R-08-04-10-11G2 - 4/10/2008 RESOLUTION NO. R-08-04-10-11G2
WHEREAS, the City of Round Rock has applied for and received
funds from the United States Government under Title I of the Housing
and Community Development Act of 1974, Public Law 93-383, and
WHEREAS, the City of Round Rock wishes to engage Habitat for
Humanity to assist the City in utilizing said funds, and
WHEREAS, the City Council desires to enter into a Community
Development Block Grant Agreement with Habitat for Humanity for
acquisition and improvement of real property, Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS,
That the Mayor is hereby authorized and directed to execute on
behalf of the City, a Community Development Block Grant Agreement
with Habitat for Humanity for acquisition and improvement of real
property, a copy of said agreement being attached hereto as Exhibit
"A" and incorporated herein for all purposes .
The City Council hereby finds and declares that written notice
of the date, hour, place and subject of the meeting at which this
Resolution was adopted was posted and that such meeting was open to
the public as required by law at all times during which this
Resolution and the subject matter hereof were discussed, considered
and formally acted upon, all as required by the Open Meetings Act,
Chapter 551, Texas Government Code, as amended.
RESOLVED this 10th day of April,
NWELL,, ayor
City of Round Rock, Texas
ATTEST:
— 2a�-- - [A PAU
SARA L. WHITE, City Secretary
O:\WDOX\RESOLUTER80410G2DOG4mc
THE STATE OF TEXAS §
COUNTY OF WILLIAMSON §
COMMUNITY DEVELOPMENT BLOCK GRANT AGREEMENT
(B-07-MC-48-0514)
THIS AGREEMENT, entered into this day of , 2008 by and between the
City of Round Rock, a Texas home-rule municipality (herein called the "CITY") and HABITAT
FOR HUMANITY OF WILLIAMSON COUNTY, a Texas non-profit corporation (herein called
"HABITAT").
WHEREAS, the CITY has applied for and received funds from the United States
Government under Title I of the Housing and Community Development Act of 1974, Public Law
93-383; and
WHEREAS, the CITY wishes to engage HABITAT to assist the•CITY in utilizing such
funds;
NOW, THEREFORE, In consideration of the mutual covenants and agreements contained herein
the parties agree as follows:
SECTION I:
SCOPE OF SERVICES
1.1. Activities
HABITAT will be responsible for administering a Community Development Block
Grant ("CDBG") Year 2008 program known as the Lewis Street program in a manner
satisfactory to the CITY and consistent with any standards required as a condition of providing
these funds. Such program will include the following activities eligible under the CDBG
Program:
Program Delivery
Activity 1: Acquisition of real property for the construction of affordable
housing for low to moderate income families.
Activity 2: Improvement of real property with drive-ways and upgrade to water
lines.
General Administration
The project will be administered by the Executive Director.
13541000135724.DOC
1 EXHIBIT
1.2 National Objectives
HABITAT certifies that the activities carried out under this Agreement shall meet the
national objective to benefit low and moderate income persons by acquiring real property for the
purpose of developing affordable housing for low and moderate income families.
1.3. Levels of Accomplishment—Goals and Performance Measures
In addition to normal administrative services required as part of this Agreement,
HABITAT agrees to provide the following program services:
Activity Units of Service Per Month Total Units per Year
Activity l: Acquisition of 1 12
Property
Activity 2: Improvement of 1 12
Property
Units of Service shall be defined for Activity 1 as administrative, professional and other
services necessary to acquire real property; for Activity 2 as one month of work to improve
driveways, water lines and other improvements.
1.4. Staffing
To undertake the activities described above and accomplish the levels of service
described above, HABITAT will allocate staff time in support of the program funded under this
Agreement as follows:
Title I Hrs. per Week #of Weeks = Estimated Hours
Executive Director 40 100 = 4000
Timeframe: April 25, 2008- through April 25, 2010
Title I Hrs. per Week # of Weeks I=Estimated Hours
Construction Coordinator 1 40 100 = 4000
Timeframe: Timeframe: April 25, 2008- through April 25, 2010
Title I Hrs. per Week #of Weeks = Estimated Hours
Community Involvement 20 100 = 4000
Director
Timeframe: Timeframe: April 25, 2008- through April 25, 2010
Any changes in the key personnel assigned or their general responsibilities under this program
are subject to the prior approval of the CITY.
2
1.5. Performance Monitoring
The CITY will monitor the performance of HABITAT against the goals and performance
standards required herein. Substandard performance as determined by the CITY will constitute
noncompliance with this Agreement. If action to correct such substandard performance is not
taken by HABITAT within thirty(30) days after being notified by the CITY, contract suspension
or termination procedures will be initiated in accordance with Section V II of this Agreement.
SECTION 11:
TIME OF PERFORMANCE
Services of HABITAT shall start on the 25th Day of April 2008 and end on the 25th
Dav of April 2010. The term of this Agreement and the provisions herein shall be extended to
cover any additional time period during which HABITAT remains in control of CDBG funds or
other assets including program income.
SECTION III:
BUDGET
Line Item Amount
Acquisition of real property $93,000
Construction of driveways, water lines and other $13,921
improvements
Project Costs $106,921
Any indirect costs charged must be consistent with the conditions of Paragraph 8.2 (C) of
this Agreement. In addition, CITY may require a more detailed budget breakdown than the one
contained herein, and HABITAT shall provide such supplementary budget information in a
timely fashion in the form and content prescribed by CITY.
SECTION IV:
PAYMENT
It is expressly agreed the total amount to be paid by the CITY under this Agreement shall
not exceed $106,921. Drawdowns for the payment of eligible expenses shall be made against the
line item budgets provided above and incorporated herein and in accordance with performance.
Expenses for general administration shall also be paid against the line item budgets provided
above and in accordance with performance.
Payments will be contingent upon certification of HABITAT's financial management
system in accordance with the standards specified in Appendix A to this Agreement.
3
SECTION V:
NOTICES
Notices required by this Agreement shall be in writing and delivered via mail (postage
prepaid), commercial courier, or personal delivery or sent by facsimile or other electronic means.
Any notice delivered or sent as aforesaid shall be effective on the date of delivery or sending.
All notices and other written communications under this Agreement shall be addressed to the
individuals in the capacities indicated below, unless otherwise modified by subsequent written
notice.
Notices made pursuant to this Agreement shall be directed to the following
representatives:
CITY: HABITAT:
Mona Ryan, Debbie Hoffinan
Community Development Coordinator Executive Director
City of Round Rock Habitat for Humanity of Williamson
County
301 West Bagdad, Suite 140 P.O. Box 737
Round Rock, Texas 78664 Georgetown TX 78627
Telephone: 512-218-5416 Telephone: 512463-4344
Fax: 512-341-3152 Fax: 512-864-3147
e-mail: mona round-rock.tx.us e-mail: debbieh .williamsonhabitat.or
SECTION VI:
SPECIAL CONDITIONS
HABITAT shall agree to comply with the requirements of Title 24 Code of Federal
Regulations, Part 570 of the Housing and Urban Development (HUD) regulations concerning
Community Development Block Grants (CDBG) and all federal regulations and policies issued
pursuant to these regulations. HABITAT further agrees to utilize funds available under this
Agreement to supplement rather than supplant funds otherwise available.
SECTION VII:
GENERAL CONDITIONS
7.1. General Compliance
HABITAT agrees to comply with all applicable federal, state and local laws, regulations
and policies governing the funds provided under this Agreement.
4
7.2. Independent Contractor
It is understood and agreed that HABITAT is an independent contractor and shall not be
considered an employee of the CITY. HABITAT shall at all times remain an independent
contractor with respect to the services to be performed under this Agreement. The CITY shall be
exempt from payment of all unemployment compensation, FICA and retirement benefits, as
HABITAT is an independent contractor. HABITAT shall not be within protection or coverage
of the CITY'S Workers' Compensation insurance, Health Insurance, Liability Insurance or any
other Insurance that the CITY from time to time may have in force and effect.
7.3. Hold Harmless
HABITAT shall indemnify, save harmless and exempt the CITY, its officers, agents,
servants, and employees from and against any and all suits, actions, legal proceedings, claims,
demands, damages, costs, expenses , attorney fees and any and all other costs or fees incident to any
work done as result of this Agreement and arising out of a willful or negligent act or omission of
HABITAT, its officers, agents, servants, and employees; provided, however, that HABITAT shall
not be liable for any suits, actions, legal proceedings, claims, demands, damages, costs, expenses
and attorneys' fees arising out of a willful or negligent act or omission of the CITY, its officers,
agents, servants and employees, or third parties.
7.4. Worker's Compensation
HABITAT shall provide Workers' Compensation Insurance coverage for all of its
employees involved in the performance of this Agreement.
7.5. Insurance and Bonding
HABITAT shall carry sufficient insurance coverage to protect contract assets from loss due
to theft, fraud and/or undue physical damage, and as a minimum shall purchase a blanket fidelity
bond covering all employees in an amount equal to cash advances from the CITY.
7.6. Amendments
The terms and conditions of this Agreement, including the attachments listed below,
constitute the entire agreement between the parties and supersedes all previous communications,
representations, or agreements, either written or oral, with respect to the subject matter hereof.
No modification or amendment to this Agreement will be binding on either party unless
acknowledged in writing by their duly authorized representatives.
Attachments:
a. Exhibit A— Self Certification Norm
b. Exhibit B—Client Data/Beneficiary Report Form
C. Appendix A—OMB Circular A-122, Cost Principles for Non-Profit Organizations
d. Appendix B — OMB Circular A-133, Audits of States, Local Governments, and
Non-Profit Organizations
5
e. Appendix C —24 CFR 570 CDBG Regulations Subpart C, Eligible Activities
f. Appendix D—24 CFR 570 CDBG Regulations Subpart J, Grant Administration
g. Appendix E—24 CFR 570 CDBG Regulations Subpart K, Other Requirements
7.7. Suspension or Termination
Either party may terminate this Agreement at any time by giving written notice to the
other party of such termination and specifying the effective date thereof at least thirty (30) days
before the effective date of such termination. Partial terminations of the Scope of Service in
Paragraph 1.1. above may only be undertaken with the prior approval of the CITY. In the event
of any termination for convenience, all finished or unfinished documents, data, reports or other
materials prepared by HABITAT under this Agreement shall, at the option of the CITY, become
property of the CITY.
The CITY may also suspend or terminate this Agreement, in whole or in part, if
HABITAT materially fails to comply with any term of this Agreement, which include, but are
not limited to the following:
A. Failure to comply with any of the rules, regulations or provisions referred to
herein, or such statutes, regulations, executive orders, and HUD guidelines,
policies or directives as may become applicable at any time;
B. Failure, for any reason, of HABITAT to fulfill in a timely and proper manner its
obligations under this Agreement;
C. Ineffective or improper use of funds provided under this Agreement; or
D. Submission by HABITAT to the CITY reports that are incorrect or incomplete in
any material respect.
The CITY may declare HABITAT ineligible for any further participation in CITY
contracts, in addition to other remedies as provided by law. Should HABITAT fail to cure or
correct such defects or failures identified by the CITY within the fifteen (15) days after
notification of deficiencies, and such breach of contract relate to a violation of federal law or
regulations which results in a demand for reimbursement from the Department of Housing and
Urban Development (HUD) or its successor, the CITY may seek reimbursement of all funds
from the CITY to HABITAT under this Agreement.
HABITAT shall not be relieved of the liability to the CITY for damages sustained by the
CITY by virtue of any breach of this Agreement by HABITAT and the CITY may withhold any
payments to HABITAT for the purpose as set out and until such time as the exact amount of
damages due the CITY from the HABITAT is determined. Should the CITY become aware of
any activity by HABITAT which would jeopardize the CITY's position with HUD which would
cause a payback of CDBG funds or other CITY federal funds then the CITY may take
appropriate action including injunctive relief against HABITAT to prevent the transaction as
6
aforesaid. The failure of the CITY to exercise this right shall in no way constitute a waiver by
the CITY to demand payment or seek any other relief in law or in equity to which it may be
justly entitled.
7.8. Pending Litigation
HABITAT agrees to inform CITY about any litigation HABITAT is or becomes in
involved in.
7.9. Background Checks
HABITAT agrees to conduct a criminal background check on all employees working
directly with youth.
SECTION VIII:
ADMINISTRATIVE REQUIREMENTS
8.1. Financial Management
A. Accounting Standards
HABITAT agrees to comply with 24 CFR 84.21-28 and agrees to adhere to the
accounting principles and procedures required therein, utilize adequate internal controls, and
maintain necessary source documentation for all costs incurred.
B. Cost Principles
HABITAT shall administer its program in conformance with OMB Circulars A-122,
"Cost Principles for Non-Profit Organizations," or A-21, "Cost Principles for Educational
Institutions," as applicable. These principles shall be applied for all costs incurred whether
charged on a direct or indirect basis.
8.2. Documentation and Record Keeping
A. Record Keeping
HABITAT shall maintain all records required by the federal regulations specified in 24
CFR Part 570.506 and that are pertinent to the activities to be funded under this Agreement.
Such records shall include, but are not be limited to:
1. Records providing a full description of each activity undertaken;
2. Records demonstrating that each activity undertaken meets one of the
National Objectives of the CDBG program under 24 CFR Part 570.208;
7
3. Records required to determine the eligibility of activities under 24 CFR.
Part 570.201 - 570.206;
4. Financial records as required by 24 CFR Part 570.502, and OMB Circular
A-110; and
5. Other records necessary to document compliance with Subpart K of 24
CFR 570.
B. Retention
HABITAT shall retain all financial records, supporting documents, statistical records
and all. other records pertinent to this Agreement for a period of four (4) years after the
termination of all activities funded under this Agreement. Notwithstanding the above, if there is
litigation, claims,.audits, negotiations or other actions that involve any of the records cited and
that have started before the expiration of the four-year period, then such records must be retained
until completion of the actions and resolution of all issues, or the expiration of the four-year
period, which ever occurs later.
C. Client Data
HABITAT shall maintain client data demonstrating client eligibility for services
provided. Such data shall include, but not be limited to, client name, address and annual
household income level as shown in Exhibit "A", attached hereto and incorporated herein. Any
other basis for determining eligibility must be approved by the CITY in advance in writing, and
description of services provided. Such information shall be made available to CITY monitors or
their designees upon request.
D. Disclosure
HABITAT understands that client information collected under this contract is private
and the use or disclosure of such information, when not directly connected with the
administration of the CITY's or HABITAT's responsibilities with respect to services provided
under this contract is prohibited by the U.S. Privacy Act of 1974 unless written consent is
obtained from such person receiving service and, in the case of a minor, that of a responsible
parent/guardian.
E. Close-Outs
HABITAT's obligation to the CITY shall not end until all closeout requirements are
completed. Activities during this close-out period shall include, but are not limited to: making
final payments, disposing of program assets (including the return of all unused materials,
equipment, unspent cash advances, program income balances, and receivable accounts to the
CITY), and determining custodianship of records. Not withstanding the foregoing, the terms of
this Agreement shall remain in effect during any period that HABITAT has control over CDBG
funds, including program income.
8
F. Audits & Inspections
All HABITAT's records with respect to any matters covered by this Agreement shall be
made available to the CITY, grantor agency, their designees or the Federal Government, at any
time during normal business hours, as often as the CITY or grantor agency deems necessary, to
audit, examine, and make excerpts or transcripts of all relevant data. Any deficiencies noted in
audit reports must be fully cleared by HABITAT within thirty (30) days after receipt by
HABITAT. Failure of HABITAT to comply with the above audit requirements will constitute a
violation of this contract and may result in the withholding of future payments. HABITAT
hereby agrees to have an annual agency audit conducted in accordance with current CITY policy
concerning HABITAT's audits and OMB Circular A-133, attached hereto as Appendix B.
8.3. Reporting and Payment Procedures
A. Program Income
HABITAT shall report quarterly all program income, as defined at 24 CFR 570.500(a),
generated by activities carried out with CDBG funds made available under this contract. The use
of program income by HABITAT shall comply with requirements set forth in 24 CFR 570.504.
By way of further limitations, HABITAT may use such income during the contract period for
activities permitted under this contract and shall reduce requests for additional funds by the
amount of any such program income balances on hand. All unused program income shall be
returned to the CITY at the end of the contract period. Any interest earned on cash advances
from the U.S. Treasury is not program income and shall be remitted promptly to the CITY.
Reporting of any such program income shall, at minimum, be included in quarterly reports under
Section VIII of this Agreement. Information on program income provided in these reports will
include, but not be limited to, summaries of program income generated; a summary of
expenditures of these funds; and a description of the use of program income sufficient for
determining eligibility of these expenses under CDBG guidelines.
B. Indirect Costs
If indirect costs are charged, HABITAT will develop an indirect cost allocation plan for
determining the appropriate HABITAT's share of administrative costs and shall submit such plan
to the CITY for approval.
C. Payment Procedures
The CITY will pay to HABITAT funds available under this Agreement based on
information submitted by HABITAT and consistent with an approved budget and CITY policies
concerning payments. With the exception of certain advances, payments will be made for .
eligible expenses actually incurred by HABITAT, and not to exceed actual cash requirements.
Payments will be adjusted by the CITY in accordance with advance fund and program income
balances available under this contract for costs incurred by the CITY on the behalf of HABITAT.
9
D. Progress Reports
HABITAT shall submit regular Quarterly Progress Reports to the CITY in the form,
content, and frequency as required by the CITY. These shall include but not be limited to
summary of expenditures, list of beneficiaries and a brief narrative of accomplishments.
Beneficiary reports should be submitted on Exhibit "B", attached hereto and incorporated herein
unless an alternative report is approved by CITY in advance and in writing.
E. Budgets
The CITY and the HABITAT may agree to revise the budget, provided in Section III
above, from time to time in accordance with existing CITY policies. Any amendments to the
budget must be approved in writing by both the CITY and HABITAT.
8.4. Procurement
A. Compliance
HABITAT shall maintain real property inventory records, which clearly identifies any
properties purchased, improved or sold using funds provided under this Agreement. Property
retained shall continue to meet eligibility criteria and shall conform to the "changes in use"
restrictions specified in 24 CFR Parts 570.503(b)(8). All program assets (unexpended advanced
funds) shall revert to the CITY upon termination of this Agreement. The only authorized
expenditures of funds shall be for construction and related costs as described herein.
B. OMB Standards
HABITAT shall procure materials in accordance with the requirements of Attachment O
of OMB Circular A-110, Procurement Standards, and shall subsequently follow Attachment N,
Property Management Standards, covering utilization and disposal of property. These
requirements.are referenced in 24 CFR Part 84, titled "Common Rule".
C. Travel
HABITAT shall obtain written approval from the CITY for any travel outside the
metropolitan area with funds provided under this Agreement. The CITY shall determine that
such travel is necessary and reasonable according to applicable standards outlined in OMB
Circular A87.
8.5. Use and Reversion of Assets
The use and disposition of real property and equipment under this Agreement shall be in
compliance with the requirements of 24 CFR Part 84 and 24 CFR 570.502, 570.503 and 570.504,
as applicable, which include but are not limited to the following:
10
. ...._.. ........
A. HABITAT agrees that should it discontinue the services as provided for herein,
then HABITAT shall transfer to the CITY all unexpended CDBG funds on hand and any
accounts receivable attributable to the use of funds under this Agreement within ten (10) days
from the time of expiration, cancellation, or termination of services. The funds remaining will be
appropriated to eligible CDBG activities in keeping with the CITY's budgetary process.
B. Real property under HABITAT's control that was acquired or improved; in whole
or in part, with funds under this Agreement in excess of$25,000 shall be used to meet one of the
CDBG National Objectives pursuant to 24 CFR 570.208 until five (5) years after expiration of
this Agreement. If HABITAT fails to use CDBG-assisted real property in a manner that meets a
CDBG,National Objective for the prescribed period of time, HABITAT shall pay the CITY an
amount equal to the current fair market value of the property less any portion of the value
attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the
property. Such payment shall constitute program income to the CITY. HABITAT may retain
real property acquired or improved under this Agreement after the expiration of the five-year
period.
C. In all cases in which equipment acquired, in whole or in part, with funds under
this Agreement is sold, the proceeds shall be program income (prorated to reflect the extent to
that funds received under this Agreement were used to acquire the equipment). Equipment not
needed by HABITAT for activities under this Agreement shall be (a) transferred to the CITY for
the CDBG program or (b) retained after compensating the CITY an amount equal to the current
fair market value of the equipment less the percentage of non-CDBG funds used to acquire the
equipment.
SECTION IX:
RELOCATION, REAL PROPERTY ACQUISITION AND ONE-FOR-ONE HOUSING
REPLACEMENT
9.1. HABITAT agrees to comply with (a) the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970, as amended (URA), and implementing regulations at
49 CFR Part 24 and 24 CFR 570.606(b): (b) the requirements of 24 CFR 570.606(c) governing
the Residential Anti-displacement and Relocation Assistance Plan under section 104(d) of the
HCD Act; and 9c) the requirements in 24 CFR 570.606(d) governing optional relocation
policies. HABITAT shall provide relocation assistance to displaced persons as defined by 24
CFR 570.606(b)(2) that are displaced as a direct result of acquisition, rehabilitation, demolition
or conversion for a CDBG-assisted project. HABITAT also agrees to comply with applicable
CITY ordinances, resolutions and policies concerning the displacement of persons from their
residences.
11
SECTION X:
PERSONNEL & PARTICIPANT CONDITIONS
10.1. Civil Rights
A. Compliance
HABITAT agrees to comply with city and state civil rights acts and ordinances, and with
Title VI of the Civil Rights Act of 1964 as amended, Title VIII of the Civil Rights Act of 1968 as
amended, Section 109 of Title I of the Housing and Community Development Act of 1974,
Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the
Age Discrimination Act of 1975, Executive Order 11063, and with Executive Order 11246 as
amended by Executive Orders 11375, 11478, 12107 and 12086.
B. Nondiscrimination
HABITAT will not cause any person to be excluded from participation in, denied the
benefits of, or subjected to discrimination under any of the program's activities receiving
assistance under this Agreement based on the grounds of race, color, religion, sex, ancestry,
national origin or handicap. In order to allow the CITY to monitor non-discrimination,
HABITAT will at minimum maintain records regarding the race of persons or households
assisted under this contract and whether households assisted have a female head of household.
HABITAT will not discriminate against any employee or applicant for employment
because of race, color, religion, sex, ancestry, national origin, or other handicap, age, marital
status, or status with regard to public assistance. HABITAT will take affirmative action to
insure all employment practices are free from such discrimination. Such employment practices
include but are not limited to the following: hiring, upgrading, demotion, transfer, recruitment or
recruitment advertising, layoff, termination, rates of pay or other forms of compensation, and
selection for training, including apprenticeship. HABITAT agrees to post in conspicuous
places, available to employees and applicants for employment, notices to be provided by the
contracting agency setting forth the provisions of this nondiscrimination clause.
C. Land Covenants
This Agreement is subject to the requirements of Title VI of the Civil Rights Act of 1964
(P.L. 88-352) and 24 CFR 570.601 and 570.602. In regard to the sale, lease, or other transfer of
land acquired, cleared or improved with assistance provided under this Agreement, HABITAT
shall cause or require a covenant running with the land to be inserted in the deed or lease for
such transfer, prohibiting discrimination as herein defined, in the sale, lease or rental, or in the
use or occupancy of such land, or in any improvements erected or to be erected thereon,
providing that the CITY and the United States are beneficiaries of and entitled to enforce such
covenants. HABITAT, in undertaking its obligation to carry out the program assisted hereunder,
agrees to take such measures as are necessary to enforce such covenant, and will not itself so
discriminate.
12
D. Compliance with Section 504
HABITAT agrees to comply with any federal regulations issued pursuant to compliance
with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 706) or applicable updates which
prohibits discrimination against the handicapped in any federally assisted program. The CITY
shall provide HABITAT with, any guidelines necessary for compliance with that portion of the
regulations in force during the term of this Agreement.
10.2. Affirmative Action
A. Approved Plan
HABITAT agrees that it shall be committed to carry out pursuant to the CITY's
specifications an Affirmative Action Program in keeping with the principles as provided in
Presidents Executive Order 11246 of September 24, 1966. The CITY shall provide Affirmative
Action guidelines to HABITAT to assist in the formulation of such program. HABITAT shall
submit a plan for an Affirmative Action Program for approval prior to the award of funds.
