstances involved.

3. Indirect Cost Allocations Not Using Rates
In certain situations, governmental departments or agencies (components of the governmental unit), because of the nature of their
Federal awards, may be required to develop a cost allocation plan that distributes indirect (and, in some cases, direct) costs to the
specific funding sources. In these cases, a narrative cost allocation methodology should be developed, documented, maintained for
audit, or submitted, as appropriate, to the cognizant agency for indirect costs for review, negotiation, and approval.

4. Appeals
If a dispute arises in a negotiation of an indirect cost rate (or other rate) between the cognizant agency for indirect costs and the
governmental unit, the dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect costs.

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5. Collection of Unallowable Costs and Erroneous Payments
Costs specifically identified as unallowable and charged to Federal awards either directly or indirectly will be refunded (including interest
chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations).

6. OMB Assistance
To the extent that problems are encountered among the Federal agencies or governmental units in connection with the negotiation and approval
process, OMB will lend assistance, as required, to resolve such problems in a timely manner.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75889, Dec. 19, 2014; 85 FR 49581, Aug. 13, 2020]

Appendix VIII to Part 200 - Nonprofit Organizations Exempted From Subpart E of Part 200
1.

Advance Technology Institute (ATI), Charleston, South Carolina

2.

Aerospace Corporation, El Segundo, California

3.

American Institutes of Research (AIR), Washington, DC

4.

Argonne National Laboratory, Chicago, Illinois

5.

Atomic Casualty Commission, Washington, DC

6.

Battelle Memorial Institute, Headquartered in Columbus, Ohio

7.

Brookhaven National Laboratory, Upton, New York

8.

Charles Stark Draper Laboratory, Incorporated, Cambridge, Massachusetts

9.

CNA Corporation (CNAC), Alexandria, Virginia

10. Environmental Institute of Michigan, Ann Arbor, Michigan
11. Georgia Institute of Technology/Georgia Tech Applied Research Corporation/Georgia Tech Research Institute, Atlanta, Georgia
12. Hanford Environmental Health Foundation, Richland, Washington
13. IIT Research Institute, Chicago, Illinois
14. Institute of Gas Technology, Chicago, Illinois
15. Institute for Defense Analysis, Alexandria, Virginia
16. LMI, McLean, Virginia
17. Mitre Corporation, Bedford, Massachusetts
18. Noblis, Inc., Falls Church, Virginia
19. National Radiological Astronomy Observatory, Green Bank, West Virginia
20. National Renewable Energy Laboratory, Golden, Colorado
21. Oak Ridge Associated Universities, Oak Ridge, Tennessee
22. Rand Corporation, Santa Monica, California
23. Research Triangle Institute, Research Triangle Park, North Carolina
24. Riverside Research Institute, New York, New York
25. South Carolina Research Authority (SCRA), Charleston, South Carolina
26. Southern Research Institute, Birmingham, Alabama
27. Southwest Research Institute, San Antonio, Texas
28. SRI International, Menlo Park, California
29. Syracuse Research Corporation, Syracuse, New York
30. Universities Research Association, Incorporated (National Acceleration Lab), Argonne, Illinois
31. Urban Institute, Washington DC
32. Nonprofit insurance companies, such as Blue Cross and Blue Shield Organizations
33. Other nonprofit organizations as negotiated with Federal awarding agencies
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49582, Aug. 13, 2020]

Appendix IX to Part 200 - Hospital Cost Principles
Until such time as revised guidance is proposed and implemented for hospitals, the existing principles located at 45 CFR part 75 Appendix IX,
entitled “Principles for Determining Cost Applicable to Research and Development Under Grants and Contracts with Hospitals,” remain in effect.
[86 FR 10440, Feb. 22, 2021]

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Appendix X to Part 200 - Data Collection Form (Form SF-SAC)
The Data Collection Form SF-SAC is available on the FAC Web site.