B. Women- and Minority-Owned Businesses (W/MBE)
HABITAT will use its best efforts to afford small businesses, minority business
enterprises, and women's business enterprises the maximum practicable opportunity to
participate in the performance of this Agreement. As used in this Agreement, the terms "small
business' means a business that meets the criteria set forth in section 3(a) of the Small Business
Act, as amended (I5 U.S.C. 632), and "minority and women's business enterprise" means a
business at least fifty-one (51) percent owned and controlled by minority group members or
women. For the purpose of this definition, "minority group members" are Afro-Americans,.
Spanish-speaking, Spanish surnamed or Spanish-heritage Americans, Asian-Americans, and
American Indians. HABITAT may relay on written representations by businesses regarding
their status as minority and female business enterprises in lieu of an independent investigation.
C. Access to Records
HABITAT shall furnish and cause each of its own subcontractors to furnish all
information and reports required hereunder and will permit access to its books, records and
accounts by the CITY, HUD or its agent, or other authorized Federal officials for purposes of
investigation to ascertain compliance with the rules, regulations and provisions stated herein.
D. Notifications
HABITAT will send to each labor union or representative of workers with which it has a
collective bargaining agreement or other contract or understanding, a notice, to be provided by.
the agency contracting officer, advising the labor union or worker's representative of
HABITAT's commitments hereunder, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
13
E. E uacL 1 Employment Opportunity and Affirmative Action(EEO/AA) Statement
HABITAT will, in all solicitations or advertisements for employees.placed by or on
behalf of HABITAT, state that it is an Equal Opportunity or Affirmative Action employer.
F. Subcontract Provisions
HABITAT will include the provisions of Paragraphs X.A, Civil Rights, and B,
Affirmative Action, in every subcontract or purchase order, specifically or by reference, so that
such provisions will be binding upon each of its own subcontractors.
10.3. Employment Restrictions
A. Prohibited Activity
HABITAT is prohibited from using funds provided herein or personnel employed in the
administration of the program for: political activities; inherently religious activities; lobbying;
political patronage; and nepotism activities.
B. Labor Standards
HABITAT agrees to comply with the requirements of the Secretary of Labor in
accordance with the Davis-Bacon Act as amended, the provisions of Contract Work Hours and
Safety Standards Act as amended, the provisions of Contract Work Hours and Safety Standards
Act (40 U.S.C. 327 et seq.) and all other applicable Federal, state and local laws and regulations
pertaining to labor standards insofar as those acts apply to the performance of this Agreement.
HABITAT agrees to comply with the Copeland Anti-Kick Back Act (18 U.S.C. 874 et seq:) and
its implementing regulations of the U.S. Department of Labor at 29 CFR Part 5. HABITAT shall
maintain documentation that demonstrates compliance with hour and wage requirements of this
part. Such documentation shall be made available to the CITY for review upon request.
HABITAT agrees that, except with respect to the rehabilitation or construction of
residential property containing less than eight (8) units, all contractors engaged under contracts
in excess of$2,000.00 for construction, renovation or repair work financed in whole or in part
with assistance provided under this Agreement, shall comply with Federal requirements adopted
by the CITY pertaining to such contracts and with the applicable requirements of the regulations
of the Department of Labor, under 29 CFR Parts 1, 3, 5 and 7 governing the payment of wages
and ratio of apprentices and trainees to journey workers; provided that, if wage rates higher than
those required under the regulations are imposed by state or local law, nothing hereunder is
intended to relieve HABITAT of its obligation, if any, to require payment of the higher wage.
HABITAT shall cause or require to be inserted in full, in all such contracts subject to such
regulations,provisions meeting the requirement of this paragraph.
C. "Section 3" Clause
1. Compliance
14
Compliance with the provisions of Section 3 of the HUD Act of 1968, as
amended, and as implemented by the regulations set forth in 24 CFR 135, and all applicable rules
and orders issued hereunder prior to the execution of this Agreement, shall be a condition of the
Federal financial assistance provided under this Agreement and binding upon the CITY,
HABITAT and any of HABITAT's subcontractors. Failure to fulfill these requirements shall
subject the CITY, HABITAT and any of HABITAT's subcontractors, their successors and
assigns, to those sanctions specified by the Agreement through which Federal assistance is
provided. HABITAT certifies and agrees that no contractual or other disability exists that would
prevent compliance with these requirements.
HABITAT further agrees to comply with these "Section 3" requirements and to
include the following language in all subcontracts executed under this Agreement:
"The work to be performed under this Agreement is a project assisted under a
program providing direct Federal financial assistance from HUD and is subject to
the requirements of Section 3 of the Housing and Urban Development Act of
1968, as amended (12 U.S.C. 1701). Section 3 requires that to the greatest extent
feasible opportunities for training and employment be given to low- and very low-
income residents of the project area, and that contracts for work in connection
with the project be awarded to business concerns that provide economic
opportunities for low- and very low-income persons residing in the metropolitan
area in which the project is located."
HABITAT further agrees to ensure that opportunities for training and
employment arising in connection with a housing rehabilitation (including reduction and
abatement of lead-based paint hazards), housing construction, or other public construction
project are given to low- and very low-income persons residing within the metropolitan area in
which the CDBG-funded project is located; where feasible, priority should be given to low-and
very law-income persons within the service area of the project or the neighborhood in which the
project is located, and to low- and very low-income participants in other HUD programs; and
award contracts for work undertaken in connection with a housing rehabilitation (including
reduction and abatement of lead-based pain hazards), housing construction, or other public
construction project to business concerns that provide economic opportunities for low-and very
low-income persons residing within the metropolitan area in which the CDBG-funded project is
located; where feasible, priority should be given to business concerns that provide economic
opportunities to low- and very low-income residents within the service area or the neighborhood
in which the project is located, and to low- and very low-income participants in other HUD
programs.
HABITAT certifies and agrees that no contractual or other legal incapacity exists
that would prevent compliance with these requirements.
2. Notifications
HABITAT agrees to send to each labor organization or representative of workers
with which it has a collective bargaining agreement or other contract or understanding, if any, a
15
notice advising said labor organization or worker's representative of its commitments under this
Section 3 clause and shall post copies of the notice in conspicuous places to employees and
applicants for employment or training.
3. Subcontracts
HABITAT will include this Section 3 clause in every subcontract and will take
appropriate action pursuant to the subcontract upon a finding that the subcontractor is in
violation of regulations issued by the grantor agency. HABITAT will not subcontract with any
entity where it has notice or knowledge that the latter has been found in violation of regulations
under 24 CFR Part 135 and will not let any subcontract unless the entity has first provided it with
a preliminary statement of ability to comply with the requirements of these regulations.
10.4. Conduct
A. Assignability
HABITAT shall not assign or transfer any interest in this Agreement without the prior
written consent of the CITY.
B. Subcontracts
1. Approvals
HABITAT shall not enter into any subcontracts with any agency or individual in the
performance of this contract without written consent of the CITY prior to the execution of such
Agreement.
2. Monitoring of Subcontractors
HABITAT will monitor all subcontracted services on a regular basis to assure contract
compliance. Results of monitoring efforts shall be summarized in written reports and supported
with evidence of follow-up actions taken to correct areas of noncompliance.
3. Content
HABITAT shall cause all of the provisions of this contract in its entirety to be included
in and made a part of any subcontract executed in the performance of this Agreement.
4. Selection Process
HABITAT shall undertake to insure that all subcontracts let in the performance of this
agreement shall be awarded on a fair and open competition basis in accordance with applicable
procurement requirements. Executed copies of all subcontracts shall be forwarded to the CITY
along with documentation concerning the selection process.
16
C. Hatch Act
HABITAT agrees that no funds provided, nor personnel employed under this
Agreement, shall be in any way or to any extent engaged in the conduct of political activities in
violation of Chapter 15 of Title V United States Code.
D. Conflict of Interest
HABITAT understands and agrees to abide by the provisions of 24 CFR 84.42 and
570.611, which include, but are not limited to the following:
1. HABITAT shall maintain a written code or standards of conduct that shall
govern the performance of its officers, employees or agents engaged in the award and
administration of contracts supported by Federal funds.
2. No employee, officer or agent of HABITAT shall participate in the
selection, or.in the award, or administration of, a contract supported by Federal funds if a conflict
of interest, real or apparent, would be involved.
3. No covered persons who exercise or have exercised any functions or
responsibilities with respect to CDBG-assisted activities, or who are in a position to participate
in a decision-making process or gain inside information with regard to such activities, may
obtain a financial interest in any contract, or have a financial interest in any contract, subcontract,
or agreement with respect to the CDBD-assisted activity, or with respect to the proceeds from the
CDBG-assisted activity, either for themselves or those with whom they have business or
immediate family ties, during their tenure or for a period of one (1) year thereafter.
These conflict of interest provisions apply to "covered persons" which shall include any
person who is an employee, agent, consultant, officer, or elected official of the CITY, HABITAT
or any designated public agencies which are receiving funds under the CDBG Entitlement
program.
E. Lobbying
HABITAT hereby certifies that:
1. No Federal appropriated funds have been paid or will be paid, by or on
behalf of it, to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any Federal contract, the making of any
Federal grant, the making of any Federal loan, the entering into any cooperative agreement, and
the extension, continuation, renewal, amendment, or modification of any Federal contract, grant,
loan, or cooperative agreement;
2. If any funs other than Federal appropriated funds have been paid or will be
paid to any person for influencing or attempting to influence an officer or employee of any
17
agency, a Member of Congress, an officer or employee of Congress, .or an employee of a
Member of Congress in connection with this Federal contract, grant, loan or cooperative
agreement, it will complete and submit Standard Fonn-LLL, "Disclosure Form to Report
Lobbying," in accordance with its instructions; and
3. It will require that the language of paragraph 4. of this certification be
included in the award documents for all subawards at all tiers including subcontracts, subgrants,
and contracts under grants, loans, and cooperative agreements and that all subrecipients shall
certify and disclose accordingly:
4. Lobbying Certification
This certification is a material representation of a fact upon which reliance was
placed when this transaction was made or entered into. Submission of this certification is a
prerequisite for making or entering into this transaction imposed by section 1352, title 31, U.S.C.
Any person who fails to file the required certification shall be subject to a civil penalty of not
less than $10,000 and not more than $100,000 for each such failure.
F. Copydvht
If this Agreement results in any copyrightable material or inventions, the CITY and/or
grantor agency reserves the right to royalty-free, non-exclusive and irrevocable license to
reproduce, publish or otherwise use and to authorize others to use, the work or materials for
governmental purposes.
G. Religious Organization
HABITAT agrees that funds provided under this Agreement will not be utilized for
inherently religious activities, such as worship, religious instruction, or proselytization; to
promote religious interests; or for the benefit of a religious organization as specified in 24 CFR
570.2006).
SECTION XI:
ENVIRONMENTAL CONDITIONS
11.1. Air and Water
HABITAT agrees to comply with the following requirements insofar as they apply to the
performance of this Agreement:
A. Clean Air Act, 42 U.S.C., 7401, et seq.;
B. Federal Water Pollution Control Act, as amended, 33 U.S.C., 1251, et seq., as
amended, 1318 relating to inspection, monitoring, entry, reports, and information, as well as
18
other requirements specified in said Section 114 and Section 308, and all regulations and
guidelines issued thereunder; and
C. Environmental Protection Agency (EPA) regulations pursuant to 40 CFR Part 50,
as amended.
11.2. Flood Disaster Protection
In accordance with the requirements of the Flood Disaster Protection Act of 1973 .(42
U.S.C. 4001), HABITAT shall assure that for activities located in an area identified by the
Federal Emergency Management Agency (FEMA) as having special. flood hazards, flood
.insurance under the National Flood Insurance Program is obtained and maintained as a condition
of financial assistance for acquisition or construction purposes including rehabilitation.
11.3. Lead-Based Paint
HABITAT agrees that any construction or rehabilitation of residential structures with
assistance provided under this Agreement shall be subject to HUD Lead-Based Paint Regulations
at 24 CFR 570.608, and 24 CFR Part 35, Subpart B. Such regulations pertain to all CDBG-
assisted housing and require that all owners, prospective owners, and tenants of properties
constructed prior to 1978 be properly notified that such properties may include lead-based paint.
Such notification shall point out the hazards of lead-based paint and explain the symptoms,
treatment and precautions that should be taken when dealing with lead-based paint poisoning and
the advisability and availability of blood lead level screening for children under seven. The.
notice should also point out that if lead-based paint is found on the property, abatement measures
may be undertaken. The regulations further require that, depending on the amount of Federal
funds applied to a property, paint testing, risk assessment, treatment and/or abatement may be
conducted.
11.4. Historic Preservation
HABITAT agrees to comply with the Historic Preservation requirements set forth in the
National Historic Preservation Act of 1966, as amended (16 U.S.C. 470) and the procedures set
forth in 36 CFR Part 800, Advisory Council on Historic Preservation Procedures for Protection
of Historic Properties, insofar as they apply to the performance of this agreement.
In general, this requires concurrence from the State Historic Preservation Officer for all
rehabilitation and demolition of historic properties that are fifty years old or older or that are
included on a Federal, state, or local historic property list.
19
SECTION XII:
SEVARABILITY
12.1. If any provision of this Agreement is held invalid, the remainder of the Agreement shall
not be affected thereby and all other parts of this Agreement shall nevertheless be in full force
and effect.
SECTION XIII:
SECTION HEADINGS AND SUBHEADINGS
13.1. The section headings and subheadings contained in this Agreement are included for
convenience only and shall not limit or otherwise affect the terms of this Agreement.
SECTION XIV:
WAIVER
14.1. The CITY's failure to act with respect to a breach by HABITAT does not waive its right
to act with respect to subsequent or similar breaches. The failure of the CITY to exercise or
enforce any right or provision shall not constitute a waiver of such right or provision.
IN WITNESS WHEREOF, this Agreement is executed as of the date first written above.
Approved as to form:
Stephan L. Sheets, City Attorney
CITY: HABITAT:
City of Round Rock Habitat for Humanity of Williamson
County
NYLE MAXWELL, Mayor Name:
Title:
ATTEST:
SARAH WHITE
City Secretary
20
Exhibit A
Self Certification Form
21
City of Round Rock
Community Development Block Grant Program
Self Declaration of Income __ Program Year 2007-08
This activity is funded with federal Community Development Block Grant (CDBG) funds and is designed to primarily benefit low to
moderate-income households (LMI).This requires that the Applicant meet and certify the amount of their annual household income in
order to participate in the program. Applicant should not provide his/her signature unless he/she has read and understands the income
information they are certifying under penalty of law. At the discretion of the program, Applicant may be required to provide
documentation to support the self-declaration of income.
Client Data:
Applicant: _ SSN#:
Address: City_ Zip
Program beneficiarv, if different from Applicant. A separate form must be completed for each child in the same family who is
participating in a program.
Name: SSN#
Address: City Zip
Female Head of Household: [-]Yes ❑No("Yes"if you are a single parent with children)
Ethnicity: HISPANIC or LATINO ❑ YES ❑ NO
RACE(check one):
❑ White(W) ❑Am Indian/Alaskan Native AI -
( ) ❑ Asian&White(AW) ❑ Other Multi-Racial
..
_.................................. _....... ............ . (0)
❑ lack/African-Amer. B
( ) ❑ Native Hawaiian/Other Pacific Islander(HI) an&Whit
❑ Black African American (BW)
...... ......
.. .. .......
❑ Asian
❑Am.Indian/Alaskan Native&White(IAW) ❑Am Indian/Alaskan Native&Blk (IAB)
..... .............. ........................................................................................ ........ ................
Applicant Household Income Information
Estimate the annual income of the household by projecting the prevailing rate of income of each person at the time assistance is provided
for the individual,family,or household(as applicable). Estimated annual income shall include income from all sources of household
members as applicable. Income or asset enhancement derived from the CDBG-assisted activity shall not be considered in calculating
estimated annual income. LOCATE FAMILY SIZE AND THEN CIRCLE ANNUAL(Page 1)OR MONTHLY(Page 2)AMOUNT THAT IS
CLOSEST TO FAMILY INCOME
Annual Income$
No.In NU17"5. HIJUs
HU€?'s
Famil 25% 30% 30p% 35% 40% 45% 50% 55% 60% 65% 70% 75% 100%
1 12,450 14,9404, fI f ..17 430 19,920 22,4104 90p 27.390 ! 29,880 32,370 34,860 37,350 39 840 3$ p',di49 800
2 14,225 17.070 11 ibb, 19,915 22,760 i 25,605 28 450 31,295 . 34,140_ 36,985 39,830 _42,675 45 520 45 til 56 900
........ ......._
3 16,000 19 200 19�2G0 22,400 25,600 28,800 32 O(? 35 200 38,400 _ 41,600 44,800 48,000 _ 51 200 �a1�a( 1:X64 000
4... 17,775 21,330 1 3fiQ 24 885 1 28,440 31,995 ESQ 39 105 42 660 46,215 - 49,770 53,325 56 880 71 100
._... ..__._
5 ; 19,200 23,040r5p 26 880 30,720 34 560 3$400 42 240 46,080 49,920 J 53,760 O 57,600 61 440 ;! 76,800
6 20,625 . 24,750 28.875 33,00...... ._......._..._. ._.. ............ ._._... w
7 22 050 . 26,460. ¢ 30 870 35,280 39 690 4d €iE 48,510 52,920 '' S7 330 61,740 T 66 150 70 560 y 7��0 ,88 200
_ .. .,.... ..
- ._.....
8 23,475 28,170 32,865 37,560 ; 42,255 +tff3 (? 51,645 56,340 i 61,035 65,730 l 70,425 75,120 7 .1(�C?'.'93,900
23
Monthly Income $
No.In HUD's HUD'sHUD's
Family25% 30% 30% 35% 40% 45% 50%; 55% 60% 65% 70%] 75% 80% 8Q°l° 100%
1 1,038 : 1,2451 246 1 453 ! 1 660 , 1 868 2,075 2 283 2, 490 2,698 2 905 3 113 3,320 3,317 14 150
2 1,185 1,423 1 429 1 660 1,897 2 134 2 371 2 608 2,845 3 082 3,319 3 556 3,793 3 792 4,742
3 1 333 1,600 1600 1 867 2 133 2 400 2 667 2,933 3,200 3,467 3,733 4,000 4,267 4,267 5,333
...
4 1,481 1,7789 2,074 2,370 2,666 29 3
3,259 3,555 3,851 4 148 4 444 4,740 4742 5,925
5 1,600 1,920 1,921 2 240 2,560 2 880 3 200 3,520 3,840 4 160 4,480 4,800 5,120 5 121_j 6,400
6 1,719 2,... 2063 2406 2750 : 3,094 .3438 3,781 4,125 4,469 4,813 5,156 5,500 1 5,500 : 6,875
7 1,838 2,205 2,20d 2,573 . 2940 3,308 3,675 4,043 4,410 4,778 5,145 5,513 5,880 5;879 17,350
......
8 1,956 i 2,348 1 2,346 ' 2,739 : 3,130 3,521 3,913 4,304 4,695 5,086 : 5,478 5,869 6,260 6,258 7,825
Number of persons living in household: Number of adults (18 yrs and older) living in household:
Applicant Self Declaration Certification
Evidenced by the signature below, Applicant certifies his or her annual household income. Applicant certifies that the
information herein provided is true and accurate. Applicant further acknowledges that any inaccuracy and/or
misrepresentation provided herein may constitute fraud, which is punishable by law. Applicant certifies that all information
provided herein and any attachments hereto, are true and correct as of the date set forth opposite signature. Applicant
acknowledges that Title 18, Section 1001 of the U.S. Code states that any person that makes intentional or negligent
statements to any department of the United States Government is guilty of a felony that could result in but not be limited to
a fine, imprisonment, or both.
Applicant Signature Date
Program Use Only:
Program/Activity Name:
HUD Income guidelines used to certify client dated: MARCH 20, 2007
Based upon client information provided, client household: (check one)
❑ Does meet income qualifications
❑ Does not meet income qualifications
Reviewer's Signature: Date:
24
Exhibit B
Client/ Beneficiary Data
This report is prepared in digital format. The following exhibit is an example of the information required to
complete the client/beneficiary data.
25
Client ! Beneficiary Data
Unduplicated Clients
Agency:
Address: Date:
Contact: Plan/Frog:
Phone: Activity No.:
2004-05 UndupticitQti_Ciie its: q
Fx�timated sheds:
Race Categories. 1N' Whitca(r bt Hispania 0righ) WH Whitt;+Hi
spanic A I tem U0cfian or AI v;ka Nativo
9 Black{nal Hispanic origin) BH Mack+Hispanic AS A itui or t';�cific L land r
Cl ptf r multi-r Cilli i NOT Hi penia Obi O(hOr mtrttr rac'01&Hisrxirtic
rwo'0 pas lwx ;1 tSf�Alfl a ,THS ArrJ) oft` 11 S r1ri(7)tXrrd r bites: Whikr.alone:(3trsck arAfrican Arrreric err ai`
one,.�rnt�riran iridian at#J AlaBkan Natnle Ilona,Asian AfapnE Native Nawaiiarr
� +fntx l #s tNrXO � tttrr fti9Ed gvestkis Ihatude t)tfsparrta ar LetXna askad tiaJare r�oa �1 Rrspsnde rt co«Jd select mare that,one nese,2)Arrnztircmr Indian
braid
?�.1Sf8tVdG1'�ft? �• ,
'_--
2005
H alae fr +me Aridness
cit Xi
Qct Nov Dcs; Jan Fait (vier` A�.�r Ma JunJu!, AG�meat Arrit
....,.. i ..e<..y, �.u.. ..mm s..+�.ux
,
i
3
q
_�
ti
q
E � ,
M
t..,,._,.:. _.
d � _,., ., i q'
S i
{
W
q,
q,
3
...............
- q
0
,.. 0
€ W
0
PrOOram V99t2004-05
CO Of ROund frock
Appendix A
OMB Circular A-122
Cost Principles for Non Profit Organizations
27
is to a college or university,
CIRCULAR NO. A-122 Circular A-21 shall apply; if a
Revised May 10, 2004 subaward is to a State, local, or
federally recognized Indian tribal
government, Circular A-87 shall
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND apply.
ESTABLISHMENTS
4. Definitions.
SUBJECT: Cost Principles for Non-Profit
Organizations
a. Non-profit organization means any
corporation, trust, association,
1. Purpose, This Circular establishes cooperative, or other organization
principles for determining costs of grants, which:
contracts and other agreements with non- (1) is operated primarily for
profit organizations. It does not apply to scientific, educational,
colleges and universities which are covered service, charitable, or
by Office of Management and Budget (OMB) similar purposes in the
Circular A-21, "Cost Principles for public interest;
Educational Institutions"; State, local, and
federally recognized Indian tribal
governments which are covered by OMB (2) is not organized
Circular A-87, "Cost Principles for State, primarily for profit; and
Local, and Indian Tribal Governments"; or
hospitals. The principles are designed to (3) uses its net proceeds to
provide that the Federal Government bear its maintain, .improve, and/or
fair share of costs except where restricted expand its operations. For
or prohibited by law. The principles do not this purpose, the term "non-
attempt to prescribe the extent of cost profit organization" excludes
sharing or matching on grants, contracts, or (i) colleges and
other agreements. However, such cost sharing universities; (ii) hospitals;
or matching shall not be accomplished (iii) State, local, and
throuqh arbitrary limitations on individual federally recognized Indian
cost elements by Federal agencies. Provision tribal governments; and (iv)
for profit or other increment above cost is those non-profit
outside the scope of this Circular. organizations which are
excluded from coverage of
2. Supersession. This Circular_ supersedes this Circular in accordance
cost principles issued by individual with paragraph 5.
agencies for non-profit organizations.
b. Prior approval means securing the
3. Applicability. awarding agency's permission in
advance to incur cost for those items
that are designated as requiring
a. These principles shall be used by prior approval by the Circular.
all Federal agencies in determining Generally this permission will be in
the costs of work performed by non- writing. Where an item of cost
profit organizations under grants, requiring prior approval is specified
cooperative agreements, cost in the budget of an award, approval
reimbursement contracts, and other of the budget constitutes approval of
contracts in which costs are used in that cost.
pricing, administration, or
settlement. All of these instruments
are hereafter referred to as awards. 5. Exclusion of some non-profit
The principles do not apply to awards organizations. Some non-profit
under which an organization is not organizations, because of their size
required to account to the Federal and nature of operations, can be
Government for actual costs incurred. considered to be similar to
b. All cost reimbursement subawards commercial concerns for purpose of
(subgrants, subcontracts, etc.) are applicability of cost principles.
subject to those Federal cost Such non-profit organizations shall
principles applicable to the operate under Federal cost principles
particular organization concerned. applicable to commercial concerns. A
Thus, if a subaward is to a non- listing of these organizations is
profit organization, this Circular contained in Attachment C. Other
shall apply; if a subaward is to a organizations may be added from time
commercial organization, the cost to time.
principles applicable to commercial
concerns shall apply; if a subaward
28
6. Responsibilities. Agencies ATTACHMENT A
responsible for administering Circular No. A-122
programs that involve awards to non-
profit organizations shall implement
the provisions of this Circular. Upon GENERAL PRINCIPLES
request, implementing instruction
shall be furnished to OMB. Agencies Table of Contents
shall designate a liaison official to
serve as the agency representative on
matters relating to the A. Basic Considerations
implementation of this Circular. The
name and title of such representative 1. Composition of total costs
shall be furnished to OMB within 30 2. Factors affecting
days of the date of this Circular. allowability of costs
3. Reasonable costs
7. Attachments. The principles and 4. Allocable costs
related policy guides are set forth 5. Applicable credits
in the following Attachments: 6. Advance understandings
7. Conditional exemptions
Att_ac_hment_A_ - General Principles
B. Direct Costs
Attachment B - Selected Items of Cost
C. Indirect Costs
Attachment C - Non-Profit
Organizations Not Subject To This D. Allocation_ofIndirect_Costs_ and
Circular Determination of Indirect Cost Rates
8. Requests for exceptions. OMB may 1. General
grant exceptions to the requirements 2. Simplified allocation method
of this Circular when permissible 3. Multiple allocation base
under existing law. However, in the method
interest of achieving maximum 4. Direct allocation method
uniformity, exceptions will be 5. Special indirect cost rates
permitted only in highly unusual
circumstances. E. Negotiation and Approval of
Indirect Cost Rates
9. Effective Date. The provisions of
this Circular are effective 1. Definitions
immediately. Implementation shall be 2. Negotiation and approval of
phased in by incorporating the rates
provisions into new awards made after
the start of the organization's next
fiscal year. For existing awards, the
new principles may be applied if an
organization and the cognizant ATTACHMENT A
Federal agency agree. Earlier Circular No. A-122
implementation, or a delay in
implementation of individual
provisions, is also permitted by GENERAL PRINCIPLES
mutual agreement between an
organization and the cognizant
Federal agency. A. Basic Considerations
10. Inquiries. Further information 1. Composition of total costs. The
concerning this Circular may be total cost of an award is the sum of
obtained by contacting the Office of the allowable direct and allocable
Federal Financial Management, OMB, indirect costs less any applicable
Washington, DC 20503, telephone (202) credits.
395-3993.
2. Factors affecting allowability of
Attachments costs. To be allowable under an
award, costs must meet the following
general criteria:
a. Be reasonable for the
performance of the award and
29
be allocable thereto under considering their
these principles. responsibilities to the
organization, its members,
b. Conform to any limitations or employees, and clients, the
exclusions set forth in these public at large, and the
principles or in the award as Federal Government.
to types or amount of cost
items. d. Significant deviations from
the established practices of
c. Be consistent with policies the organization which may
and procedures that apply unjustifiably increase the
uniformly to both federally award costs.
financed and other activities
of the organization. 4. Allocable costs.
d. Be accorded consistent
treatment. a. A cost is allocable to a
particular cost objective,
such as a grant, contract,
e. Be determined in accordance project, service, or other
with generally accepted activity, in accordance with
accounting principles (GAAP) . the relative benefits
received. A cost is allocable
f. Not be included as a cost or to a Federal award if it is
used to meet cost sharing or treated consistently with
matching requirements of any other costs incurred for the
other federally financed same purpose in like
program in either the current circumstances and if it:
or a prior period.
(1) Is incurred specifically
g. Be adequately documented. for the award.
(2) Benefits both the award
3. Reasonable costs. A cost is and other work and can be
reasonable if, in its nature or distributed in reasonable
amount, it does not exceed that which proportion to the benefits
would be incurred by a prudent person received, or
under the circumstances prevailing at
the time the decision was made to (3) Is necessary to the
incur the costs. The question of the overall operation of the
reasonableness of specific costs must organization, although a
be scrutinized with particular care direct relationship to any
in connection with organizations or particular cost objective
separate divisions thereof which cannot be shown.
receive the preponderance of their
support from awards made by Federal b. Any cost allocable to a
agencies. In determining the particular award or other
reasonableness of a given cost, cost objective under these
consideration shall be given to: principles may not be shifted
to other Federal awards to
a. whether the cost is of a type overcome funding
generally recognized as deficiencies, or to avoid
ordinary and necessary for restrictions imposed by law
the operation of the or by the terms of the award.
organization or the
performance of the award. 5. Applicable credits.
b. The restraints or
requirements imposed by such a. The term applicable credits
factors as generally accepted refers to those receipts, or
sound business practices, reduction of expenditures
arms length bargaining, which operate to offset or
Federal and State laws and reduce expense items that are
regulations, and terms and allocable to awards as direct
conditions of the award. or indirect costs. Typical
examples of such transactions
are: purchase discounts,
c. Whether the individuals rebates or allowances,
concerned acted with prudence recoveries or indemnities on
in the circumstances, losses, insurance refunds,
30
and adjustments of a. OMB authorizes conditional
overpayments or erroneous exemption from OMB
charges. To the extent that administrative requirements
such credits accruing or and cost principles circulars
received by the organization for certain Federal programs
relate to allowable cost, with statutorily-authorized
they shall be credited to the consolidated planning and
Federal Government either as consolidated administrative
a cost reduction or cash funding, that are identified
refund, as appropriate. by a Federal agency and
approved by the head of the
b. In some instances, the Executive department or
amounts received from the establishment. A Federal
Federal Government to finance agency shall consult with OMB
organizational activities or during its consideration of
service operations should be whether to grant such an
treated as applicable exemption.
credits. Specifically, the
concept of netting such b. To promote efficiency in
credit items against related State and local program
expenditures should be administration, when Federal
applied by the organization non-entitlement programs with
in determining the rates or common purposes have specific
amounts to be charged to statutorily-authorized
Federal awards for services consolidated planning and
rendered whenever the consolidated administrative
facilities or other resources funding and where most of the
used in providing such State agency's resources come
services have been financed from non-Federal sources,
directly, in whole or in Federal agencies may exempt
part, by Federal funds. these covered State-
administered, non-entitlement
c. For rules covering program grant programs from certain
income (i.e., gross income OMB grants management
earned from federally requirements. The exemptions
supported activities) see would be from all but the
Sec. _.24 of Office of allocability of costs
Management and Budget (OMB) provisions of OMB Circulars
Circular A-110, "Uniform A-87 (Attachment A,
Administrative Requirements subsection C.3), "Cost
for Grants and Agreements Principles for State, Local,
with Institutions of Higher and Indian Tribal
Education, Hospitals, and Governments," A-21 (Section
Other Non-Profit C, subpart 4), "Cost
Organizations." Principles for Educational
Institutions," and A-122
(Attachment A, subsection
6. Advance understandings. Under any A.4) , "Cost Principles for
given award, the reasonableness and Non-Profit Organizations,"
allocability of certain items of and from all of the
costs may be difficult to determine. administrative requirements
This is particularly true in provisions of OMB Circular A-
connection with organizations that 110, "Uniform Administrative
receive a preponderance of their Requirements for Grants and
support from Federal agencies. In Agreements with Institutions
order to avoid subsequent of Higher Education,
disallowance or dispute based on Hospitals, and Other Non-
unreasonableness or nonallocability, Profit Organizations," and
it is often desirable to seek a the agencies' grants
written agreement with the cognizant management common rule.
or awarding agency in advance of the
incurrence of special or unusual
costs. The absence of an advance c. When a Federal agency
agreement on any element of cost will provides this flexibility, as
not, in itself, affect the a prerequisite to a State's
reasonableness or allocability of exercising this option, a
that element. State must adopt its own
written fiscal and
administrative requirements
7. Conditional exemptions. for expending and accounting
for all funds, which are
31
consistent with the 4. The costs of activities performed
provisions of OMB Circular A- primarily as a service to members,
87, and extend such policies clients, or the general public when
to all subrecipients. These significant and necessary to the
fiscal and administrative organization's mission must be
requirements must be treated as direct costs whether or
sufficiently specific to not allowable and be allocated an
ensure that: funds are used equitable share of indirect costs.
in compliance with all Some examples of these types of
applicable Federal statutory activities include:
and regulatory provisions,
costs are reasonable and
necessary for operating these a. Maintenance of membership
programs, and funds are not rolls, subscriptions,
be used for general expenses publications, and related
required to carry out other functions.
responsibilities of a State
or its subrecipients. b. Providing services and
information to members,
B. Direct Costs
legislative or administrative
bodies, or the public.
1. Direct costs are those that can be c. Promotion, lobbying, and
identified specifically with a other forms of public
particular final cost objective, relations.
i.e., a particular award, project,
service, or other direct activity of
an organization. However, a cost may d. Meetings and conferences
not be assigned to an award as a except those held to conduct
direct cost if any other cost the general administration of
incurred for the same purpose, in the organization.
like circumstance, has been allocated
to an award as an indirect cost. e. Maintenance, protection, and
Costs identified specifically with investment of special funds
awards are direct costs of the awards not used in operation of the
and are to be assigned directly organization.
thereto. Costs identified
specifically with other final cost f. Administration of group
objectives of the organization are benefits on behalf of members
direct costs of those cost objectives or clients, including life
and are not to be assigned to other and hospital insurance,
awards directly or indirectly. annuity or retirement plans,
financial aid, etc.
2. Any direct cost of a minor amount
may be treated as an indirect cost C. Indirect Costs
for reasons of practicality where the
accounting treatment for such cost is
consistently applied to all final 1. Indirect costs are those that have
cost objectives. been incurred for common or joint
objectives and cannot be readily
identified with a particular final
3. The cost of certain activities are cost objective. Direct cost of minor
not allowable as charges to Federal amounts may be treated as indirect
awards (see, for example, fundraising costs under the conditions described
costs in paragraph 17 of Attachment in subparagraph B.2. After direct
B) . However, even though these costs costs have been determined and
are unallowable for purposes of assigned directly to awards or other
computing charges to Federal awards, work as appropriate, indirect costs
they nonetheless must be treated as are those remaining to be allocated
direct costs for purposes of to benefiting cost objectives. A cost
determining indirect cost rates and may not be allocated to an award as
be allocated their share of the an indirect cost if any other cost
organization's indirect costs if they incurred for the same purpose, in
represent activities which (1) like circumstances, has been assigned
include the salaries of personnel, to an award as a direct cost.
(2) occupy space, and (3) benefit
from the organization's indirect
costs. 2. Because of the diverse
characteristics and accounting
practices of non-profit
organizations, it is not possible to
32
specify the types of cost which may the relative degree of
be classified as indirect cost in all benefit. The indirect costs
situations. However, typical examples allocated to each function
of indirect cost for many non-profit are then distributed to
organizations may include individual awards and other
depreciation or use allowances on activities included in that
buildings and equipment, the costs of function by means of an
operating and maintaining facilities, indirect cost rate(s) .
and general administration and
general expenses, such as the c. The determination of what
salaries and expenses of executive
officers, personnel administration, constitutes an organization's
major functions will depend
and accounting. on its purpose in being; the
types of services it renders
3. Indirect costs shall be classified to the public, its clients,
within two broad categories: and its members; and the
"Facilities" and "Administration." amount of effort it devotes
"Facilities" is defined as to such activities as
depreciation and use allowances on fundraising, public
buildings, equipment and capital information and membership
improvement, interest on debt activities.
associated with certain buildings,
equipment and capital improvements, d. Specific methods for
and operations and maintenance allocating indirect costs and
sxpens". "Administration" is defined computing indirect cost rates
as general administration and general along with the conditions
expenses such as the director's under which each method
office, accounting, personnel, should be used are described
library expenses and all other types in subparagraphs 2 through 5.
of expenditures not listed
specifically under one of the
subcategories of "Facilities" e. The base period for the
(including cross allocations from allocation of indirect costs
other pools, where applicable) . See is the period in which such
indirect cost rate reporting costs are incurred and
requirements in subparagraphs D.2.e accumulated for allocation to
and D.3. work performed in that
g period. The base period
normally should coincide with
D. Allocation of Indirect Costs and the organization's fiscal
Determination of Indirect Cost Rates year but, in any event, shall
be so selected as to avoid
inequities in the allocation
1. General. of the costs.
a. Where a non-profit
organizationn has only one 2. Simplified allocation method.
major function, or where all
its major functions benefit a. Where an organization's major
from its indirect costs to functions benefit from its
approximately the same indirect costs to
degree, the allocation of approximately the same
indirect costs and the degree, the allocation of
computation of an indirect indirect costs may be
cost rate may be accomplished accomplished by (i)
through simplified allocation separating the organization's
procedures, as described in total costs for the base
subparagraph 2. period as either direct or
indirect, and (ii) dividing
b. Where an organization has the total allowable indirect
several major functions which costs (net of applicable
benefit from its indirect credits) by an equitable
costs in varying degrees, distribution base. The result
allocation of indirect costs of this process is an
may require the accumulation indirect cost rate which is
of such costs into separate used to distribute indirect
cost groupings which then are costs to individual awards.
allocated individually to The rate should be expressed
benefiting functions by means as the percentage which the
of a base which best measures total amount of allowable
33
indirect costs bears to the 3. Multiple allocation base method
base selected. This method
should also be used where an
organization has only one a. General. where an
major function encompassing a organization's indirect costs
number of individual projects benefit its major functions
or activities, and may be in varying degrees, indirect
used where the level of costs shall be accumulated
Federal awards to an into separate cost groupings,
organization is relatively as described in subparagraph
small. b. Each grouping shall then
be allocated individually to
b. Both the direct costs and the benefiting functions by means
of a base which best measures
indirect costs shall exclude
capital expenditures and the relative benefits. The
default allocation bases by
unallowable costs. However,
unallowable costs which cost pool are described in represent activities must be subparagraph c.
included in the direct costs
under the conditions b. Identification of indirect
described in subparagraph costs. Cost groupings shall
B,3, be established so as to
permit the allocation of each
C. The distribution base may be grouping on the basis ofbenefits provided to the
total direct costs (excluding major functions. Each
capital expenditures and grouping shall constitute a
other distorting items, such pool of expenses that are of
subas major subcontracts or like character in terms of
and wages,
direct salaries functions they benefit and in
and waggees,,sor other base terms of the allocation base
which results in an equitable which best measures the
distribution. The relative benefits provided to
distribution base shall each function. The groupings
generally exclude participant are classified within the two
support costs as defined in broad categories:
paragraph 32 of Attachment B. "Facilities" and
"Administration," as
d. Except where a special described in subparagraph
rate(s) is required in C.3. The indirect cost pools
accordance with subparagraph are defined as follows:
5, the indirect cost rate
developed under the above (1) Depreciation and use
principles is applicable to allowances. The expenses
all awards at the under this heading are the
organization. If a special portion of the costs of the
rate(s) is required, organization's buildings,
appropriate modifications capital improvements to land
shall be made in order to and buildings, and equipment
develop the special rate(s) . which are computed in
accordance with paragraph 11
e. For an organization that of Attachment B
receives more than $10 ("Depreciation and use
million in Federal funding of allowances") .
direct costs in a fiscal
year, a breakout of the (2) Interest. Interest on
indirect cost component into debt associated with certain
two broad categories, buildings, equipment and
Facilities and Administration capital improvements are
as defined in subparagraph computed in accordance with
C.3, is required. The rate in paragraph 23 of Attachment B
each case shall be stated as ("Interest") .
the percentage which the
amount of the particular (3) Operation and maintenance
indirect cost category (i.e., expenses. The expenses under
Facilities or Administration) this heading are those that
is of the distribution base have been incurred for the
identified with that administration, operation,
category. maintenance, preservation,
and protection of the
organization's physical
34
plant. They include expenses treated as direct costs
normally incurred for such wherever identifiable to a
items as: janitorial and particular program. The
utility services; repairs and salaries and wages of
ordinary or normal administrative and pooled
alterations of buildings, clerical staff should
furniture and equipment; care normally be treated as
of grounds; maintenance and indirect costs. Direct
operation of buildings and charging of these costs may
other plant facilities; be appropriate where a major
security; earthquake and project or activity
disaster preparedness; explicitly requires and
environmental safety; budgets for administrative or
hazardous waste disposal; clerical services and other
property, liability and other individuals involved can be
insurance relating to identified with the program
property; space and capital or activity. Items such as
leasing; facility planning office supplies, postage,
and management; and, central local telephone costs,
receiving. The operation and periodicals and memberships
maintenance expenses category should normally be treated as
shall also include its indirect costs.
allocable share of fringe
benefit costs, depreciation C. Allocation bases. Actual
and use allowances, and
interest costs. conditions shall be taken
into account in selecting the
base to be used in allocating
(9) General administration the expenses in each grouping
and general expenses. The to benefitting functions. The
expenses under this heading essential consideration in
are those that have been selecting a method or a base
incurred for the overall
general executive and is that it is the one best administrative offices of the suited for assigning the pool
organization and other of costs to cost objectives expenses of a general nature in accordance with benefits
derived; a traceable cause
which do not relate solely to ca and effect relationship; or
any major function the logic and reason, where
organization. This category neither the cause nor the
shall also include its
allocable share of fringe effect of the relationship is
determinable. When an
benefit costs, operation and allocation can be made by
maintenance expense, assignment of a cost grouping
depreciation and use p g
allowances, and interest directly to the functionbenefited, the allocation
costs. Examples of this shall be made in that manner.
category include central
offices, such as the When the expenses in a cost
director's office, the office grouping are more general innature, the allocation shall
of finance, business be made through the use of a
services, budget and selected base which produces
planning, personnel, safety results that are equitable to
and risk management, general both the Federal Government
counsel, management and the organization. The
information systems, and distribution shall be made in
library costs. accordance with the bases
In developing this cost pool, described herein unless it
special care should be can be demonstrated that the
exercised to ensure that
use of a different base would costs incurred for the same result in a more equitable
allocation of the costs, or
purpose in like circumstances that a more readily available
are treated consistently as
either direct or indirect base would not increase the costs. For example, salaries costs charged to sponsoredawards. The results of
supplies, project technical staff, project special cost studies (such as
supplies,
publication, telephone toll an engineering utility study)
charges, computer costs, shall not be used to
travel costs, and specialized determine and allocate the
services costs shall be indirect costs to sponsored
35
awards. from the use
of that space;
(I) Depreciation and use or
allowances. Depreciation and
use allowances expenses shall (ii)
be allocated in the following organization-
manner: wide employee
FTEs or
(a) Depreciation or salaries and
use allowances on wages
buildings used applicable to
exclusively in the the
conduct of a single benefitting
function, and on functions of
capital improvements the
and equipment used in organization.
such buildings, shall
be assigned to that
function. (d) Depreciation or
use allowances on
(b) Depreciation or certain capital
use allowances on improvements to land,
buildings used for such as paved parking
more than one areas, fences,
function, and on sidewalks, angi the
capital improvements like, not included in
and equipment used in the cost of buildings,
such buildings, shall shall be allocated to
be allocated to the user categories on a
individual functions FTE basis and
performed in each distributed to major
building on the basis functions in
of usable square feet proportion to the
of space, excluding salaries and wages of
common areas, such as all employees
hallways, stairwells, applicable to the
and restrooms. functions.
(c) Depreciation or
use allowances on
buildings, capital (2) Interest. Interest costs
improvements and shall be allocated in the
equipment related same manner as the
space (e.g., depreciation or use
individual rooms, and allowances on the buildings,
laboratories) used equipment and capital
jointly by more than equipments to which the
one function (as interest relates.
determined by the
users of the space) (3) Operation and maintenance
shall be treated as expenses. Operation and
follows. The cost of maintenance expenses shall be
each jointly used unit allocated in the same manner
of space shall be as the depreciation and use
allocated to the allowances.
benefitting functions
on the basis of: (4) General administration
and general expenses. General
administration and general
(i) the expenses shall be allocated
employees and to benefitting functions
other users on based on modified total
a full-time direct costs (MTDC), as
equivalent described in subparagraph
(FTE) basis or D.3.f. The expenses included
salaries and in this category could be
wages of those grouped first according to
individual major functions of the
functions organization to which they
benefitting render services or provide
36
benefits. The aggregate function on the basis of
expenses of each group shall MTDC. MTDC consists of all
then be allocated to salaries and wages, fringe
benefitting functions based benefits, materials and
on MTDC. supplies, services, travel,
and subgrants and
d. Order of distribution. subcontracts up to the first
$25,000 of each subgrant or
(1) Indirect cost categories subcontract (regardless of
consisting of depreciation the period covered by the
and use allowances, interest, subgrant or subcontract) .
operation and maintenance, Equipment, capital
and general administration expenditures, charges for
and general expenses shall be patient care, rental costs
allocated in that order to and the portion in excess of
the remaining indirect cost $25,000 shall be excluded
categories as well as to the from MTDC. Participant
major functions of the support costs shall generally
organization. Other cost be excluded from MTDC. Other
categories could be allocated items may only be excluded
in the order determined to be when the Federal cost
most appropriate by the cognizant agency determines
organization. When cross that an exclusion is
allocation of costs is made necessary to avoid a serious
as provided in subparagraph inequity in the distribution
(2) , this order of allocation of indirect costs.
does not apply.
g. Individual Rate Components.
(2) Normally, an indirect An indirect cost rate shall
cost category will be be determined for each
considered closed once it has separate indirect cost pool
been allocated to other cost developed. The rate in each
objectives, and costs shall case shall be stated as the
not be subsequently allocated percentage which the amount
to it. However, a cross of the particular indirect
allocation of costs between cost pool is of the
two or more indirect costs distribution base identified
categories could be used if with that pool. Each indirect
such allocation will result cost rate negotiation or
in a more equitable determination agreement shall
allocation of costs. If a include development of the
cross allocation is used, an rate for each indirect cost
appropriate modification to pool as well as the overall
the composition of the indirect cost rate. The
indirect cost categories is indirect cost pools shall be
required. classified within two broad
categories: "Facilities" and
e. Application of indirect cost "Administration," as
rate or rates. Except where a described in subparagraph
special indirect cost rate(s) C.3.
is required in accordance
with subparagraph D.S, the 4. Direct allocation method.
separate groupings of
indirect costs allocated to
each major function shall be a. Some non-profit organizations
aggregated and treated as a treat all costs as direct
common pool for that costs except general
function. The costs in the administration and general
common pool shall then be expenses. These organizations
distributed to individual generally separate their
awards included in that costs into three basic
function by use of a single categories: (i) General
indirect cost rate. administration and general
expenses, (ii) fundraising,
f. Distribution basis. Indirect and (iii) other direct
functions (including projects
costs shall be distributed to performed under Federal
applicable sponsored awards awards) . Joint costs, such as
and other benefitting depreciation, rental costs,
activities within each major operation and maintenance of
37
facilities, telephone provisions should be made for a
expenses, and the like are separate indirect cost pool
prorated individually as applicable to such work. The separate
direct costs to each category indirect cost pool should be
and to each award or other developed during the course of the
activity using a base most regular allocation process, and the
appropriate to the particular separate indirect cost rate resulting
cost being prorated. therefrom should be used, provided it
is determined that (i) the rate
b. This method is acceptable, differs significantly from that which
provided each joint cost is would have been obtained under
prorated using a base which subparagraphs 2, 3, and 4, and (ii)
accurately measures the the volume of work to which the rate
benefits provided to each would apply is material.
award or other activity. The
bases must be established in E. Negotiation and Approval of
accordance with reasonable Indirect Cost Rates
criteria, and be supported by
current data. This method is
compatible with the Standards 1. Definitions. As used in this
of Accounting and Financial section, the following terms have the
Reporting for Voluntary meanings set forth below:
Health and Welfare
organizations issued jointly a. Cognizant agency means the
by the National Health Federal agency responsible
Council, Inc., the National for negotiating and approving
Assembly of Voluntary Health'
and Social Welfare indirect cost rates for a organizations, and the United non-profit organization onbehalf of all Federal
Way of America.
agencies.