Appendix XI to Part 200 - Compliance Supplement
The compliance supplement is available on the OMB website.
[85 FR 49582, Aug. 13, 2020]

Appendix XII to Part 200 - Award Term and Condition for Recipient Integrity and Performance Matters

A. Reporting of Matters Related to Recipient Integrity and Performance
1. General Reporting Requirement
If the total value of your currently active grants, cooperative agreements, and procurement contracts from all Federal awarding
agencies exceeds $10,000,000 for any period of time during the period of performance of this Federal award, then you as the
recipient during that period of time must maintain the currency of information reported to the System for Award Management
(SAM) that is made available in the designated integrity and performance system (currently the Federal Awardee Performance and
Integrity Information System (FAPIIS)) about civil, criminal, or administrative proceedings described in paragraph 2 of this award
term and condition. This is a statutory requirement under section 872 of Public Law 110-417, as amended (41 U.S.C. 2313). As
required by section 3010 of Public Law 111-212, all information posted in the designated integrity and performance system on or
after April 15, 2011, except past performance reviews required for Federal procurement contracts, will be publicly available.

2. Proceedings About Which You Must Report
Submit the information required about each proceeding that:
a.

Is in connection with the award or performance of a grant, cooperative agreement, or procurement contract from the Federal
Government;

b.

Reached its final disposition during the most recent five-year period; and

c.

Is one of the following:
(1) A criminal proceeding that resulted in a conviction, as defined in paragraph 5 of this award term and condition;
(2) A civil proceeding that resulted in a finding of fault and liability and payment of a monetary fine, penalty, reimbursement,
restitution, or damages of $5,000 or more;
(3) An administrative proceeding, as defined in paragraph 5. of this award term and condition, that resulted in a finding of
fault and liability and your payment of either a monetary fine or penalty of $5,000 or more or reimbursement, restitution,
or damages in excess of $100,000; or
(4) Any other criminal, civil, or administrative proceeding if:
(i)

It could have led to an outcome described in paragraph 2.c.(1), (2), or (3) of this award term and condition;

(ii) It had a different disposition arrived at by consent or compromise with an acknowledgment of fault on your part; and
(iii) The requirement in this award term and condition to disclose information about the proceeding does not conflict
with applicable laws and regulations.

3. Reporting Procedures
Enter in the SAM Entity Management area the information that SAM requires about each proceeding described in paragraph 2 of
this award term and condition. You do not need to submit the information a second time under assistance awards that you received
if you already provided the information through SAM because you were required to do so under Federal procurement contracts that
you were awarded.

4. Reporting Frequency
During any period of time when you are subject to the requirement in paragraph 1 of this award term and condition, you must report
proceedings information through SAM for the most recent five year period, either to report new information about any proceeding(s)
that you have not reported previously or affirm that there is no new information to report. Recipients that have Federal contract,
grant, and cooperative agreement awards with a cumulative total value greater than $10,000,000 must disclose semiannually any
information about the criminal, civil, and administrative proceedings.

5. Definitions
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For purposes of this award term and condition:
a.

Administrative proceeding means a non-judicial process that is adjudicatory in nature in order to make a determination of fault
or liability (e.g., Securities and Exchange Commission Administrative proceedings, Civilian Board of Contract Appeals
proceedings, and Armed Services Board of Contract Appeals proceedings). This includes proceedings at the Federal and State
level but only in connection with performance of a Federal contract or grant. It does not include audits, site visits, corrective
plans, or inspection of deliverables.

b.

Conviction, for purposes of this award term and condition, means a judgment or conviction of a criminal offense by any court
of competent jurisdiction, whether entered upon a verdict or a plea, and includes a conviction entered upon a plea of nolo
contendere.

c.

Total value of currently active grants, cooperative agreements, and procurement contracts includes (1) Only the Federal share of the funding under any Federal award with a recipient cost share or match; and
(2) The value of all expected funding increments under a Federal award and options, even if not yet exercised.

B.

[Reserved]

[80 FR 43310, July 22, 2015, as amended at 85 FR 49582, Aug. 13, 2020]

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