C. Under this method, indirect b. Predetermined rate means an
costs consist exclusively of indirect cost rate,
general administration and applicable to a specified
general expenses. In all current or future period,
other respects, the usually the organization's
organization's indirect cost fiscal year. The rate is
rates shall be computed in
the same manner as that based on an estimate of the described in subparagraph 2. costs to be incurred duringthe period. A predetermined
rate is not subject to
5. Special indirect cost rates. In adjustment.
some instances, a single indirect
cost rate for all activities of an c. Fixed rate means an indirect
organization or for each major cost rate which has the same
function of the organization may not characteristics as a
be appropriate, since it would not predetermined rate, except
take into account those different that the difference between
factors which may substantially the estimated costs and the
affect the indirect costs applicable actual costs of the period
to a particular segment of work. For covered by the rate is
this purpose, a particular segment of carried forward as an
work may be that performed under a adjustment to the rate
single award or it may consist of computation of a subsequent
work under a group of awards period.
performed in a common environment.
These factors may include the
physical location of the work, the d. Final rate means an indirect
level of administrative support cost rate applicable to a
required, the nature of the specified past period which
facilities or other resources is based on the actual costs
employed, the scientific disciplines of the period. A final rate
or technical skills involved, the is not subject to adjustment.
organizational arrangements used, or
any combination thereof. When a e. Provisional rate or billing
particular segment of work is rate means a temporary
performed in an environment which indirect cost rate applicable
appears to generate a significantly to a specified period which
different level of indirect costs, is used for funding, interim
reimbursement, and reporting
38
indirect costs on awards b. A non-profit organization
pending the establishment of which has not previously
a final rate for the period. established an indirect cost
rate with a Federal agency
f. Indirect cost proposal means shall submit its initial
the documentation prepared by indirect cost proposal
an organization to immediately after the
substantiate its claim for organization is advised that
the reimbursement of indirect an award will be made and, in
costs. This proposal provides no event, later than three
the basis for the review and months after the effective
negotiation leading to the date of the award.
establishment of an
organization's indirect cost C. Organizations that have
rate. previously established
indirect cost rates must
g. Cost objective means a submit a new indirect cost
function, organizational proposal to the cognizant
subdivision, contract, grant, agency within six months
or other work unit for which after the close of each
cost data are desired and for fiscal year.
which provision is made to
accumulate and measure the d. A predetermined rate may be
cost of pracesses, projects, negotiated for use on awards
jobs and capitalized where there is reasonable
projects. assurance, based on past
experience and reliable
2. Negotiation and approval of rates, projection of the
organization's costs, that
the rate is not likely to
a. Unless different arrangements exceed a rate based on the
are agreed to by the agencies organization's actual costs.
concerned, the Federal agency
with the largest dollar value e. Fixed rates may be negotiated
of awards with an where predetermined rates are
organization will be not considered appropriate. A
designated as the cognizant fixed rate, however, shall
agency for the negotiation not be negotiated if (i) all
and approval of the indirect or a substantial portion of
cost rates and, where the organization's awards are
necessary, other rates such expected to expire before the
as fringe benefit and carry-forward adjustment can
computer charge-out rates. be made; (ii) the mix of
Once an agency is assigned Federal and non-Federal work
cognizance for a particular at the organization is too
non-profit organization, the erratic to permit an
assignment will not be equitable carry-forward
changed unless there is a adjustment; or (iii) the
major long-term shift in the organization's operations
dollar volume of the Federal fluctuate significantly from
awards to the organization. year to year.
All concerned Federal
agencies shall be given the
opportunity to participate in f. Provisional and final rates
the negotiation process but, shall be negotiated where
after a rate has been agreed neither predetermined nor
upon, it will be accepted by fixed rates are appropriate.
all Federal agencies. When a
Federal agency has reason to g. The results of each
believe that special negotiation shall be
operating factors affecting formalized in a written
its awards necessitate agreement between the
special indirect cost rates cognizant agency and the non-
in accordance with profit organization. The
subparagraph D.5, it will, cognizant agency shall
prior to the time the rates distribute copies of the
are negotiated, notify the agreement to all concerned
cognizant agency. Federal agencies.
39
h. If a dispute arises in a 25. Lobbing
negotiation of an indirect 26. Losses_on other sponsored
cost rate between the agreements or contracts
cognizant agency and the non- 27. Maintenance and repair costs
profit organization, the 28. Materials and supplies costs
dispute shall be resolved in 29. Meetings and conferences
accordance with the appeals 30. Memberships, subscriptions
procedures of the cognizant and professional activity
agency. costs
31. Organization costs
i. To the extent that problems 32. Page charges in professional
are encountered among the journals
Federal agencies in 33. Participant support costs
connection with the 34. Patent costs
negotiation and approval 35. Plant and homeland security
process, OMB will lend costs
assistance as required to 36. Pre-alreement costs
resolve such problems in a 37. Professional services costs
timely manner. 38. Publication and printing
costs
39. Rearrangement and alteration
costs
40. Reconversion costs
ATTACHMENT B 41. Recruiting costs
Circular No. A-122 42. Relocation costs
43. Rental costs of buildings and
equipment
SELECTED ITEMS OF COST 44. Royalties and other costs for
use of patents and copyrights
Table of Contents 45. Selling and marketing
46. Specialized service
facilities
1. Advertising and_p_ublic_ 47. Taxes
relations costs 48. Termination costs applicable
2. Advisory councils to sponsored agreements_
3. Alcoholic beverages 49. Training costs
4. Audit costs and related 50. Transportation costs
services 51. Travel costs
5. Bad debts 52. Trustees
6. Bonding costs
7. Communication costs
8. Compensation for personal ATTACHMENT B
services Circular No. A-122
9. Contingency provisions
10. Defense and prosecution of SELECTED ITEMS OF COST
criminal and civil
proceedings, claims, appeals
and patent infringement Paragraphs 1 through 53 provide
11. Depreciation and use principles to be applied in
allowances establishing the allowability of
12. Donations and contributions certain items of cost. These
13. Employee morale, health, and principles apply whether a cost is
welfare costs treated as direct or indirect.
14. Entertainment costs Failure to mention a particular item
15. Equipment and other capital of cost is not intended to imply that
expenditures it is unallowable; rather,
16. Fines and penalties determination as to allowability in
17. Fund raising and investment each case should be based on the
management costs treatment or principles provided for
18. Gains and losses on similar or related items of cost.
depreciable assets
19. Goods or services for 1. Advertising and public relations
personal use costs.
20. Housing and personal living
expenses
21. Idle facilities and idle a. The term advertising costs
capacity means the costs of
22. Insurance and indemnification advertising media and
23. Interest corollary administrative
24. Labor relations costs costs. Advertising media
include magazines,
40
newspapers, radio and media and government public
television, direct mail, relations officers, to the
exhibits, electronic or extent that such activities
computer transmittals, and are limited to communication
the like. and liaison necessary keep
the public informed on
b. The term public relations matters of public concern,
includes community relations such as notices of Federal
and means those activities contract/grant awards,
dedicated to maintaining the financial matters, etc.
image of the non-profit
organization or maintaining e. Costs identified in
or promoting understanding subparagraphs c and d if
and favorable relations with incurred for more than one
the community or public at Federal award or for both
large or any segment of the sponsored work and other work
public. of the non-profit
organization, are allowable
C. The only allowable to the extent that the
advertising costs are those principles in Attachment A,
which are solely for: paragraphs B. ("Direct
Costs") and C. ("Indirect
(1) The recruitment of Costs") are observed.
personnel required for the
performance by the non-profit f. Unallowable advertising and
organization of obligations public relations costs
arising under a Federal award include the following:
(See also Attachment B,
paragraph 41, Recruiting (1) All advertising and
costs, and paragraph 42, public relations costs other
Relocation costs); than as specified in
subparagraphs c, d, and e;
(2) The procurement of goods (2) Costs of meetings,
and services for the conventions, convocations, or
performance of a Federal other events related to other
award; activities of the non-profit
(3) The disposal of scrap or organization, including:
surplus materials acquired in
the performance of a Federal (a) Costs of displays,
award except when non-profit demonstrations, and
organizations are reimbursed exhibits;
for disposal costs at a
predetermined amount; or (b) Costs of meeting
rooms, hospitality
(4) Other specific purposes suites, and other
necessary to meet the special facilities
requirements of the Federal used in conjunction
award. with shows and other
special events; and
d. The only allowable public (c) Salaries and wages
relations costs are: of employees engaged
(1) Costs specifically in setting up and
displaying exhibits,
required by the Federal making demonstrations,
award; and providing
(2) Costs of communicating
briefings;
with the public and press
pertaining to specific (3) Costs of promotional
activities or accomplishments items and memorabilia,
which result from performance including models, gifts, and
of Federal awards (these souvenirs;
costs are considered
necessary as part of the (4) Costs of advertising and
outreach effort for the public relations designed
Federal award); or solely to promote the non-
profit organization.
(3) Costs of conducting
general liaison with news
41
2. Advisory Councils b. Costs of bonding required
pursuant to the terms of the
Costs incurred by advisory councils award are allowable.
or committees are allowable as a
direct cost where authorized by the c. Costs of bonding required by
Federal awarding agency or as an the non-profit organization
indirect cost where allocable to in the general conduct of its
Federal awards. operations are allowable to
the extent that such bonding
is in accordance with sound
3. Alcoholic beverages. Costs of business practice and the
alcoholic beverages are unallowable. rates and premiums are
reasonable under the
4. Audit costs and related services circumstances.
a. The costs of audits required 7. Communication costs. Costs
by, and performed in incurred for telephone services,
accordance with, the Single local and long distance telephone
Audit Act, as implemented by calls, telegrams, postage, messenger,
Circular A-133, "Audits of electronic or computer transmittal
States, Local Governments, services and the like are allowable.
and Non-Profit Organizations"
are allowable. Also see 31 8. Compensation for personal
USC 7505(b) and section 230 services.
("Audit Costs") of Circular
A-133.
a. Definition. Compensation for
b. Other audit costs are personal services includes
allowable if included in an all compensation paid
indirect cost rate proposal, currently or accrued by the
or if specifically approved organization for services of
by the awarding agency as a employees rendered during the
direct cost to an award. period of the award (except
as otherwise provided in
subparagraph h) . It includes,
C. The cost of agreed-upon but is not limited to,
procedures engagements to salaries, wages, director's
monitor subrecipients who are and executive committee
exempted from A-133 under member's fees, incentive
section 200(d) are allowable, awards, fringe benefits,
subject to the conditions pension plan costs,
listed in A-133, section 230 allowances for off-site pay,
(b) (2) . incentive pay, location
allowances, hardship pay, and
5. Bad debts. Bad debts, including cost of living differentials.
losses (whether actual or estimated)
arising from uncollectable accounts b. Allowability. Except as
and other claims, related collection otherwise specifically
costs, and related legal costs, are provided in this paragraph,
unallowable. the costs of such
compensation are allowable to
6. Bonding costs. the extent that:
(1) Total compensation to
a. Bonding costs arise when the individual employees is
Federal Government requires reasonable for the services
assurance against financial rendered and conforms to the
loss to itself or others by established policy of the
reason of the act or default organization consistently
of the non-profit applied to both Federal and
organization. They arise also non-Federal activities; and
in instances where the non-
profit organization requires (2) Charges to awards whether
similar assurance. Included treated as direct or indirect
are such bonds as bid, costs are determined and
performance, payment, advance supported as required in this
payment, infringement, and paragraph.
fidelity bonds.
42
C. Reasonableness. of specific types of
compensation due to changes
(1) When the organization is in Federal policy.
predominantly engaged in
activities other than those e. Unallowable costs. Costs
sponsored by the Federal which are unallowable under
Government, compensation for other paragraphs of this
employees on federally Attachment shall not be
sponsored work will be
considered reasonable to the allowable under this
paragraph solely on the basis
extent that it is consistent
with that paid for similar that they constitute personal work in the organization's compensation.
other activities.
f. Overtime, extra-pay shift,
(2) When the organization is and multi-shift premiums.
predominantly engaged in Premiums for overtime, extra-
federally sponsored pay shifts, and multi-shift
activities and in cases where work are allowable only with
the kind of employees the prior approval of the
required for the Federal awarding agency except:
activities are not found in
the organization's other (1) When necessary to cope
activities, compensation for with emergencies, such as
employees on federally those resulting from
sponsored work will be accidents, natural disasters,
considered reasonable to the breakdowns of equipment, or
extent that it is comparable occasional operational
to that paid for similar work bottlenecks of a sporadic
in the labor markets in which nature.
the organization competes for
the kind of employees (2) When employees are
involved. performing indirect
functions, such as
d. Special considerations in administration, maintenance,
or accounting.
determining allowability.
Certain conditions require (3) In the performance of
special consideration and tests, laboratory procedures,
possible limitations in or other similar operations
determining costs under which are continuous in
Federal awards where amounts nature and cannot reasonably
appear unreasonable. Among types of compensation be interrupted or otherwise
ap
such conditions are the completed.
following:
(4) When lower overall cost
(1) Compensation to members to the Federal Government
will result.
of non-profit organizations,
trustees, directors,
associates, officers, or the g• Fringe benefits.
immediate families thereof.
Determination should be made (1) Fringe benefits in the
that such compensation is form of regular compensation
reasonable for the actual paid to employees during
personal services rendered periods of authorized
rather than a distribution of absences from the job, such
earnings in excess of costs. as vacation leave, sick
leave, military leave, and
(2) Any change in an the like, are allowable,
organization's compensation provided such costs are
policy resulting in a absorbed by all organization
substantial increase in the activities in proportion to
organization's level of the relative amount of time
compensation, particularly or effort actually devoted to
when it was concurrent with each.
an increase in the ratio of
Federal awards to other (2) Fringe benefits in the
activities of the form of employer
organization or any change in contributions or expenses for
the treatment of allowability social security, employee
insurance, workmen's
43
compensation insurance, only to the extent that the
pension plan costs (see insurance represents
subparagraph h) , and the additional compensation. The
like, are allowable, provided costs of such insurance when
such benefits are granted in the organization is named as
accordance with established beneficiary are unallowable.
written organization
policies. Such benefits
whether treated as indirect h. Organization-furnished
costs or as direct costs, automobiles. That portion of
shall be distributed to the cost of organization-
particular awards and other furnished automobiles that
activities in a manner relates to personal use by
consistent with the pattern employees (including
of benefits accruing to the transportation to and from
individuals or group of work) is unallowable as
employees whose salaries and fringe benefit or indirect
wages are chargeable to such costs regardless of whether
awards and other activities. the cost is reported as
taxable income to the
(3) (a) Provisions for a employees. These costs are
reserve under a self- allowable as direct costs to
insurance program for sponsored award when
unemployment compensation or necessary for the performance
workers' compensation are of the sponsored award and
allowable to the extent that approved by awarding
the provisions represent agencies,
reasonable estimates of the
liabilities for such i. Pension plan costs.
compensation, and the types
of coverage, extent of (1) Costs of the
coverage, and rates and organization's pension plan
premiums would have been which are incurred in
allowable had insurance been accordance with the
purchased to cover the risks. established policies of the
However, provisions for self-- organization are allowable,
insured liabilities which do provided:
not become payable for more
than one year after the (a) Such policies meet
provision is made shall not
exceed the present value of the test of
the liability. reasonableness;
(b) The methods of
(b) Where an cost allocation are
organization follows a not discriminatory;
consistent policy of
expensing actual (c) The cost assigned
payments to, or on to each fiscal year is
behalf of, employees determined in
or former employees accordance with
for unemployment generally accepted
compensation or accounting principles
workers' compensation, (GAAP), as prescribed
such payments are in Accounting
allowable in the year Principles Board
of payment with the Opinion No. 8 issued
prior approval of the by the American
awarding agency, Institute of Certified
provided they are Public Accountants;
allocated to all and
activities of the
organization. (d) The costs assigned
to a given fiscal year
are funded for all
(4) Costs of insurance on the plan participants
lives of trustees, officers, within six months
or other employees holding after the end of that
positions of similar
year. However,
responsibility are allowable increases to normal
and past service
44
pensic,n costs caused effect, an implied
by a delay in funding agreement on the
the actuarial organization's part,
liability beyond 30 or
days after each
quarter of the year to (d) circumstances of
which such costs are the particular
assignable are employment.
unallowable.
(2) Costs of severance
(2) Pension plan termination payments are divided into two
insurance premiums paid categories as follows:
pursuant to the Employee
Retirement Income Security
Act (ERISA) of 1974 (Pub. L. (a) Actual normal
93-406) are allowable. Late turnover severance
payment charges on such payments shall be
premiums are unallowable. allocated to all
activities; or, where
(3) Excise taxes on the organization
accumulated funding provides for a reserve
deficiencies and other for normal severances,
penalties imposed under ERISA such method will be
are unallowable. acceptable if the
charge to current
operations is
j . Incentive compensation. reasonable in light of
Incentive compensation to payments actually made
employees based on cost for normal severances
reduction, or efficient over a representative
performance, suggestion past period, and if
awards, safety awards, etc., amounts charged are
are allowable to the extent allocated to all
that the overall compensation activities of the
is determined to be organization.
reasonable and such costs are
paid or accrued pursuant to (b) Abnormal or mass
an agreement entered into in severance pay is of
good faith between the such a conjectural
organization and the nature that
employees before the services measurement of costs
were rendered, or pursuant to by means of an accrual
an established plan followed will not achieve
by the organization so equity to both
consistently as to imply, in parties. Thus,
effect, an agreement to make accruals for this
such payment. purpose are not
allowable. However,
k. Severance pay. the Federal Government
recognizes its
(1) Severance pay, also obligation to
commonly referred to as participate, to the
dismissal wages, is a payment extent of its fair
in addition to regular share, in any specific
salaries and wages, by payment. Thus,
organizations to workers allowability will be
whose employment is being considered on a case-
terminated. Costs of by-case basis in the
severance pay are allowable event or occurrence.
only to the extent that in
each case, it is required by (c) Costs incurred in
certain severance pay
(a) law, packages (commonly
known as "a golden
parachute" payment)
(b) employer-employee which are in an amount
agreement, in excess of the
normal severance pay
(c) established policy paid by the
that constitutes, in
45
organization to an system has been approved in
employee upon writing by the cognizant
termination of agency. (See subparagraph E.2
employment and are of Attachment A.)
paid to the employee
contingent upon a (2) Reports reflecting the
change in management distribution of activity of
control over, or each employee must be
ownership of, the maintained for all staff
organization's assets members (professionals and
are unallowable. nonprofessionals) whose
compensation is charged, in
(d) Severance payments whole or in part, directly to
to foreign nationals awards. In addition, in order
employed by the to support the allocation of
organization outside indirect costs, such reports
the United States, to must also be maintained for
the extent that the other employees whose work
amount exceeds the involves two or more
customary or functions or activities if a
prevailing practices distribution of their
for the organization compensation between such
in the United States functions or activities is
are unallowable, needed in the determination
unless they are of the organization's
necessary for the indirect cost rate(s) (e.g.,
performance of Federal an employee engaged part-time
programs and approved in indirect cost activities
by awarding agencies. and part-time in a direct
function) . Reports maintained
(e) Severance payments by non-profit organizations
to foreign nationals to satisfy these requirements
employed by the must meet the following
organization outside standards:
the United States due
to the termination of
the foreign national (a) The reports must
as a result of the reflect an after-the-
closing of, or fact determination of
curtailment of the actual activity of
activities by, the each employee. Budget
organization in that estimates (i.e.,
country, are estimates determined
unallowable, unless before the services
they are necessary for are performed) do not
the performance of qualify as support for
Federal programs and charges to awards.
approved by awarding
agencies. (b) Each report must
account for the total
activity for which
1. Training costs. See paragraph employees are
49. compensated and which
is required in
m. Support of salaries and fulfillment of their
wages. obligations to the
organization.
(1) Charges to awards for
salaries and wages, whether (c) The reports must
treated as direct costs or be signed by the
indirect costs, will be based individual employee,
on documented payrolls or by a responsible
approved by a responsible supervisory official
official(s) of the having first hand
organization. The knowledge of the
distribution of salaries and activities performed
wages to awards must be by the employee, that
supported by personnel the distribution of
activity reports, as activity represents a
prescribed in subparagraph reasonable estimate of
(2), except when a substitute the actual work
46
performed by the offense by any court of
employee during the competent jurisdiction,
periods covered by the whether entered upon as a
reports. verdict or a plea, including
a conviction due to a plea of
(d) The reports must nolo contendere.
be prepared at least
monthly and must (2) Costs include, but are
coincide with one or not limited to,
more pay periods. administrative and clerical
expenses; the cost of legal
services, whether performed
(3) Charges for the salaries by in-house or private
counsel; and the costs of the
and wages of nonprofessional
employees, in addition to the services of accountants,
consultants, or others
supporting documentation
described in subparagraphs retained by the organization(1) and (2) , must also be to assist it; costs of
supported by records employees, officers and indicating the total number trustees, and any similar
costs incurred before, .
of hours worked each day
maintained in conformance during, and after
commencement of a judicial or
regulations implementing
enting the
with Department Labor administrative proceeding Fair Labor Standards Act that bears a direct
(FLSA) (29 CFR Part 516) . For relationship to the
proceedings.
this purpose, the term
"nonprofessional employee" (3) Fraud, as used herein,
shall have the same meaning means (i) acts of fraud
as "nonexempt employee," corruption or attempts to
under FLSA. defraud the Federal
(4) Salaries and wages of Government or to corrupt its
employees used in meeting agents, (ii) acts that
constitute a cause for
cost sharing or matching debarment or suspension (as
requirements on awards must specified in agency
be supported in the same regulations), and (iii) acts
manner as salaries and wages which violate the False
claimed for reimbursement
from awarding agencies. Claims Act, 31 U.S.C.,
sections 3729-3731, or the
Anti-Kickback Act, 41 U.S.C.,
9. Contingency provisions. sections 51 and 54.
Contributions to a contingency
reserve or any similar provision made (4) Penalty does not include
for events the occurrence of which restitution, reimbursement,
cannot be foretold with certainty as or compensatory damages.
to time, intensity, or with an
assurance of their happening, are (5) Proceeding includes an
unallowable. investigation.
The term "contingency reserve" b. (1) Except as otherwise
excludes self-insurance reserves (see described herein, costs
Attachment B, paragraphs 8.g. (3) and incurred in connection with
22.a(2) (d) ); pension funds (see any criminal, civil or
paragraph 8.i) : and reserves for administrative proceeding
normal severance pay (see paragraph (including filing of a false
8.k.) certification) commenced by
the Federal Government, or a
State, local or foreign
10. Defense and prosecution of government, are not allowable
criminal and civil proceedings, if the proceeding: (1)
claims, appeals and patent relates to a violation of, or
infringement. failure to comply with, a
Federal, State, local or
a. Definitions. foreign statute or regulation
by the organization
(1) Conviction, as used (including its agents and
herein, means a judgment or a employees), and (2) results
conviction of a criminal
47
in any of the following to the extent specifically
dispositions: provided in such agreement.
(a) In a criminal d. If a proceeding referred to
proceeding, a in subparagraph b is
conviction. commenced by a State, local
or foreign government, the
(b) In a civil or authorized Federal official
administrative may allow the costs incurred
proceeding involving by the organization for such
an allegation of fraud proceedings, if such
or similar misconduct, authorized official
a determination of determines that the costs
organizational were incurred as a result of
liability. (1) a specific term or
condition of a federally
(c) In the case of any sponsored award, or (2)
civil or specific written direction of
administrative an authorized official of the
proceeding, the sponsoring agency.
imposition of a
monetary penalty. e. Costs incurred in connection
with proceedings described in
(d) A final decision subparagraph b, but which are
by an appropriate not made unallowable by that
Federal official to subparagraph, may be allowed
debar or suspend the by the Federal Government,
organization, to but only to the extent that:
rescind or void an
award, or to terminate (1) The costs are reasonable
an award for default in relation to the activities
by reason of a required to deal with the
violation or failure proceeding and the underlying
to comply with a law cause of action;
or regulation.
(e) A disposition b (2) Payment of the costs
p y incurred, as allowable and
consent or compromise, allocable costs, is not
if the action could prohibited by any other
have resulted in any provision(s) of the sponsored
of the dispositions award;
described in (a) , (b) ,
(c) or (d) . (3) The costs are not
otherwise recovered from the
Federal Government or a third
(2) If more than one party, either directly as a
proceeding involves the same result of the proceeding or
alleged misconduct, the costs otherwise; and,
of all such proceedings shall
be unallowable if any one of (4) The percentage of costs
them results in one of the allowed does not exceed the
dispositions shown in percentage determined by an
subparagraph b. (1) . authorized Federal official
to be appropriate,
considering the complexity of
c. If a proceeding referred to the litigation, generally
in subparagraph b is accepted principles governing
commenced by the Federal the award of legal fees in
Government and is resolved by civil actions involving the
consent or compromise United States as a party, and
pursuant to an agreement such other factors as may be
entered into by the appropriate. Such percentage
organization and the Federal shall not exceed 80 percent.
Government, then the costs However, if an agreement
incurred by the organization reached under subparagraph c
in connection with such has explicitly considered
proceedings that are this 80 percent limitation
otherwise not allowable under and permitted a higher
subparagraph b may be allowed percentage, then the full
amount of costs resulting
48
from that agreement shall be use allowance or
allowable. depreciation. However, except
as provided in Attachment B,
f. Costs incurred by the paragraph f, a combination of
organization in connection the two methods may not be
with the defense of suits used in connection with a
brought by its employees or single class of fixed assets
ex-employees under section 2 (e.g., buildings, office
of the Major Fraud Act of equipment, computer
1988 (Pub. L. 100-700), equipment, etc.) .
including the cost of all
relief necessary to make such b. The computation of use
employee whole, where the allowances or depreciation
organization was found liable shall be based on the
or settled, are unallowable. acquisition cost of the
assets involved. The
g. Costs of legal, accounting, acquisition cost of an asset
and consultant services, and donated to the non-profit
related costs, incurred in organization by a third party
connection with defense shall be its fair market
against Federal Government value at the time of the
claims or appeals, antitrust donation.
suits, or the prosecution of
claims or appeals against the c. The computation of use
Federal Government, are allowances or depreciation
.unallowable. will exclude:
h. Costs of legal, accounting, (1) The cost of land;
and consultant services, and
related costs, incurred in (2) Any portion of the cost
connection with patent of buildings and equipment
infringement litigation, are borne by or donated by the
unallowable unless otherwise Federal Government
provided for in the sponsored irrespective of where title
awards. was originally vested or
where it presently resides;
i. Costs which may be
and
unallowable under this 3) Any portion of the cost
paragraph, including directly of buildings and equipment
associated costs, shall be contributed by or for the
segregated and accounted for non-profit organization in
by the organization
separately. During the satisfaction of a statutory
matching requirement.
pendency of any proceeding
covered by subparagraphs b
and f, the Federal Government d. Where depreciation method is
shall generally withhold followed, the period of
payment of such costs. useful service (useful life)
However, if in the best established in each case for
interests of the Federal usable capital assets must
Government, the Federal take into consideration such
Government may provide for factors as type of
conditional payment upon construction, nature of the
provision of adequate equipment used, technological
security, or other adequate developments in the
assurance, and agreements by particular program area, and
the organization to repay all the renewal and replacement
unallowable costs, plus policies followed for the
interest, if the costs are individual items or classes
subsequently determined to be of assets involved. The
unallowable. method of depreciation used
to assign the cost of an
asset (or group of assets) to
11. Depreciation and use allowances. accounting periods shall
reflect the pattern of
a. Compensation for the use of consumption of the asset
buildings, other capital during its useful life.
improvements, and equipment
on hand may be made through In the absence of clear
evidence indicating that the
49
expected consumption of the sidewalks) will be computed
asset will be significantly at an annual rate not
greater or lesser_ in the exceeding two percent of
early portions of its useful acquisition cost.
life than in the later
portions, the straight-line The use allowance for
method shall be presumed to equipment will be computed at
be the appropriate method. an annual rate not exceeding
six and two-thirds percent of
Depreciation methods once acquisition cost. When the
used shall not be changed use allowance method is used
unless approved in advance by for buildings, the entire
the cognizant Federal agency. building must be treated as a
When the depreciation method single asset; the building's
is introduced for application components (e.g., plumbing
to assets previously subject system, heating and air
to a use allowance, the conditioning, etc.) cannot be
combination of use allowances segregated from the
and depreciation applicable building's shell.
to such assets must not
exceed the total acquisition The two percent limitation,
cost of the assets. however, need not be applied
to equipment which is merely
e. When the depreciation method attached or fastened to the
is used for buildings, a building but not permanently
building's shell may be fixed to it and which is used
segregAted from each building as furnishings or decorations
component (e.g., plumbing or for specialized purposes
system, heating, and air (e.g., dentist chairs and
conditioning system, etc.) dental treatment units,
and each item depreciated counters, laboratory benches
over its estimated useful bolted to the floor,
life; or the entire building dishwashers, modular
(i.e., the shell and all furniture, carpeting, etc.) .
components) may be treated as Such equipment will be
a single asset and considered as not being
depreciated over a single permanently fixed to the
useful life. building if it can be removed
without the need for costly
f. when the depreciation method or extensive alterations or
repairs to the building or
is used for a particular the equipment. Equipment that
class assets, meets these criteria will be
depreciation may bbe e allowed
on any such assets that, subject to the 6 2/3 percent
equipment use allowance
under subparagraph d, would limitation.
be viewed as fully
depreciated. However, a
reasonable use allowance may h. Charges for use allowances or
be negotiated for such assets depreciation must be
if warranted after taking supported by adequate
into consideration the amount property records and physical
of depreciation previously inventories must be taken at
charged to the Federal least once every two years (a
Government, the estimated statistical sampling basis is
useful life remaining at time acceptable) to ensure that
of negotiation, the effect of assets exist and are usable
any increased maintenance and needed. When the
charges or decreased depreciation method is
efficiency due to age, and followed, adequate
any other factors pertinent depreciation records
to the utilization of the indicating the amount of
asset for the purpose depreciation taken each
contemplated. period must also be
maintained.
g. Where the use allowance
method is followed, the use 12. Donations and contributions.
allowance for buildings and
improvement (including land a. Contributions or donations
improvements, such as paved
parking areas, fences, and rendered. Contributions or
50
donations, including cash, supported by an award, the
property, and services, made indirect costs allocated to
by the organization, the services will be
regardless of the recipient, considered as a part of the
are unallowable. total costs of the project.
Such indirect costs may be
b. Donated services received: reimbursed under the award or
used to meet cost sharing or
(1) Donated or volunteer matching requirements.
services may be furnished to
an organization by (5) The value of the donated
professional and technical services may be used to meet
personnel, consultants, and cost sharing or matching
other skilled and unskilled requirements under conditions
labor. The value of these described in Sec._.23 of
services is not reimbursable Circular A-110. Where donated
either as a direct or services are treated as
indirect cost. However, the indirect costs, indirect cost
value of donated services may rates will separate the value
be used to meet cost sharing of the donations so that
or matching requirements in reimbursement will not be
accordance with the Common made.
Rule.
c. Donated goods or space.
(2)The value of donated
services utilized in the (1) Donated goods; i.e.,
performance of'a direct cost expendable personal
activity shall, when material property/supplies, and
in amount, be considered in donated use of space may be
the determination of the non- furnished to a non-profit
profit organization's organization. The value of
indirect costs or rate(s) the goods and space is not
and, accordingly, shall be reimbursable either as a
allocated a proportionate direct or indirect cost.
share of applicable indirect
costs when the following (2) The value of the
exist: donations may be used to meet
cost sharing or matching
(a) The aggregate share requirements under the
value of the services conditions described in
is material; Circular A-110. Where
donations are treated as
(b) The services are indirect costs, indirect cost
supported by a rates will separate the value
significant amount of of the donations so that
the indirect costs reimbursement will not be
incurred by the non- made.
profit organization;
and 13. Employee morale, health, and
welfare costs.
(c) The direct cost
activity is not
pursued primarily for a. The costs of employee
the benefit of the information publications,
Federal Government. health or first-aid clinics
and/or infirmaries,
recreational activities,
employee counseling services,
(3) In those instances where and any other expenses
there is no basis for incurred in accordance with
determining the fair market the non-profit organization's
value of the services established practice or
rendered, the recipient and custom for the improvement of
the cognizant agency shall working conditions, employer-
negotiate an appropriate employee relations, employee
allocation of indirect cost morale, and employee
to the services. performance are allowable.
(4) Where donated services
directly benefit a project b. Such costs will be equitably
apportioned to all activities
51
of the non-profit (3) "Special purpose
organization. Income equipment" means equipment
generated from any of these which is used only for
activities will be credited research, medical,
to the cost thereof unless scientific, or other
such income has been technical activities.
irrevocably set over to Examples of special purpose
employee welfare equipment include
organizations. microscopes, x-ray machines,
surgical instruments, and
14. Entertainment costs. Costs of spectrometers.
entertainment, including amusement,
(1) "General purpose
diversion, and social activities and
equipment" means equipment,
any costs directly associated with
which is not limited to
such costs (such as tickets to shows
research, medical, scientific
or sports events, meals, lodging,
or other technical
rentals, transportation, and
activities. Examples include
gratuities) are unallowable.
office equipment and
furnishings, modular offices,
15. Equipment and other capital telephone networks,
expenditures. information technology
equipment and systems, air
conditioning equipment,
a. For purposes of this reproduction and printing
subparagraph, the following equipment, and motor
definitions apply: vehicles.
(1) "Capital Expenditures"
means expenditures for the b. The following rules of
acquisition cost of capital allowability shall apply to
assets (equipment, buildings, equipment and other capital
land), or expenditures to expenditures:
make improvements to capital
assets that materially (1) Capital expenditures for
increase their value or general purpose equipment,
useful life. Acquisition cost buildings, and land are
means the cost of the asset unallowable as direct
including the cost to put it charges, except where
in place. Acquisition cost approved in advance by the
for equipment, for example, awarding agency.
means the net invoice price
of the equipment, including (2) Capital expenditures for
the cost of any special purpose equipment are
modifications, attachments, allowable as direct costs,
accessories, or auxiliary provided that items with a
apparatus necessary to make unit cost of $5000 or more
it usable for the purpose for have the prior approval of
which it is acquired. the awarding agency.
Ancillary charges, such as
taxes, duty, protective in (3) Capital expenditures for
transit insurance, freight, improvements to land,
and installation may be buildings, or equipment which
included in, or excluded from materially increase their
the acquisition cost in value or useful life are
accordance with the non- unallowable as a direct cost
profit organization's regular except with the prior
accounting practices. approval of the awarding
agency.
(2) "Equipment" means an
article of nonexpendable, (4) When approved as a direct
tangible personal property charge pursuant to paragraph
having a useful life of more 15.b. (1), (2), and (3) above,
than one year and an capital expenditures will be
acquisition cost which equals charged in the period in
or exceeds the lesser of the which the expenditure is
capitalization level incurred, or as otherwise
established by the non-profit determined appropriate by and
organization for financial negotiated with the awarding
statement purposes, or $5000. agency.
52
(5) Equipment and other subparagraph B.3 of
capital expenditures are Attachment A.
unallowable as indirect
costs. However, see
as Gains and losses on depreciable
Attachment B, paragraph 11.,
Depreciation and use assets.
allowance, for rules on the
allowability of use a. (1) Gains and losses on sale,
allowances or depreciation on retirement, or other
buildings, capital disposition of depreciable
improvements, and equipment. property shall be included in
Also, see Attachment B, the year in which they occur
paragraph 93., Rental costs as credits or charges to cost
of buildings and equipment, grouping(s) in which the
for rules on the allowability depreciation applicable to
of rental costs for land, such property was included.
buildings, and equipment. The amount of the gain or
loss to be included as a
(6) The unamortized portion credit or charge to the
of any equipment written off appropriate cost grouping(s)
as a result of a change in shall be the difference
capitalization levels may be between the amount realized
recovered by continuing to on the property and the
claim the otherwise allowable undepreciated basis of the
use allowances or property.
depreciation on the
equipment, or by amortizing (2) Gains and losses on the
the amount to be written off disposition of depreciable
over a period of years property shall not be
negotiated with the cognizant recognized as a separate
agency. credit or charge under the
following conditions:
16. Fines and penalties. Costs of
fines and penalties resulting from (a) The gain or loss
violations of, or failure of the is processed through a
organization to comply with Federal, depreciation account
State, and local laws and regulations and is reflected in
are unallowable except when incurred the depreciation
as a result of compliance with allowable under
specific provisions of an award or paragraph 11.
instructions in writing from the
awarding agency. (b) The property is
given in exchange as
17. Fund raising and investment part of the purchase
price of a similar
management costs. item and the gain or
loss is taken into
a. Costs of organized fund account in determining
raising, including financial the depreciation cost
campaigns, endowment drives, basis of the new item.
solicitation of gifts and
bequests, and similar (c) A loss results
expenses incurred solely to from the failure to
raise capital or obtain maintain permissible
contributions are insurance, except as
unallowable. otherwise provided in
Attachment B,
b. Costs of investment counsel paragraph 22.
and staff and similar
expenses incurred solely to (d) Compensation for
enhance income from the use of the
investments are unallowable. property was provided
through use allowances
in lieu of
c. Fund raising and investment depreciation in
activities shall be allocated accordance with
an appropriate share of paragraph 9.
indirect costs under the
conditions described in
(e) Gains and losses
arising from mass or
53
extraordinary sales, completely unused facilities
retirements, or other that are excess to the non-
dispositions shall be profit organization's current
considered on a case- needs.
by-case basis.
(3) "Idle capacity" means the
unused capacity of partially
used facilities. It is the
difference between: (a) that
b. Gains or losses of any nature which a facility could
arising from the sale or achieve under 100 percent
exchange of property other operating time on a one-shift
than the property covered in basis less operating
subparagraph a shall be interruptions resulting from
excluded in computing award time lost for repairs,
costs. setups, unsatisfactory
materials, and other normal
delays; and (b) the extent to
19. Goods or services for personal
which the facility was
use. Costs of goods or services for actually used to meet demands
personal use of the organization's during the accounting period.
employees are unallowable regardless A multi-shift basis should be
of whether the cost is reported as used if it can be shown that
taxable income to the employees. this amount of usage would
normally be expected for the
20. Housing and personal living type of facility involved.
expenses.
(4) "Cost of idle facilities
or idle capacity" means costs
a. Costs of housing (e.g., such as maintenance, repair,
depreciation, maintenance, housing,
utilities, furnishings, rent, rent, and other
related costs, e.g.,
etc.), housing allowances and insurance, interest, property
personal living expenses taxes and depreciation or use
for/of the organization's allowances.
officers are unallowable as
fringe benefit or indirect
costs regardless of whether b. The costs of idle facilities
the cost is reported as are unallowable except to the
taxable income to the extent that:
employees. These costs are
allowable as direct costs to (1) They are necessary to
sponsored award when meet fluctuations in
necessary for the performance workload; or
of the sponsored award and
approved by awarding (2) Although not necessary to.
agencies. meet fluctuations in
workload, they were necessary
when acquired and are now
b. The term "officers" includes idle because of changes in
current and past officers and program requirements, efforts
employees. to achieve more economical
operations, reorganization,
21. Idle facilities and idle termination, or other causes
capacity. which could not have been
reasonably foreseen. Under
the exception stated in this
a. As used in this section the subparagraph, costs of idle
following terms have the facilities are allowable for
meanings set forth below: a reasonable period of time,
ordinarily not to exceed one
(1) "Facilities" means land year, depending on the
and buildings or any portion initiative taken to use,
thereof, equipment lease, or dispose of such
individually or collectively, facilities.
or any other tangible capital
asset, wherever located, and
whether owned or leased by c. The costs of idle capacity the non-profit organization. are normal costs of doingbusiness and are a factor in
(2) "Idle facilities" means the normal fluctuations of
usage or indirect cost rates
54
from period to period. Such the risk of loss or
costs are allowable, provided damage to Federal
that the capacity is property are allowable
reasonably anticipated to be only to the extent
necessary or was originally that the organization
reasonable and is not subject is liable for such
to reduction or elimination loss or damage.
by use on other Federal
awards, subletting, renting, (d) Provisions for a
or sale, in accordance with reserve under a self-
sound business, economic, or insurance program are
security practices. allowable to the
Widespread idle capacity extent that types of
throughout an entire facility coverage, extent of
or among a group of assets coverage, rates, and
having substantially the same premiums would have
function may be considered been allowed had
idle facilities. insurance been
purchased to cover the
22. Insurance and indemnification. risks. However,
provision for known or
reasonably estimated
a. Insurance includes insurance self-insured
which the organization is liabilities, which do
required to carry, or which not become payable for
is approved, under the terms more than one year
of the award and any other after the provision is
insurance which the made, shall not exceed
organization maintains in the present value of
connection with the general the liability.
conduct of its operations.
This paragraph does not apply (e) Costs of insurance
to insurance which represents on the lives of
fringe benefits for employees trustees, officers, or
(see subparagraphs 8.g and other employees
8.i(2) ) . holding positions of
similar
(1) Costs of insurance responsibilities are
required or approved, and allowable only to the
maintained, pursuant to the extent that the
award are allowable. insurance represents
additional
(2) Costs of other insurance compensation (see
maintained by the subparagraph 8.g(4) ) .
organization in connection The cost of such
with the general conduct of insurance when the
its operations are allowable organization is
subject to the following identified as the
limitations: beneficiary is
unallowable.
(a) Types and extent
o (f) Insurance against
f coverage shall be
defects. Costs of
in accordance with
sound business insurance with respect
to any costs incurred
practice and the rates to correct defects in
and premiums shall be the organization's
reasonable under the materials or
circumstances. workmanship are
(b) Costs allowed for unallowable.
business interruption
or other similar (g) Medical liability
insurance shall be (malpractice)
insurance. Medical
limited to exclude liability insurance is
coverage of management an allowable cost of
fees. Federal research
(c) Costs of insurance programs only to the
extent that the
or of any provisions Federal research
for a reserve covering programs involve human
55
subjects or training renovations, alterations,
of participants in equipment, land, and capital
research techniques. assets acquired through
Medical liability capital leases), acquired
insurance costs shall after September 29, 1995 and
be treated as a direct used in support of Federal
cost and shall be awards is allowable, provided
assigned to individual that:
projects based on the
manner in which the (1) For facilities
insurer allocates the acquisitions (excluding
risk to the population renovations and alterations)
covered by the costing over $10 million
insurance. where the Federal
Government's reimbursement is
(3) Actual losses which could expected to equal or exceed
have been covered by 40 percent of an asset's
permissible insurance cost, the non-profit
(through the purchase of organization prepares, prior
insurance or a self-insurance to the acquisition or
program) are unallowable replacement of the capital
unless expressly provided for asset(s), a justification
in the award, except: that demonstrates the need
for the facility in the
conduct of federally
(a) Costs incurred sponsored activities. Upon
because of losses not -request, the needs
covered under nominal justification must be
deductible insurance provided to the Federal
coverage provided in agency with cost cognizance
keeping with sound authority as a prerequisite
business practice are to the continued allowability
allowable. of interest on debt and
depreciation related to the
(b) Minor losses not facility. The needs
covered by insurance, justification for the
such as spoilage, acquisition of a facility
breakage, and should include, at a minimum,
disappearance of the following:
supplies, which occur
in the ordinary course
of operations, are (a) A statement of
allowable. purpose and
justification for
facility acquisition
b. Indemnification includes or replacement
securing the organization
against liabilities to third (b) A statement as to
persons and any other loss or why current facilities
damage, not compensated by are not adequate
insurance or otherwise. The
Federal Government is (c) A statement of
obligated to indemnify the planned future use of
organization only to the the facility
extent expressly provided in
the award. (d) A description of
the financing
agreement to be
23. Interest. arranged for the
facility
a. Costs incurred for interest
on borrowed capital, (e) A summary of the
temporary use of endowment building contract with
funds, or the use of the non- estimated cost
profit organization's own information and
funds, however represented, statement of source
are unallowable. However, and use of funds
interest on debt incurred
after September 29, 1995 to (f) A schedule of
acquire or replace capital planned occupancy
assets (including dates
56
(2) For facilities costing (3) The actual interest cost
over $500,000, the non-profit claimed is predicated upon
organization prepares, prior interest rates that are no
to the acquisition or higher than the fair market
replacement of the facility, rate available to the non-
a lease/purchase analysis in profit organization from an
accordance with the unrelated ("arm's length")
provisions of Sec. _.30 third party.
through _.37 of Circular A-
110, which shows that a (4) Investment earnings,
financed purchase or capital including interest income, on
lease is less costly to the bond or loan principal,
organization than other pending payment of the
leasing alternatives, on a construction or acquisition
net present value basis. costs, are used to offset
Discount rates used should be allowable interest cost.
equal to the non--profit Arbitrage earnings reportable
organization's anticipated to the Internal Revenue
interest rates and should be Service are not required to
no higher than the fair be offset against allowable
market rate available to the interest costs.
non-profit organization from
an unrelated ("arm's length") (5) Reimbursements are
third-party. The limited to the least costly
lease/purchase analysis shall alternative based on the
include a comparison of the total cost analysis required
net-present value of the under subparagraph (b) . For
projected total cost example, if an operating
comparisons of both lease is determined to be
alternatives over the period less costly than purchasing
the asset is expected to be through debt financing, then
used by the non-profit reimbursement is limited to
organization. The cost the amount determined if
comparisons associated with leasing had been used. In all
purchasing the facility shall cases where a lease/purchase
include the estimated analysis is performed,
purchase price, anticipated Federal reimbursement shall
operating and maintenance be based upon the least
costs (including property expensive alternative.
taxes, if applicable) riot
included in the debt (6) Non-profit organizations
financing, less any estimated are also subject to the
asset salvage value at the following conditions:
end of the period defined
above. The cost comparison
for a capital lease shall (a) Interest on debt
include the estimated total incurred to finance or
lease payments, any estimated refinance assets
bargain purchase option, acquired before or
operating and maintenance reacquired after
September 29, 1995, is
costs, and taxes not included not allowable.
in the capital leasing
arrangement, less any
estimated credits due under (b) Interest
the lease at the end of the attributable to fully
period defined above. depreciated assets is
Projected operating lease
unallowable.
costs shall be based on the
anticipated cost of leasing (c) For debt
comparable facilities at fair arrangements over $1
market rates under rental million, unless the
agreements that would be non-profit
renewed or reestablished over organization makes an
the period defined above, and initial equity
any expected maintenance contribution to the
costs and allowable property asset purchase of 25
taxes to be borne by the non- percent or more, non-
profit organizations
profit organization directly
or as part of the lease shall reduce claims
for interest expense
arrangement. by an amount equal to
57
imputed interest Federal cognizant
earnings on excess agency. The extent of
cash flow, which is to the relocation, the
be calculated as amount of the Federal
follows. Annually, participation in the
non-profit financing, and the
organizations shall depreciation and
prepare a cumulative interest charged to
(from the inception of date may require
the project) report of negotiation and/or
monthly cash flows downward adjustments
that includes inflows of replacement space
and outflows, charged to Federal
regardless of the programs in the
funding source. future.
Inflows consist of
depreciation expense, (e) The allowable
amortization of costs to acquire
capitalized facilities and
construction interest, equipment are limited
and annual interest to a fair market value
expense. For cash flow available to the non-
calculations, the profit organization
annual inflow figures from an unrelated
shall be divided by ("arm's length") third
the number of months party.
in the year (usually
12) that the building
is in service for b. For non-profit organizations
monthly amounts. subject to "full coverage"'
Outflows consist of under the Cost Accounting
initial equity Standards (CAS) as defined at
contributions, debt 48 CFR 9903.201, the interest
principal payments allowability provisions of
(less the pro rata subparagraph a do not apply.
share attributable to Instead, these organizations'
the unallowable costs sponsored agreements are
of land) and interest subject to CAS 414 (48 CFR
payments. Where 9903.414), cost of money as
cumulative inflows an element of the cost of
exceed cumulative facilities capital, and CAS
outflows, interest 417 (48 CFR 9903.417), cost
shall be calculated on of money as an element of the
the excess inflows for cost of capital assets under
that period and be
construction.
treated as a reduction
to allowable interest c. The following definitions are
expense. The rate of to be used for purposes of
interest to be used to this paragraph:
compute earnings on
excess cash flows (1) Re-acquired assets means
shall be the three assets held by the non-profit
month Treasury Bill organization prior to
closing rate as of the September 29, 1995 that have
last business day of again come to be held by the
that month. organization, whether through
repurchase or refinancing. It
(d) Substantial does not include assets
relocation of acquired to replace older
federally sponsored assets.
activities from a
facility financed by (2) Initial equity
indebtedness, the cost contribution means the amount
of which was funded in or value of contributions
whole or part through made by non-profit
Federal organizations for the
reimbursements, to acquisition of the asset or
another facility prior prior to occupancy of
to the expiration of a facilities.
period of 20 years
requires notice to the (3) Asset costs means the
58
capitaiizable costs of an members of the general public
asset, including construction or any segment thereof to
costs, acquisition costs, and contribute to or participate
other such costs capitalized in any mass demonstration,
in accordance with GAAP. march, rally, fundraising
drive, lobbying campaign or
24. Labor relations costs. Costs
letter writing or telephone
incurred in maintaining satisfactory campaign; or
relations between the organization
and its employees, including costs of (5) Legislative liaison
activities, including
labor management committees, employee attendance at legislative
publications, and other related
activities are allowable. sessions or committee
hearings, gathering
information regarding
25. Lobbying. legislation, and analyzing
the effect of legislation,
when such activities are
a. Notwithstanding other carried on in support of or
provisions of this Circular, in knowing preparation for an
costs associated with the effort to engage in
following activities are
unallowable lobbying.
unallowable:
(1) Attempts to influence the b. The following activities are
outcomes of any Federal, excepted from the coverage of
State, or local election, subparagraph a:
referendum, initiative, or
similar procedure, through in (1) Providing a technical and
kind or cash contributions, factual presentation of
endorsements, publicity, or information on a topic
similar activity; directly related to the
performance of a grant,
(2) Establishing, contract or other agreement
administering, contributing through hearing testimony,
to, or paying the expenses of statements or letters to the
a political party, campaign, Congress or a State
political action committee, legislature, or subdivision,
or other organization member, or cognizant staff
established for the purpose member thereof, in response
of influencing the outcomes to a documented request
of elections; (including a Congressional
Record notice requesting
(3) Any attempt to influence: testimony or statements for
(i) The introduction of the record at a regularly
Federal or State legislation; scheduled hearing) made by
or (ii) the enactment or the recipient member,
modification of any pending legislative body or
Federal or State legislation subdivision, or a cognizant
through communication with staff member thereof;
any member or employee of the provided such information is
Congress or State legislature readily obtainable and can be
(including efforts to readily put in deliverable
influence State or local form; and further provided
officials to engage in that costs under this section
similar lobbying activity), for travel, lodging or meals
or with any Government are unallowable unless
official or employee in incurred to offer testimony
connection with a decision to at a regularly scheduled
sign or veto enrolled Congressional hearing
legislation; pursuant to a written request
for such presentation made by
(4) Any attempt to influence: the Chairman or Ranking
(i) The introduction of Minority Member of the
Federal or State legislation; Committee or Subcommittee
or (ii) the enactment or conducting such hearing.
modification of any pending
Federal or State legislation (2) Any lobbying made
by preparing, distributing or unallowable by subparagraph
using publicity or a(3) to influence State
propaganda, or by urging legislation in order to
59
directly reduce the cost, or conditions (1) and (2) are
to avoid material impairment met, the absence of time
of the organization's logs, calendars, or similar
authority to perform the records will not serve as a
grant, contract, or other basis for disallowing costs
agreement. by contesting estimates of
lobbying time spent by
(3) Any activity specifically employees during a calendar
authorized by statute to be month.
undertaken with funds from
the grant, contract, or other (5) Agencies shall establish
agreement. procedures for resolving in
advance, in consultation with
C. (1) When an organization OMB, any significant
seeks reimbursement for questions or disagreements
indirect costs, total concerning the interpretation
lobbying costs shall be or application of paragraph
separately identified in the 25. Any such advance
indirect cost rate proposal, resolution shall be binding
and thereafter treated as in any subsequent
other unallowable activity settlements, audits or
costs in accordance with the investigations with respect
procedures of subparagraph to that grant or contract for
B.3 of Attachment A. purposes of interpretation of
this Circular; provided,
(2) Organizations shall however, that this shall not
submit, as part of the andual be construed to prevent a
indirect cost rate proposal, contractor or grantee from
a certification that the contesting the lawfulness of
requirements and standards of such a determination.
this paragraph have been
complied with. d. Executive lobbying costs.
Costs incurred in attempting
(3) Organizations shall to improperly influence
maintain adequate records to either directly or
demonstrate that the indirectly, an employee or
determination of costs as officer of the Executive
being allowable or Branch of the Federal
unallowable pursuant to Government to give
paragraph 25 complies with consideration or to act
the requirements of this regarding a sponsored
Circular. agreement or a regulatory
matter are unallowable.
(4) Time logs, calendars, or Improper influence means any
similar records shall not be influence that induces or
required to be created for tends to induce a Federal
purposes of complying with employee or officer to give
this paragraph during any consideration or to act
particular calendar month regarding a federally
when: (1) the employee sponsored agreement or
engages in lobbying (as regulatory matter on any
defined in subparagraphs (a) basis other than the merits
and (b)) 25 percent or less of the matter.
of the employee's compensated
hours of employment during 26. Losses on other sponsored
that calendar month, and (2) agreements or contracts. Any excess
within the preceding five-
year period, the organization un costs over income on any award is
has not materially misstated unallowable as a cost of any other
allowable or unallowable award. This includes, but is not
costs of any nature, limited to, the organization's
including legislative contributed portion by reason of cost
lobbying costs. When sharing agreements or any under-
conditions (1) and (2) are recoveries through negotiation of
met, organizations are not lump sums for, or ceilings on,
required to establish records
indirect costs.
to support the allowabliliy
of claimed costs in addition 27. Maintenance and repair costs.
to records already required Costs incurred for necessary
or maintained. Also, when maintenance, repair, or upkeep of
60
buildings and equipment (including business, technical, and
Federal property unless otherwise professional organizations
provided for) which neither add to are allowable.
the permanent value of the property
nor appreciably prolong its intended b. Costs of the non-profit
life, but keep it in an efficient organization's subscriptions
operating condition, are allowable. to business, professional,
Costs incurred for improvements which and technical periodicals are
add to the permanent value of the allowable.
buildings and equipment or
appreciably prolong their intended
life shall be treated as capital c. Costs of membership in any
expenditures (see paragraph 15) . civic or community
organization are allowable
with prior approval by
28. Materials and supplies costs. Federal cognizant agency.
a. Costs incurred for materials, d. Costs of membership in any
supplies, and fabricated country club or social or
parts necessary to carry out dining club or organization
a Federal award are are unallowable.
allowable.
31. Organization costs. Expenditures,
b. Purchased materials and such as incorporation fees, brokers'
supplies shall be charged at fees, fees to promoters, organizers
their actual prices, net of or management consultants, attorneys,
applicable credits. accountants, or investment
Withdrawals from general counselors, whether or not employees
stores or stockrooms should of the organization, in connection
be charged at their actual with establishment or reorganization
net cost under any recognized of an organization, are unallowable
method of pricing inventory except with prior approval of the
withdrawals, consistently awarding agency.
applied. Incoming
transportation charges are a
proper part of materials and 32. Page charges in professional
supplies costs. journals. Page charges for
professional journal publications are
allowable as a necessary part of
c. Only materials and supplies research costs, where:
actually used for the
performance of a Federal
award may be charged as a. The research papers report
direct costs. work supported by the Federal
Government; and
d. Where federally donated or
furnished materials are used b. The charges are levied
in performing the Federal impartially on all research
award, such materials will be papers published by the
used without charge. journal, whether or not by
federally sponsored authors.
29. Meetings and conferences. Costs
of meetings and conferences, the 33. Participant support costs.
primary purpose of which is the Participant support costs are direct
dissemination of technical costs for items such as stipends or
information, are allowable. This subsistence allowances, travel
includes costs of meals, allowances, and registration fees
transportation, rental of facilities, paid to or on behalf of participants
speakers' fees, and other items or trainees (but not employees) in
incidental to such meetings or connection with meetings,
conferences. But see Attachment B, conferences, symposia, or training
paragraphs 19., Entertainment costs, projects. These costs are allowable
and 33., Participant support costs. with the prior approval of the
awarding agency.
30. Memberships, subscriptions, and
professional activity costs. 39. Patent costs.
a. Costs of the non-profit a. The following costs relating
organization's membership in to patent and copyright
61
matters are allowable: (i) capital expenditures, of this
cost of preparing Circular.
disclosures, reports, and
other documents required by
the Federal award and of 36. Pre-agreement costs. Pre-award
searching the art to the costs are those incurred prior to the
extent necessary to make such effective date of the award directly
disclosures; (ii) cost of pursuant to the negotiation and in
preparing documents and any anticipation of the award where such
other patent costs in costs are necessary to comply with
connection with the filing the proposed delivery schedule or
and prosecution the
a United period of performance. Such costs are
States patent application allowable only to the extent that
title or royalty-free they would have been allowable if
where ti
license tl required by the incurred after the date of the award
Federal Government to be and only with the written approval of
conveyed to the Federal the awarding agency.
Government; and (iii) general
counseling services relating 37. Professional services costs.
to patent and copyright
matters, such as advice on
patent and copyright laws, a. Costs of professional and
regulations, clauses, and consultant services rendered
employee agreements (but see by persons who are members of
paragraphs 37., Professional a particular profession or
services costs, and 44., possess a special skill, and
Royalties and other costs for who are not officers or
use of patents and employees of the non-profit
copyrights) . organization, are allowable,
subject to subparagraphs b
and c when reasonable in
b. The following costs related relation to the services
to patent and copyright rendered and when not
matter are unallowable: contingent upon recovery of
the costs from the Federal
(1) Cost of preparing
Government.
disclosures, reports, and
other documents and of In addition, legal and
searching the art to the related services are limited
extent necessary to make under Attachment B, paragraph
disclosures not required by 10.
the award
(2) Costs in connection with b. In determining the
filing and prosecuting any allowability of costs in a
foreign patent application, particular case, no single
or any United States patent factor or any special
application, where the combination of factors is
Federal award does not necessarily determinative.
require conveying title or a However, the following
royalty-free license to the factors are relevant:
Federal Government (but see
paragraph 45., Royalties and (1) The nature and scope of
other costs for use of the service rendered in
patents and copyrights) . relation to the service
required.
35. Plant and homeland security (2) The necessity of
costs. Necessary and reasonable contracting for the service,
expenses incurred for routine and considering the non-profit
homeland security to protect organization's capability in
facilities, personnel, and work the particular area.
products are allowable. Such costs
include, but are not limited to, (3) The past pattern of such
wages and uniforms of personnel costs, particularly in the
engaged in security activities; years prior to Federal
equipment; barriers; contractual awards.
security services; consultants; etc.
Capital expenditures for homeland and (4) The impact of Federal
plant security purposes are subject awards on the non-profit
to paragraph 15., Equipment and other organization's business
(i.e., what new problems have
62
arisen) . allowable as a necessary part
of research costs where:
(5) Whether the proportion of
Federal work to the non- (1) The research papers
profit organization's total report work supported by the
business is such as to Federal Government: and
influence the non-profit
organization in favor of (2) The charges are levied
incurring the cost, impartially on all research
particularly where the papers published by the
services rendered are not of journal, whether or not by
a continuing nature and have federally sponsored authors.
little relationship to work
under Federal grants and
contracts. 39. Rearrangement and alteration
costs. Costs incurred for ordinary or
(6) Whether the service can normal rearrangement and alteration
be performed more of facilities are allowable. Special
economically by direct arrangement and alteration costs
employment rather than incurred specifically for the project
contracting. are allowable with the prior approval
of the awarding agency.
(7) The qualifications of the
individual or concern 40. Reconversion costs. Costs
rendering the service and the incurred in the restoration or
customary fees charged, rehabilitation of the non-profit
especially on non-Federal organization's facilities to
awards. approximately the same condition
existing immediately prior to
(8) Adequacy of the commencement of Federal awards, less
contractual agreement for the costs related to normal wear and
service (e.g., description of tear, are allowable.
the service, estimate of time
required, rate of
compensation, and termination 41. Recruiting costs.
provisions) .
a. Subject to subparagraphs b,
C. In addition to the factors in c, and d, and provided that
subparagraph b, retainer fees the size of the staff
to be allowable must be recruited and maintained is
supported by evidence of bona in keeping with workload
fide services available or requirements, costs of "help
rendered wanted" advertising,
operating costs of an
employment office necessary
38. Publication and printing costs. to secure and maintain an
adequate staff, costs of
a. Publication costs include the operating an aptitude and
costs of printing (including educational testing program,
the processes of composition, travel costs of employees
plate-making, press work, while engaged in recruiting
binding, and the end products personnel, travel costs of
produced by such processes), applicants for interviews for
distribution, promotion, prospective employment, and
mailing, and general relocation costs incurred
handling. Publication costs incident to recruitment of
also include page charges in new employees, are allowable
professional publications. to the extent that such costs
are incurred pursuant to a
well-managed recruitment
b. If these costs are not program. Where the
identifiable with a
particular cost objective, organization uses employment
they should be allocated as agencies, costs that are not
in excess of standard
indirect costs to all commercial rates for such
benefiting activities the services are allowable.
non-profit organizationn..
c. Page charges for professional b. In publications, costs of
help wanted advertising that
journal publications are includes color, includes
63
advertising material for b. Allowable relocation costs
other than recruitment for current employees are
purposes, or is excessive in limited to the following:
size (taking into
consideration recruitment (1) The costs of
purposes for which intended transportation of the
and normal organizational employee, members of his
practices in this respect), immediate family and his
are unallowable. household, and personal
effects to the new location.
c. Costs of help wanted
advertising, special (2) The costs of finding a
emoluments, fringe benefits, new home, such as advance
and salary allowances trips by employees and
incurred to attract spouses to locate living
professional personnel from quarters and temporary
other organizations that do lodging during the transition
not meet the test of period, up to maximum period
reasonableness or do not of 30 days, including advance
conform with the established trip time.
practices of the
organization, are (3) Closing costs, such as
unallowable. brokerage, legal, and
appraisal fees, incident to
the disposition of the
d. Where relocation costs
employee's former home. These
incurred incident to costs, together with those
recruitment of a new employee described in (4) , are limited
have been allowed either as to 8 percent of the sales
an allocable direct or price of the employee's
indirect cost, and the newly former home.
hired employee resigns for
reasons within his control (4) The continuing costs of
within twelve months after ownership of the vacant
being hired, the organization former home after the
will be required to refund or settlement or lease date of
credit such relocation costs the employee's new permanent
to the Federal Government. home, such as maintenance of
buildings and grounds
42. Relocation costs. (exclusive of fixing up
expenses), utilities, taxes,
and property insurance.
a. Relocation costs are costs
incident to the permanent
(5) Other necessary and
change of duty assignment
reasonable expenses normally
(for an indefinite period or incident to relocation, such
for a stated period of not as the costs of canceling an
less than 12 months) of an unexpired lease,
existing employee or upon disconnecting and
recruitment of a new reinstalling household
employee. Relocation costs appliances, and purchasing
are allowable, subject to the insurance against loss of or
limitation described in damages to personal property.
subparagraphs b, c, and d, The cost of canceling an
provided that: unexpired lease is limited to
three times the monthly
(1) The move is for the
rental.
benefit of the employer.
(2) Reimbursement to the c. Allowable relocation costs
employee is in accordance for new employees are limited
with an established written to those described in (1) and
policy consistently followed (2) of subparagraph b. When
by the employer. relocation costs incurred
incident to the recruitment
(3) The reimbursement does of new employees have been
not exceed the employee's allowed either as a direct or
actual (or reasonably indirect cost and the
estimated) expenses. employee resigns for reasons
within his control within 12
months after hire, the
64
organization shall refund or c. Rental costs under "less-
credit the Federal Government than-arms-length" leases are
for its share of the cost. allowable only up to the
However, the costs of travel amount (as explained in
to an overseas location shall subparagraph b. of this
be considered travel costs in paragraph 43.) that would be
accordance with paragraph 50 allowed had title to the
and not relocation costs for property vested in the non-
the purpose of this paragraph profit organization. For this
if dependents are not purpose, a less-than-arms-
permitted at the location for length lease is one under
any reason and the costs do which one party to the lease
not include costs of agreement is able to control
transporting household goods. or substantially influence
the actions of the other.
d. The following costs related Such leases include, but are
to relocation are not limited to those between
unallowable: (i) divisions of a non-profit
organization; (ii) non-profit
(1) Fees and other costs organizations under common
associated with acquiring a control through common
new home. officers, directors, or
members; and (iii) a non-
(2) A loss on the sale of a profit organization and a
former home. director, trustee, officer,
or key employee of the non-
(3) Continuing mortgage profit organization or his
principal and interest immediate family, either
payments on a home being directly or through
sold. corporations, trusts, or
similar arrangements in which
(4) Income taxes paid by an they hold a controlling
employee related to interest. For example, a non-
reimbursed relocation costs. profit organization may
establish a separate
corporation for the sole
43. Rental costs of buildings and purpose of owning property
equipment. and leasing it back to the
non-profit organization.
a. Subject to the limitations
described in subparagraphs b. d. Rental costs under leases
through d. of this paragraph which are required to be
43, rental costs are treated as capital leases
allowable to the extent that under GAAP are allowable only
the rates are reasonable in up to the amount (as
light of such factors as: explained in subparagraph b)
rental costs of comparable that would be allowed had the
property, if any; market non-profit organization
conditions in the area; purchased the property on the
alternatives available; and, date the lease agreement was
the type, life expectancy, executed. The provisions of
condition, and value of the Financial Accounting
property leased. Rental Standards Board Statement 13,
arrangements should be Accounting for Leases, shall
reviewed periodically to be used to determine whether
determine if circumstances a lease is a capital lease.
have changed and other Interest costs related to
options are available. capital leases are allowable
to the extent they meet the
b. Rental costs under "sale and criteria in subparagraph 23.
lease back" arrangements are Unallowable costs include
allowable only up to the amounts paid for profit,
amount that would be allowed management fees, and taxes
had the non-profit that would not have been
organization continued to own incurred had the non-profit
the property. This amount organization purchased the
would include expenses such facility.
as depreciation or use
allowance, maintenance, 44. Royalties and other costs for use
taxes, and insurance. of patents and copyrights.
65
a. Royalties on a patent or allowable as direct costs, with prior
copyright or amortization of approval by awarding agencies, when
the cost of acquiring by they are necessary for the
purchase a copyright, patent, performance of Federal programs.
or rights thereto, necessary
for the proper performance of
46. Specialized service facilities.
the award are allowable
unless:
a. The costs of services
(1) The Federal Government provided by highly complex or
has a license or the right to specialized facilities
free use of the patent or operated by the non-profit
copyright. organization, such as
computers, wind tunnels, and
(2) The patent or copyright reactors are allowable,
has been adjudicated to be provided the charges for the
invalid, or has been services meet the conditions
administratively determined of either 46 b. or c. and, in
to be invalid. addition, take into account
any items of income or
(3) The patent or copyright Federal financing that
is considered to be qualify as applicable credits
unenforceable. under Attachment A,
subparagraph A.5. of this
(4) The patent or copyright Circular.
is expired.
b. The costs of such services,
b. Special care should be when material, must be
exercised in determining charged directly to
reasonableness where the applicable awards based on
royalties may have arrived at actual usage of the services
as a result of less-than- on the basis of a schedule of
arm's-length bargaining, rates or established
e.g. : methodology that (i) does not
discriminate against
(1) Royalties paid to federally supported
persons, including activities of the non-profit
corporations, affiliated with organization, including usage
the non-profit organization. by the non-profit
organization for internal
(2) Royalties paid to purposes, and (ii) is
unaffiliated parties, designed to recover only the
including corporations, under aggregate costs of the
an agreement entered into in services. The costs of each
contemplation that a Federal service shall consist
award would be made. normally of both its direct
costs and its allocable share
(3) Royalties paid under an of all indirect costs. Rates
agreement entered into after shall be adjusted at least
an award is made to a non- biennially, and shall take
profit organization. into consideration over/under
applied costs of the previous
c. In any case involving a period(s) .
patent or copyright formerly
owned by the non-profit c. Where the costs incurred for
organization, the amount of a service are not material,
royalty allowed should not they may be allocated as
exceed the cost which would indirect costs.
have been allowed had the
non-profit organization d. Under some extraordinary
retained title thereto. circumstances, where it is in
the best interest of the
45. Selling and marketing. Costs of Federal Government and the
selling and marketing any products or institution to establish
services of the non-profit alternative costing
organization are unallowable (unless arrangements, such
allowed under Attachment B. paragraph arrangements may be worked
1. as allowable public relations out with the cognizant
cost. However, these costs are Federal agency.
66
47. Taxes. Contemporaneous purchases of
common items by the non-
profit organization shall be
a. In general, taxes which the regarded as evidence that
organization is required to such items are reasonably
pay and which are paid or usable on the non-profit
accrued in accordance with organization's other work.
GAAP, and payments made to Any acceptance of common
local governments in lieu of items as allocable to the
taxes which are commensurate the
terminated portion of
with the local government Federal award shall f
services received are limited to the extent that
be
allowable, except for (i) the quantities of such items
taxes from which exemptions on hand, in transit, and on
are available to the
organization directly or order are in excess of the
reasonable quantitative
which are available to the requirements of other work.
organization based on an
exemption afforded the
Federal Government and in the b. If in a particular case,
latter case when the awarding despite all reasonable
agency makes available the efforts by the non-profit
necessary exemption organization, certain costs
certificates, (ii) special cannot be discontinued
assessments on land which immediately after the
represent capital effective date of
improvements, and (iii) termination, such costs are
Federal income taxes. generally allowable within
the limitations set forth in
b. Any refund of taxes, and any
this Circular, except that
any such costs continuing
payment to the organization
of interest thereon, which after termination due to the were allowed as award costs, negligent or willful failure
of the non-profit
will be credited either as a
cost reduction or cash organization to discontinue
refund, as appropriate, to such costs shall beunallowable.
the Federal Government.
C. Loss of useful value of
sponsored
Termination costs applicable to special tooling, machinery,
sponsored agreements. and is generally allowable
Termination of awards generally gives if:
rise to the incurrence of costs, or (1) Such special tooling,
the need for special treatment of special machinery, or
costs, which would not have arisen equipment is not reasonably
had the Federal award not been capable of use in the other
terminated. Cost principles covering work of the non-profit
these items are set forth below. They organization,
are to be used in conjunction with
the other provisions of this Circular (2) The interest of the
in termination situations. Federal Government is
protected by transfer of
a. The cost of items reasonably title or by other means
usable on the non-profit deemed appropriate by the
organization's other work awarding agency, and
shall not be allowable unless
the non-profit organization (3) The loss of useful value
submits evidence that it for any one terminated
would not retain such items Federal award is limited to
at cost without sustaining a that portion of the
loss. In deciding whether acquisition cost which bears
such items are reasonably the same ratio to the total
usable on other work of the acquisition cost as the
non-profit organization, the terminated portion of the
awarding agency should Federal award bears to the
consider the non-profit entire terminated Federal
organization's plans and award and other Federal
orders for current and awards for which the special
scheduled activity. tooling, special machinery,
or equipment was acquired.
67
d. Rental costs under unexpired .32 through .37 of
leases are generally Circular A-110
allowable where clearly shown (3) Indirect costs related to
to have been reasonably salaries and wages incurred
necessary for the performance as settlement expenses in
of the terminated Federal subparagraphs (1) and (2) .
award less the residual value Normally, such indirect costs
of such leases, if: shall be limited to fringe
benefits, occupancy cost, and
(1) the amount of such rental immediate supervision.
claimed does not exceed the
reasonable use value of the
property leased for the f. Claims under sub awards,
period of the Federal award including the allocable
and such further period as portion of claims which are
may be reasonable, and common to the Federal award,
and to other work of the non-
(2) the non-profit profit organization are
organization makes all generally allowable,
reasonable efforts to
terminate, assign, settle, or An appropriate share of the
otherwise reduce the cost of non-profit organization's
such lease. There also may be indirect expense may be
included the cost of allocated to the amount of
alterations of such leased settlements with
property, provided such subcontractors and/or
alterations were necessary subgrantees, provided that
for the performance of the the amount allocated is
Federal award, and of otherwise consistent with the
reasonable restoration basic guidelines contained in
required by the provisions of Attachment A. The indirect
the lease. expense so allocated shall
exclude the same and similar
costs claimed directly or
e. Settlement expenses including indirectly as settlement
the following are generally expenses.
allowable:
(1) Accounting, legal, 49. Training costs.
clerical, and similar costs
reasonably necessary for: a. Costs of preparation and
maintenance of a program of
(a) The preparation instruction including but not
and presentation to limited to on-the-job,
the awarding agency of classroom, and apprenticeship
settlement claims and training, designed to
supporting data with increase the vocational
respect to the effectiveness of employees,
terminated portion of including training materials,
the Federal award, textbooks, salaries or wages
unless the termination of trainees (excluding
is for default (see overtime compensation which
Subpart —.61 of might arise therefrom), and
Circular A-110); and (i) salaries of the director
of training and staff when
(b) The termination the training program is
and settlement of conducted by the
subawards, organization; or (ii) tuition
and fees when the training is
in an institution not
(2) Reasonable costs for the operated by the organization,
storage, transportation, are allowable.
protection, and disposition
of property provided by the
Federal Government or b. Costs of part-time education,
acquired or produced for the at an undergraduate or post-
Federal award, except when graduate college level,
grantees or contractors are including that provided at
reimbursed for disposals at a the organization's own
predetermined amount in facilities, are allowable
accordance with Subparts only when the course or
degree pursued is relative to
68
the field in which the d. Costs of attendance of up to
employee is now working or 16 weeks per employee per
may reasonably be expected to year at specialized programs
work; and are limited to: specifically designed to
enhance the effectiveness of
(1) Training materials. executives or managers or to
prepare employees for such
(2) Textbooks. positions are allowable. Such
costs include enrollment
(3) Fees charges by the fees, training materials,
educational institution. textbooks and related
charges, employees' salaries,
(4) Tuition charged by the subsistence, and travel.
educational institution or, Costs allowable under this
in lieu of tuition, paragraph do not include
instructors' salaries and the those for courses that are
related share of indirect part of a degree-oriented
costs of the educational curriculum, which are
institution to the extent allowable only to the extent
that the sum thereof is not set forth in subparagraphs b
in excess of the tuition and c.
which would have been paid to
the participating educational e. Maintenance expense, and
institution. normal depreciation or fair
(5) Salaries and related rental, on facilities owned
or leased by the organization
costs of instructors who are for training purposes are
employees of the allowable to the extent set
organization. forth in paragraphs 11, 27,
(6) Straight-time and 50.
compensation of each employee
for time spent attending f. Contributions or donations to
classes during working hours educational or training
not in excess of 156 hours institutions, including the
per year and only to the donation of facilities or
extent that circumstances do other properties, and
not permit the operation of scholarships or fellowships,
classes or attendance at are unallowable.
classes after regular working
hours; otherwise, such g. Training and education costs
compensation is unallowable. in excess of those otherwise
allowable under subparagraphs
c. Costs of tuition, fees, b and c may be allowed with
training materials, and prior approval of the
textbooks (but not awarding agency. To be
subsistence, salary, or any considered for approval, the
other emoluments) in organization must demonstrate
connection with full-time that such costs are
education, including that consistently incurred
provided at the pursuant to an established
organization's own training and education
facilities, at a post- program, and that the course
graduate (but not or degree pursued is relative
undergraduate) college level, to the field in which the
are allowable only when the employee is now working or
course or degree pursued is may reasonably be expected to
related to the field in which work.
the employee is now working
or may reasonably be expected 50. Transportation costs.
to work, and only where the Transportation costs include freight,
costs receive the prior express, cartage, and postage charges
approval of the awarding relating either to goods purchased,
agency. Such costs are in process, or delivered. These costs
limited to the costs are allowable. When such costs can
attributable to a total readily be identified with the items
period not to exceed one involved, they may be directly
school year for each employee charged as transportation costs or
so trained. In unusual cases added to the cost of such items (see
the period may be extended. paragraph 28) . Where identification
69
with the materials received cannot commercial airfare (coach or
readily be made, transportation costs equivalent), Federal
may be charged to the appropriate Government contract airfare
indirect cost accounts if the (where authorized and
organization follows a consistent, available), or the lowest
equitable procedure in this respect. commercial discount airfare
are unallowable except when
51. Travel costs.
such accommodations would:
(a) require circuitous
routing; (b) require travel
a. General. Travel costs are the during unreasonable hours;
expenses for transportation, (c) excessively prolong
lodging, subsistence, and travel; (d) result in
related items incurred by additional costs that would
employees who are in travel offset the transportation
status on official business savings; or (e) offer
of the non-profit accommodations not reasonably
organization. Such costs may adequate for the traveler's
be charged on an actual cost medical needs. The non-profit
basis, on a per diem or organization must justify and
mileage basis in lieu of document these conditions on
actual costs incurred, or on a case-by-case basis in order
a combination of the two, for the use of first-class
provided the method used is airfare to be allowable in
applied to an entire trip and such cases.
not to selected days of the
trip, and results in charges (2) Unless a pattern of
consistent with those avoidance is detected, the
normally allowed in like Federal Government will
circumstances in the non- generally not question a non-
profit organization's non- profit organization's
federally sponsored determinations that customary
activities. standard airfare or other
discount airfare is
b. Lodging and subsistence. unavailable for specific
Costs incurred by employees trips if the non-profit
and officers for travel, organization can demonstrate
including costs of lodging, either of the following: (a)
other subsistence, and that such airfare was not
incidental expenses, shall be available in the specific
considered reasonable and case; or (b) that it is the
allowable only to the extent non-profit organization's
such costs do not exceed overall practice to make
charges normally allowed by routine use of such airfare.
the non-profit organization
in its regular operations as d. Air travel by other than
the result of the non-profit commercial carrier. Costs of
organization's written travel travel by non-profit
policy. In the absence of an organization-owned, -leased,
acceptable, written non- or -chartered aircraft
profit organization policy include the cost of lease,
regarding travel costs, the charter, operation (including
rates and amounts established personnel costs),
under subchapter I of Chapter maintenance, depreciation,
57, Title 5, United States insurance, and other related
Code ("Travel and Subsistence costs. The portion of such
Expenses; Mileage costs that exceeds the cost
Allowances"), or by the of allowable commercial air
Administrator of General travel, as provided for in
Services, or by the President subparagraph] c., is
(or his or her designee) unallowable.
pursuant to any provisions of
such subchapter shall apply e. Foreign travel. Direct
to travel under Federal charges for foreign travel
awards (48 CFR 31.205-46(a)) . costs are allowable only when
the travel has received prior
c. Commercial air travel. approval of the awarding
agency. Each separate foreign
(1) Airfare costs in excess trip must receive such
of the customary standard approval. For purposes of
70
this provision, `foreign Georgia Tech Research Institute,
travel" includes any travel Atlanta, Georgia
outside Canada, Mexico, the
United States, and any United
States territories and Hanford Environmental Health
possessions. However, the Foundation, Richland, Washington
term "foreign travel" for a
non-profit organization IIT Research Institute, Chicago,
located in a foreign country Illinois
means travel outside that
country.
Institute of Gas Technology, Chicago,
Illinois
52. Trustees. Travel and subsistence
costs of trustees (or directors) are
allowable. The costs are subject to Institute for Defense Analysis,
restrictions regarding lodging, Alexandria, Virginia
subsistence and air travel costs
provided in paragraph 51. LMI, McLean, Virginia
Mitre Corporation, Bedford,
Massachusetts
ATTACHMENT C
Circular No. A-122 Mitretek Systems, Inc., Falls Church,
Virginia
NON-PROFIT ORGANIZATIONS NOT SUBJECT
TO THIS CIRCULAR National Radiological Astronomy
Observatory, Green Bank, West
Advance Technology Institute (ATI), Virginia
Charleston, South Carolina
National Renewable Energy Laboratory,
Aerospace Corporation, El Segundo, Golden, Colorado
California
Oak Ridge Associated Universities,
American Institutes of Research Oak Ridge, Tennessee
(AIR), Washington D.C.
Rand Corporation, Santa Monica,
Argonne National Laboratory, Chicago, California
Illinois
Research Triangle Institute, Research
Atomic Casualty Commission, Triangle Park, North Carolina
Washington, D.C.
Riverside Research Institute, New
Battelle Memorial Institute, York, New York
Headquartered in Columbus, Ohio
South Carolina Research Authority
Brookhaven National Laboratory, (SCRA), Charleston, South Carolina
Upton, New York
Southern Research Institute,
Charles Stark Draper Laboratory, Birmingham, Alabama
Incorporated, Cambridge,
Massachusetts Southwest Research Institute, San
Antonio, Texas
CNA Corporation (CNAC), Alexandria,
Virginia SRI International, Menlo Park,
California
Environmental Institute of Michigan,
Ann Arbor, Michigan Syracuse Research Corporation,
Syracuse, New York
Georgia Institute of
Technology/Georgia Tech Applied Universities Research Association,
Research Corporation/ Incorporated (National Acceleration
Lab), Argonne, Illinois
71
Urban Institute, Washington D.C.
Non-profit insurance companies, such
as Blue Cross and Blue Shield
Organizations
Other non-profit organizations as
negotiated with awarding agencies
72
Appendix B
OMB Circular A-133
Audits of States, Local Governments, and Non Profit Organizations
73
Circular No. A-133 6. Required Action. The specific
Revised to show changes published in the requirements and responsibilities of Federal
Federal Register June 27, 2003 agencies and non-Federal entities are set
Audits of States, Local Governments, and forth in the Attachment to this Circular.
Non-Profit Organizations Federal agencies making awards to non-
Federal entities, either directly or
indirectly, shall adopt the language in the
Accompanying Federal Register Materials: Circular in codified regulations as provided
-- Audits of States, Local Governments, and in Section 10 (below), unless different
Non-Profit Oan.izations provisions are required by Federal statute
June 30, 1997
27, 2003 or are approved by the Office of Management
-- Revision published June and Budget (OMB)
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND 7. OMB Responsibilities. OMB will review
ESTABLISHMENTS Federal agency regulations and
implementation of this Circular, and will
SUBJECT: Audits of States, Local provide interpretations of policy
Governments, and Non-Profit Organizations requirements and assistance to ensure
uniform, effective and efficient
1. Purpose. This Circular is issued pursuant implementation.
to the Single Audit Act of 1.984, P.L. 98-
502, and the Single Audit Act Amendments of 8. Information Contact. Further information
1996, P.L. 104-156. It sets forth standards concerning Circular A-133 may be obtained by
for obtaining consistency and uniformity contacting the Financial Standards and
among Federal agencies for the audit of Reporting Branch, Office of Federal
States, local governments, and non—profit Financial Management, Office of Management
organizations expending Federal awards. and Budget, Washington, DC 20503, telephone
(202) 395-3993.
2. Authority. Circular A-133 is issued under
the authority of sections 503, 1111, and 9. Review Date. This Circular will have a
7501 et seq. of title 31, United States policy review three years from the date of
Code, and Executive Orders 8248 and 11541. issuance.
3. Rescission and Supersession. This 10. Effective Dates. The standards set forth
Circular rescinds Circular A-128, "Audits of in § .400 of the Attachment to this
State and Local Governments," issued April Circular, which apply directly to Federal
12, 1985, and supersedes the prior Circular agencies, shall be effective July 1, 1996,
A-133, "Audits of Institutions of Higher and shall apply to audits of fiscal years
Education and Other Non-Profit beginning after June 30, 1996, except as
Institutions," issued April 22, 1996. For otherwise specified in §_.400(a) .
effective dates, see paragraph 10.
The standards set forth in this
4. Policy. Except as provided herein, the Circular that Federal agencies shall
standards set forth in this Circular shall apply to non-Federal entities shall
be applied by all Federal agencies. If any be adopted by Federal agencies in
statute specifically prescribes policies or codified regulations not later than
specific requirements that differ from the 60 days after publication of this
standards provided herein, the provisions of final revision in the Federal
the subsequent statute shall govern. Register, so that they will apply to
audits of fiscal years beginning
after June 30, 1996, with the
Federal agencies shall apply the provisions exception that § .305(b) of the
of the sections of this Circular to non- Attachment applies to audits of
Federal entities, whether they are fiscal years beginning after June 30,
recipients expending Federal awards received 1998. The requirements of Circular A-
directly from Federal awarding agencies, or 128, although the Circular is
are subrecipients expending Federal awards
rescinded, and the 1990 version of
received from a pass-through entity (a
Circular A-133 remain in effect for
recipient or another subrecipient) . audits of fiscal years beginning on
or before June 30, 1996.
This Circular does not apply to non-U.S. The revisions published in the
based entities expending Federal awards Federal Register June 27, 2003, are
received either directly as a recipient or effective for fiscal years ending
indirectly as a subrecipient. after December 31, 2003, and early
implementation is not permitted with
the exception of the definition of
5. Definitions. The definitions of key terms oversight agency for audit, which is
used in this Circular are contained in effective July 28, 2003.
§ .105 in the Attachment to this Circular.
74
/S/ Table of Contents
Augustine T. Smythe
Acting Director
Subpart A--General
Attachment
§_.100 Purpose.
PART_ --AUDITS OF STATES, LOCAL
GOVERNMENTS, AND NON-PROFIT This part sets forth standards for
ORGANIZATIONS obtaining consistency and uniformity
among Federal agencies for the audit
of non-Federal entities expending
Subpart A--General_ Federal awards.
Sec. §_.105 Definitions.
__.100 Purpose.
.105 Definitions.
— Auditee means any non-Federal entity
that expends Federal awards which
Subpart B--Audits must be audited under this part.
Auditor means an auditor, that is a
_.200 Audit requirements. public accountant or a Federal, State
_.205 Basis for determining Federal or local government audit
expended. organization, which meets the general
awards
_.210 expendSubrecipient and vendor standards specified in generally
determinations. accepted government auditing
215 Relation to other audit standards (GAGAS) . The term auditor
-- does not include internal auditors of
requirements.
_. non-profit organizations.
220 Frequency of audits.
_.225 Sanctions.
_.230 Audit costs. Audit finding means deficiencies
_.235 Program-specific audits. which the auditor is required by
§ .510(a) to report in the schedule
Subprt C_-Auditees of findings and questioned costs.
a
CFDA number means the number assigned
—.300 Auditee responsibilities. to a Federal program in the Catalog
305 Auditor selection. of Federal Domestic Assistance
310 Financial statements. (CFDA) .
_.315 Audit findings follow-up.
_.320 Report submission.
Cluster of programs means a grouping
Subpart D--Federal Agencies and Pass- of closely related programs that
Through Entities share common compliance requirements.
The types of clusters of programs are
research and development (R&D),
_.400 Responsibilities. student financial aid (SFA), and
_.405 Management decision. other clusters. "Other clusters" are
as defined by the Office of
Management and Budget (OMB) in the
Subpart E--Auditors compliance supplement or as
designated by a State for Federal
_.500 Scope of audit. awards the State provides to its
_.505 Audit reporting. subrecipients that meet the
_.510 Audit findings. definition of a cluster of programs.
_.515 Audit working papers. When designating an "other cluster,"
_.520 Major program determination. a State shall identify the Federal
_.525 Criteria for Federal program awards included in the cluster and
risk. advise the subrecipients of
_.530 Criteria for a low-risk compliance requirements applicable to
auditee. the cluster, consistent with
§ .400(d) (1) and §_.400(d) (2),
respectively. A cluster of programs
Appendix A to Part _ - Data shall be considered as one program
Collection Form (Form SF-SAC) . for determining major programs, as
described in §_.520, and, with the
Appendix B to Part _ - Circular A- exception of R&D as described in
133 Compliance Supplement. §_•200(c), whether a program-
specific audit may be elected.
75
Cognizant agency for audit means the Federal program means:
Federal agency designated to p=arry
out the responsibilities described in
§ .400(a) . (1) All Federal awards to a non-
§—.400(a) .
on-
- Federal entity assigned a single
number in the CFDA.
Compliance supplement refers to the
Circular A-133 Compliance Supplement,
included as Appendix B to Circular A- (2) When no CFDA number is assigned,
all Federal awards from the same
133, or such documents as OMB or its
designee may issue to replace it. agency made for the same purpose
should be combined and considered one
This document is available from the
Government Printing Office, program.
Superintendent of Documents,
Washington, DC 20402-9325. (3) Notwithstanding paragraphs (1)
and (2) of this definition, a cluster
Corrective action means action taken of programs. The types of clusters of
by the auditee that: programs are:
(1) Corrects identified deficiencies; (i) Research and development (R&D) ;
(2) Produces recommended (ii) Student financial aid (SEA); and
improvements; or
(iii) "Other clusters," as described
(3) Demonstrates that audit findings in the definition of cluster of
are either invalid or do not warrant programs in this section.
auditee action.
GAGAS means generally accepted
Federal agency has the same meaning government auditing standards issued
as the term agency in Section 551(1) by the Comptroller General of the
of title 5, United States Code. United States, which are applicable
to financial audits.
Federal award means Federal financial
assistance and Federal cost- Generally accepted accounting
assistance an contracts that non- principles has the meaning specified
reimbursemin generally accepted auditing
Federal entities receive directly
from Federal awarding agencies or standards issued by the American
iInstitute of Certified Public
indirectly from pass-through
Accountants (AICPA)
entities. It does not include
procurement contracts, under grants
or contracts, used to buy goods or Indian tribe means any Indian tribe,
services from vendors. Any audits of band, nation, or other organized
such vendors shall be covered by the group or community, including any
terms and conditions of the contract. Alaskan Native village or regional or
Contracts to operate Federal village corporation (as defined in,
Government owned, contractor operated or established under, the Alaskan
facilities (GOCOs) are excluded from Native Claims Settlement Act) that is
the requirements of this part. recognized by the United States as
eligible for the special programs and
Federal awarding agency means the services provided by the United
Federal agency that provides an award States to Indians because of their
directly to the recipient. status as Indians.
Federal financial assistance means Internal control means a process,
assistance that non-Federal entities effected by an entity's management
receive or administer in the form of and other personnel, designed to
grants, loans, loan guarantees, provide reasonable assurance
property (including donated surplus regarding the achievement of
property), cooperative agreements, objectives in the following
interest subsidies, insurance, food categories:
commodities, direct appropriations,
and other assistance, but does not (1) Effectiveness and efficiency of
include amounts received as operations;
reimbursement for services rendered
to individuals as described in
§—.205(h) and § .205(i) . (2) Reliability of financial
reporting; and
76
(3) Compliance with applicable laws pass-through entity in accordance
and regulations. with § .215(c) .
Internal control pertaining to the Management decision means the
compliance requirements for Federal evaluation by the Federal awarding
programs (Internal control over agency or pass-through entity of the
Federal programs) means a process-- audit findings and corrective action
effected by an entity's management plan and the issuance of a written
and other personnel--designed to decision as to what corrective action
provide reasonable assurance is necessary.
regarding the achievement of the
following objectives for Federal
programs: Non-Federal entity means a State,
local government, or non-profit
organization.
(1) Transactions are properly
recorded and accounted for to:
Non-profit organization means:
(i) Permit the preparation of
reliable financial statements and (1) any corporation, trust,
Federal reports; association, cooperative, or other
organization that:
(ii) Maintain accountability over
assets; and (i) Is operated primarily for
scientific, educational, service,
charitable, or similar purposes in
(iii) Demonstrate compliance with the public interest;
laws, regulations, and other
compliance requirements;
(ii) Is not organized primarily for
profit; and
(2) Transactions are executed in
compliance with:
(iii) Uses its net proceeds to
maintain, improve, or expand its
(i) Laws, regulations, and the operations; and
provisions of contracts or grant
agreements that could have a direct
and material effect on a Federal (2) The term non-profit organization
program; and includes non-profit institutions of
higher education and hospitals.
(ii) Any other laws and regulations
that are identified in the compliance OMB means the Executive Office of the
supplement; and President, Office of Management and
Budget.
(3) Funds, property, and other assets
are safeguarded against loss from Oversight agency for audit means the
unauthorized use or disposition. Federal awarding agency that provides
the predominant amount of direct
funding to a recipient not assigned a
Loan means a Federal loan or loan cognizant agency for audit. when
guarantee received or administered by there is no direct funding, the
a non-Federal entity. Federal agency with the predominant
indirect funding shall assume the
Local government means any unit of oversight responsibilities. The
local government within a State, duties of the oversight agency for
including a county, borough, audit are described in §_.400(b) .
municipality, city, town, township,
parish, local public authority, Effective July 28, 2003, the
special district, school district, following is added to this
intrastate district, council of definition:
governments, and any other A Federal agency with oversight for
instrumentality of local government. an auditee may reassign oversight to
another Federal agency which provides
Major program means a Federal program substantial funding and agrees to be
determined by the auditor to be a the oversight agency for audit.
major program in accordance with Within 30 days after any
§_.520 or a program identified as a reassignment, both the old and the
major program by a Federal agency or new oversight agency for audit shall
77
notify the auditee, and, if known, statements and the Federal awards as
the auditor of the reassignment. described in § .500.
Pass-through entity means a non- State means any State of the United
Federal entity that provides a States, the District of Columbia, the
Federal award to a subrecipient to Commonwealth of Puerto Rico, the
carry out a Federal program. Virgin Islands, Guam, American Samoa,
the Commonwealth of the [Northern
Program-specific audit means an audit Mariana Islands, and the Trust
of one Federal program as provided Territory of the Pacific Islands, any
for in §—.200(c) and § .235. instrumentality thereof, any multi-
State, regional, or interstate entity
which has governmental functions, and
Questioned cost means a cost that is any Indian tribe as defined in this
questioned by the auditor because of section.
an audit finding:
Student Financial Aid (SFA) includes
(1) Which resulted from a violation those programs of general student
or possible violation of a provision assistance, such as those authorized
of a law, regulation, contract, by Title IV of the Higher Education
grant, cooperative agreement, or Act of 1965, as amended, (20 U.S.C.
other agreement or document governing 1070 et seq.) which is administered
the use of Federal funds, including by the U.S. Department of Education,
funds used to match Federal funds; and similar programs provided by
other Federal agencies. It does not
(2) Where the costs, at the time of include programs which provide
fellowships or similar Federal awards
the audit, are not supported by to students on a competitive basis,
adequate documentation; or or for specified studies or research.
(3) Where the costs incurred appear subrecipient means a non-Federal
unreasonable and do not reflect the entity that expends Federal awards
actions a prudent person would take
in the circumstances. received from a pass-through entity
to carry out a Federal program, but
does not include an individual that
Recipient means a non-Federal entity is a beneficiary of such a program. A
that expends Federal awards received subrecipient may also be a recipient
directly from a Federal awarding of other Federal awards directly from
agency to carry out a Federal a Federal awarding agency. Guidance
program. on distinguishing between a
subrecipient and a vendor is provided
Research and development (R&D) means in § .210.
all research activities, both basic
and applied, and all development Types of compliance requirements
activities that are performed by a refers to the types of compliance
non-Federal entity. Research is requirements listed in the compliance
defined as a systematic study supplement. Examples include:
directed toward fuller scientific activities allowed or unallowed;
knowledge or understanding of the allowable costs/cost principles; cash
subject studied. The term research management; eligibility; matching,
also includes activities involving level of effort, earmarking; and,
the training of individuals in reporting.
research techniques where such
activities utilize the same Vendor means a dealer, distributor,
facilities as other research and merchant, or other seller providing
development activities and where such goods or services that are required
activities are not included in the for the conduct of a Federal program.
instruction function. Development is These goods or services may be for an
the systematic use of knowledge and organization's own use or for the use
understanding gained from research of beneficiaries of the Federal
directed toward the production of ram. Additional
useful materials, devices, systems, pro g onal guidance on
or methods, including design and distinguishing between a subrecipient
development of prototypes and and a vendor is provided in §_.210.
processes.
Table of Contents
Single audit means an audit which
includes both the entity's financial Subpart B--Audits
78
§_.200 Audit requirements. §_.205 Basis for determining
Federal awards expended.
(a) Audit required. Non-Federal
entities that expend $300,000 (a) Determining Federal awards
($500,000 for fiscal years ending expended. The determination of when
after December 31, 2003) or more in a an award is expended should be based
year in Federal awards shall have a on when the activity related to the
single or program-specific audit award occurs. Generally, the activity
conducted for that year in accordance pertains to events that require the
with the provisions of this part. non-Federal entity to comply with
Guidance on determining Federal. laws, regulations, and the provisions
awards expended is provided in of contracts or grant agreements,
§_.205. such as: expenditure/expense
transactions associated with grants,
(b) Singie audit. Non-Federal cost-reimbursement contracts,
entities that expend $300,000 cooperative agreements, and direct
($500,000 for fiscal years ending appropriations; the disbursement of
after December 31, 2003) or more in a funds passed through to
year in Federal awards shall have a subrecipients; the use of loan
single audit conducted in accordance proceeds under loan and loan
with §_.500 except when they elect guarantee programs; the receipt of
to have a program-specific audit property; the receipt of surplus
conducted in accordance with property; the receipt or use of
paragraph (c) of this section. program income; the distribution or
consumption of food commodities; the
disbursement of amounts entitling the
(c) Program-specific audit election. non-Federal entity to an interest
When an auditee expends Federal subsidy; and, the period when
awards under only one Federal program insurance is in force.
(excluding R&D) and the Federal
program's laws, regulations, or grant
agreements do not require a financial (b) Loan and loan guarantees (loans)
statement audit of the auditee, the Since the Federal Government is at
auditee may elect to have a program- risk for loans until the debt is
specific audit conducted in repaid, the following guidelines
accordance with §_.235. A program- shall be used to calculate the value
specific audit may not be elected for of Federal awards expended under loan
R&D unless all of the Federal awards programs, except as noted in
expended were received from the same paragraphs (e) and (d) of this
Federal agency, section:
g y, or the same Federal
agency and the same pass-through
entity, and that Federal agency, or (1) Value of new loans made or
pass-through entity in the case of a received during the fiscal year; plus
subrecipient, approves in advance a
program-specific audit.
(2) Balance of loans from previous
years for which the Federal
(d) Exemption when Federal awards Government imposes continuing
expended are less than $300,000 compliance requirements; plus
($500,000 for fiscal years ending
after December 31, 2003). Non-Federal
entities that expend less than (3) Any interest subsidy, cash, or
$300,000 ($500,000 for fiscal years administrative cost allowance
ending after December 31, 2003) a received.
year in Federal awards are exempt
from Federal audit requirements for (c) Loan and loan guarantees (loans)
that year, except as noted in at institutions of higher education.
§_.215(a), but records must be when loans are made to students of an
available for review or audit by institution of higher education but
appropriate officials of the Federal the institution does not make the
agency, pass-through entity, and loans, then only the value of loans
General Accounting Office (GAO) . made during the year shall be
considered Federal awards expended in
(e) Federally Funded Research and that year. The balance of loans for
Development Centers (FFRDC) . previous years is not included as
Management of an auditee that owns or Federal awards expended because the
operates a FFRDC may elect to treat lender accounts for the prior
the FFRDC as a separate entity for balances.
purposes of this part.
79
(d) Prior loan and loan guarantees (a) General. An auditee may be a
(loans) . Loans, the proceeds of which recipient, a subrecipient, and a
were received and expended in prior- vendor. Federal awards expended as a
years, are not considered Federal recipient or a subrecipient would be
awards expended under this part when subject to audit under this part. The
the laws, regulations, and the payments received for goods or
provisions of contracts or grant services provided as a vendor would
agreements pertaining to such loans not be considered Federal awards. The
impose no continuing compliance guidance in paragraphs (b) and (c) of
requirements other than to repay the this section should be considered in
loans. determining whether payments
constitute a Federal award or a
(e) Endowment funds. The cumulative payment for goods and services.
balance of Federal awards for
endowment funds which are federally (b) Federal award. Characteristics
restricted are considered awards indicative of a Federal award
expended in each year in which the received by a subrecipient are when
funds are still restricted. the organization:
(f) Free rent. Free rent_ received by (1) Determines who is eligible to
itself is not considered a Federal receive what Federal financial
award expended under this part. assistance;
However, free rent received as part
of an award to carry out a Federal
program shall be included in (2) Has its performance measured
determining Federal awards expended against whether theobjectives of the
and subject to audit under this part. Federal program are, met;
(g) Valuing non-cash assistance. (3) Has responsibility for
Federal non-cash assistance, such as programmatic decision making;
free rent, food stamps, food
commodities, donated property, or (4) Has responsibility for adherence
donated surplus property, shall be to applicable Federal program
valued at fair market value at the compliance requirements; and
time of receipt or the assessed value
provided by the Federal agency.
(5) Uses the Federal funds to carry
out a program of the organization as
(h) Medicare. Medicare payments to a compared to providing goods or
non-Federal entity for providing services for a program of the pass-
patient care services to Medicare through entity.
eligible individuals are not
considered Federal awards expended
under this part. (c) Payment for goods and services.
Characteristics indicative of a
payment for goods and services
(i) Medicaid. Medicaid payments to a received by a vendor are when the
subrecipient for providing patient organization:
care services to Medicaid eligible
individuals are not considered
Federal awards expended under this (1) Provides the goods and services
part unless a State requires the within normal business operations;
funds to be treated as Federal awards
expended because reimbursement is on (2) Provides similar goods or
a cost-reimbursement basis. services to many different
purchasers;
(j) Certain loans provided by the
National Credit Union Administration. (3) Operates in a competitive
For purposes of this part, loans made environment;
from the National Credit Union Share
Insurance Fund and the Central
Liquidity Facility that are funded by (4) Provides goods or services that
contributions from insured are ancillary to the operation of the
institutions are not considered Federal program; and
Federal awards expended.
(5) Is not subject to compliance
x_.210 Subrecipient and vendor requirements of the Federal program.
determinations.
80
(d) Use of judgment in making and use such audits. Theprovisions
determination. There may be unusual of this part neither limit the
circumstances or exceptions to the authority of Federal agencies,
listed characteristics. In making the including their Inspectors General,
determination of whether a or GAO to conduct or arrange for
subrecipient or vendor relationship additional audits (e.g., financial
exists, the substance of the audits, performance audits,
relationship is more important than evaluations, inspections, or reviews)
the form of the agreement. It is not nor authorize any auditee to
expected that all of the constrain Federal agencies from
characteristics will be present and carrying out additional audits. Any
juagment should be used in additional audits shall be planned
determining whether an entity is a and performed in such a way as to
subrecipient or vendor. build upon work performed by other
auditors.
(e) For-profit subrecipient. Since
this part does not apply to for- (b) Federal agency to pay for
profit subrecipients, the pass- additional audits. A Federal agency
thLough entity is responsible for that conducts or contracts for
establishing requirements, as additional audits shall, consistent
necessary, to ensure compliance by with other applicable laws and
for-profit subrecipients. The regulations, arrange for funding the
contract with the for-profit full cost of such additional audits.
subrecipient should describe
applicable compliance requirements
and the for-profit subrecipient's (c) Request for a program to be
compliance responsibility. Methods to audited as a major program: A Federal
ensure compliance for Federal awards agency may request an auditee to have
made to for-profit subrecipients may a particular Federal program audited
include pre-award audits, monitoring as a major program in lieu of the
during the contract, and post-award Federal agency conducting or
audits. arranging for the additional audits.
To allow for planning, such requests
should be made at least 180 days
(f) Compliance responsibility for prior to the end of the fiscal year
vendors. In most cases, the auditee's to be audited. The auditee, after
compliance responsibility for vendors consultation with its auditor, should
is only to ensure that the promptly respond to such request by
procurement, receipt, and payment for informing the Federal agency whether
goods and services comply with laws, the program would otherwise be
regulations, and the provisions of audited as a major program using the
contracts or grant agreements. risk-based audit approach described
Program compliance requirements in §_.520 and, if not, the
normally do not pass through to estimated incremental cost. The
vendors. However, the auditee is Federal agency shall then promptly
responsible for ensuring compliance confirm to the auditee whether it
for vendor transactions which are wants the program audited as a major
structured such that the vendor is program. If the program is to be
responsible for program compliance or audited as a major program based upon
the vendor's records must be reviewed this Federal agency request, and the
to determine program compliance. Federal agency agrees to pay the full
Also, when these vendor transactions incremental costs, then the auditee
relate to a major program, the scope shall have the program audited as a
of the audit shall include major program. A pass-through entity
determining whether these may use the provisions of this
transactions are in compliance with paragraph for a subrecipient.
laws, regulations, and the provisions
of contracts or grant agreements.
§_.220 Frequency of audits.
§_.215 Relation to other audit
requirements. Except for the provisions for
biennial audits provided in
paragraphs (a) and (b) of this
(a) Audit under this part in lieu of section, audits required by this part
other audits. An audit made in shall be performed annually. Any
accordance with this part shall be in biennial audit shall cover both years
lieu of any financial audit required within the biennial period.
under individual Federal awards. To
the extent this audit meets a Federal
agency's needs, it shall rely upon (a) A State or local government that
is required by constitution or
81
statute, in effect on January 1, conducted in accordance with this
1987, to undergo its audits less part.
frequently than annually, is
permitted to undergo its audits
pursuant to this part biennially. (2) The cost of auditing a non-
This requirement must still be in Federal entity which has Federal
effect for the biennial period under awards expended of less than $300,000
audit. ($500,000 for fiscal years ending
after December 31, 2003) per year and
is thereby exempted under §_.200(d)
(b) Any non-profit organization that from having an audit conducted under
had biennial audits for all biennial this part. However, this does not
periods ending between July 1, 1992, prohibit a pass-through entity from
and January 1, 1995, is permitted to charging Federal awards for the cost
undergo its audits pursuant to this of limited scope audits to monitor
part biennially. its subrecipients in accordance with
§_.400(d) (3), provided the
§_.225 Sanctions. subrecipient does not have a single
audit. For purposes of this part,
limited scope audits only include
No audit costs may be charged to agreed-upon procedures engagements
Federal awards when audits required conducted in accordance with either
by this part have not been made or the AICPA's generally accepted
have been made but not in accordance auditing standards or attestation
with this part. In cases of continued standards, that are paid for and
inability or unwillingness to have an arranged by a pass-through entity and
audit conducted in accordance with address only one or more of the
this part, Federal agencies and pass- following types of compliance
through entities shall take requirements: activities allowed or
appropriate action using sanctions unallowed; allowable costs/cost
such as: principles; eligibility; matching,
level of effort, earmarking; and,
(a) Withholding a percentage of
reporting.
Federal awards until the audit is
completed satisfactorily; §_.235 Program-specific audits.
(b) Withholding or disallowing (a) Program-specific audit guide
overhead costs; available. In many cases, a program-
specific audit guide will be
(c) Suspending Federal awards until available to provide specific
guidance to the auditor with respect
the audit is conducted; or P
to internal control, compliance
requirements, suggested audit
(d) Terminating the Federal award. procedures, and audit reporting
requirements. The auditor should
contact the Office of Inspector
§_.230 Audit costs. General of the Federal agency to
determine whether such a guide is
(a) Allowable costs. Unless available. When a current program-
prohibited by law, the cost of audits specific audit guide is available,
made in accordance with the the auditor shall follow GAGAS and
provisions of this part are allowable the guide when performing a program-
charges to Federal awards. The specific audit.
charges may be considered a direct
cost or an allocated indirect cost, (b) Program-specific audit guide not
as determined in accordance with the available. (1) When a program-
provisions of applicable OMB cost specific audit guide is not
principles circulars, the Federal available, the auditee and auditor
Acquisition Regulation (FAR) (48 CFR shall have basically the same
parts 30 and 31), or other applicable responsibilities for the Federal
cost principles or regulations. program as they would have for an
audit of a major program in a single
(b) Unallowable costs. A non-Federal audit.
entity shall not charge the following
to a Federal award: (2) The auditee shall prepare the
financial statement(s) for the
(1) The cost of any audit under the Federal program that includes, at a
Single Audit Act Amendments of 1996 minimum, a schedule of expenditures
(31 U.S.C. 7501 et seq.) not of Federal awards for the program and
82
notes that describe the significant (iii) A report on compliance which
accounting policies used in preparing includes an opinion (or disclaimer of
the schedule, a summary schedule of opinion) as to whether the auditee
prior audit findings consistent with complied with laws, regulations, and
the requirements of §i.315(b), and the provisions of contracts or grant
a corrective action plan consistent agreements which could have a direct
with the requirements of §_.315(c) . and material effect on the Federal
program; and
(3) The auditor shall:
(iv) A schedule of findings and
(i) Perform an audit of the financial questioned costs for the Federal
statement(s) for the Federal program program that includes a summary of
in accordance with GAGAS; the auditor's results relative to the
Federal program in a format
consistent with §_.505(d) (1) and
(ii) Obtain an understanding of findings and questioned costs
internal control and perform tests of consistent with the requirements of
internal control over the Federal §_.505(d) (3) .
program consistent with the
requirements of § .500(c) for a
major program; (c) Report submission for program-
specific audits.
(iii) Perform procedures to determine
whether the auditee has complied with (1) The audit shall be completed and
laws, regulations, and the provisions the reporting required by paragraph
of contracts or grant agreements that (c) (2) or (c) (3) of this section
could have a direct and material submitted within the earlier of 30
effect on the Federal program days after receipt of the auditor's
consistent with the requirements of report(s), or nine months after the
§_.500(d) for a major program; and end of the audit period, unless a
longer period is agreed to in advance
by the Federal agency that provided
(iv) Follow up on prior audit the funding or a different period is
findings, perform procedures to specified in a program-specific audit
assess the reasonableness of the guide. (However, for fiscal years
summary schedule of prior audit beginning on or before June 30, 1998,
findings prepared by the auditee, and the audit shall be completed and the
report, as a current year audit required reporting shall be submitted
finding, when the auditor concludes within the earlier of 30 days after
that the summary schedule of prior receipt of the auditor's report(s),
audit findings materially or 13 months after the end of the
misrepresents the status of any prior audit period, unless a different
audit finding in accordance with the period is specified in a program-
requirements of §_.500(e) . specific audit guide.) Unless
restricted by law or regulation, the
(4) The auditor's report(s) may be in auditee shall make report copies
the form of either combined or available for public inspection.
separate reports and may be organized
differently from the manner presented (2) When a program-specific audit
in this section. The auditor's guide is available, the auditee shall
report(s) shall state that the audit submit to the Federal clearinghouse
was conducted in accordance with this designated by OMB the data collection
part and include the following: form prepared in accordance with
§_.320(b), as applicable to a
(i) An opinion program-specific audit, and the
p (or disclaimer an reporting required b the
opinion) as to whether the financial p g q Y program-
statement(s) of the Federal program specific audit guide to be retained
is presented fairly in all material as an archival copy. Also, the
respects in conformity with the auditee shall submit to the Federal
stated accounting policies; awarding agency or pass-through
entity the reporting required by the
program-specific audit guide.
(ii) A report on internal control
related to the Federal program, which
shall describe the scope of testing (3) When a program-specific audit
of internal control and the results guide is not available, the reporting
of the tests; package for a program-specific audit
shall consist of the financial
statement(s) of the Federal program,
a summary schedule of prior audit
83
findings, and d COrreCtlVe dCtl0n year, name of the Federal agency,. and
plan as described in paragraph (b) (2) name of the pass-through entity.
of this section, and the auditor's
report(s) described in paragraph
(b) (4) of this section. The data (b) Maintain internal control over
collection form prepared in Federal programs that provides
accordance with § .320(b), as reasonable assurance that the auditee
applicable to a program-specific is managing Federal awards in
audit, and one copy of this reporting compliance with laws, regulations,
package shall be submitted to the and the provisions of contracts or
Federal clearinghouse designated by grant agreements that could have a
OMB to be retained as an archival material effect on each of its
copy. Also, when the schedule of Federal programs.
findings and questioned costs
disclosed audit findings or the (c) Comply with laws, regulations,
summary schedule of prior audit and the provisions of contracts or
findings reported the status of any grant agreements related to each of
audit findings, the auditee shall its Federal programs.
submit one copy of the reporting
package to the Federal clearinghouse
on behalf of the Federal awarding (d) Prepare appropriate financial
agency, or directly to the pass- statements, including the schedule of
through entity in the case of a expenditures of Federal awards in
subrecipient. Instead of submitting accordance with §_.310.
the reporting package to the pass-
through entity, when a subrecipient (e) Ensure that the audits required
is not required to submit a reporting by this part are properly performed
package to the pass-through entity, and submitted when due. When
the subrecipient shall provide extensions to the report submission
written notification to the pass- due date required by § .320(a) are
through entity, consistent with the granted by the cognizant or oversight
requirements of §_.320(e) (2) . A agency for audit, promptly notify the
subrecipient may submit a copy of the Federal clearinghouse designated by
reporting package to the pass-through OMB and each pass-through entity
entity to comply with this providing Federal awards of the
notification requirement. extension.
(d; Other sections of this part may (f) Follow up and take corrective
apply. Program-specific audits are action on audit findings, including
subject to §_.100 through preparation of a summaryschedule of
§_.215(b), §_.220 through
prior audit findings and a corrective
§_.230, §_.300 through §_.305, action plan in accordance with
§_.315, §_.320(f) through § .315(b) and § .315(c),
§ .320(j), §_.400 through respectively.
§_.405, §_.510 through §_.515,
and other referenced provisions of
this part unless contrary to the §_.305 Auditor selection.
provisions of this section, a
program-specific audit guide, or (a) Auditor procurement. In procuring
program laws and regulations. audit services, auditees shall follow
the procurement standards prescribed
Table of Contents by the Grants Management Common Rule
(hereinafter referred to as the "A-
102 Common Rule") o bli h d March 11,
Subpart C--Auditees 1988 and amended April 19, 1995
[insert appropriate CFR citation],
§_.300 Auditee responsibilities. Circular A-110, "Uniform
Administrative Requirements for
Grants and Agreements with
The auditee shall: Institutions of Higher Education,
Hospitals and Other Non-Profit
(a) Identify, in its accounts, all Organizations," or the FAR (48 CFR
Federal awards received and expended part 42), as applicable (OMB
and the Federal programs under which Circulars are available from the
they were received. Federal program Office of Administration,
and award identification shall Publications Office, room 2200, New
include, as applicable, the CFDA Executive Office Building,
title and number, award number and Washington, DC 20503) . Whenever
possible, auditees shall make
positive efforts to utilize small
84
businesses, minority-owned firms, and also prepare a schedule of
women's business enterprises, in expenditures Of Federal awards for
procuring audit services as stated in the period covered by the auditee's
the A-102 Common Rule, OMB Circular financial statements. While not
A-110, or the FAR (48 CER part 42), required, the auditee may choose to
as applicable. In requesting provide information requested by
proposals for audit services, the Federal awarding agencies and pass-
objectives and scope of the audit through entities to make the schedule
should be made clear.. Factors to be easier to use. For example, when a
considered in evaluating each Federal program has multiple award
proposal for audit services include years, the auditee may list the
the responsiveness to the request for amount of Federal awards expended for
proposal, relevant experience, each award year separately. At a
availability of staff with minimum, the schedule shall:
professional qualifications and
technical abilities, the results of
external quality control reviews, and (1.) List individual Federal programs
price. by Federal agency. For Federal
programs included in a cluster of
programs, list individual Federal
(b) Restriction on auditor preparing programs within a cluster of
indirect cost proposals. An auditor programs. For R&D, total Federal
who prepares the indirect cost awards expended shall be shown either
proposal or cost allocation plan may by individual award or by Federal
not also be selected to perform the agency and major subdivision within
audit required by this part when the the Federal agency. For example, the
indirect costs recovered by the National Institutes of Health is a
auditee during the prior year major subdivision in the Department
exceeded $1 million. This restriction of Health and Human Services.
applies to the base year used in the
preparation of the indirect cost
proposal or cost allocation plan and (2) For Federal awards received as a
any subsequent years in which the subrecipient, the name of the pass-
resulting indirect cost agreement or through entity and identifying number
cost allocation plan is used to assigned by the pass-through entity
recover costs. To minimize any shall be included.
disruption in existing contracts for
audit services, this paragraph (3) Provide total Federal awards
applies to audits of fiscal years expended for each individual Federal
beginning after Jure 30, 1998. program and the CFDA number or other
identifying number when the CFDA
(c) Use of Federal auditors. Federal information is not available.
auditors may perform all or part of
the work required under this part if (4) Include notes that describe the
they comply fully with the significant accounting policies used
requirements of this part. in preparing the schedule.
§ .310 Financial statements.s. (5) To the extent practical, pass-
through entities should identify in
(a) Financial statements. The auditee the schedule the total amount
shall prepare financial statements provided to subrecipients from each
that reflect its financial position, Federal program.
results of operations or changes in
net assets, and, where appropriate, (6) Include, in either the schedule
cash flows for the fiscal year or a note to the schedule, the value
audited. The financial statements of the Federal awards expended in the
shall be for the same organizational form of non-cash assistance, the
unit and fiscal year that is chosen amount of insurance in effect during
to meet the requirements of this the year, and loans or loan
part. However, organization-wide guarantees outstanding at year end.
financial statements may also include While not required, it is preferable
departments, agencies, and other to present this information in the
organizational units that have schedule.
separate audits in accordance with
§—.500(a) and prepare separate
financial statements. §_.315 Audit findings follow-up.
(b) Schedule of expenditures of (a) General. The auditee is
Federal awards. The auditee shall responsible for follow-up and
85
corrective action on all audit (i) Two years have passed since the
findings. As part of this audit report .in which the finding
responsibility, the auditee shall occurred was submitted to the Federal
prepare a summary schedule of prior clearinghouse;
audit findings. The auditee shall
also prepare a corrective action plan
for current year audit findings. The (ii) The Federal agency or pass-
summary schedule of prior audit through entity is not currently
findings and the corrective action following up with the auditee on the
plan shall include the reference audit finding; and
numbers the auditor assigns to audit
findings under §_.510(c) . Since the (iii) A management decision was not
summary schedule may include audit issued.
findings from multiple years, it
shall include the fiscal year in
which the finding initially occurred. (c) Corrective action plan. At the
completion of the audit, the auditee
shall prepare a corrective action
(b) Summary schedule of prior audit plan to address each audit finding
findings. The summary schedule of included in the current year
prior audit findings shall report the auditor's reports. The corrective
status of all audit findings included action plan shall provide the names)
in the prior audit's schedule of of the contact person(s) responsible
findings and questioned costs for corrective action, the corrective
relative to Federal awards. The action planned, and the anticipated
summary schedule shall- also include completion date. If the auditee does
audit findings reported in the prior not agree with the audit findings or
audit's summary schedule of prior believes corrective action is not
audit findings except audit findings required, then the corrective action
listed as corrected in accordance plan shall include an explanation and
with paragraph (b) (1) of this specific reasons.
section, or no longer valid or not
warranting further action in
accordance with paragraph (b) (4) of §_•320 Report submission.
this section.
(a) General. The audit shall be
(1) when audit findings were fully completed and the data collection
corrected, the summary schedule need form described in paragraph (b) of
only list the audit findings and this section and reporting package
state that corrective action was described in paragraph (e) of this
taken. section shall be submitted within the
earlier of 30 days after receipt of
the auditor's report(s), or nine
(2) When audit findings were not months after the end of the audit
corrected or were only partially period, unless a longer period is
corrected, the summary schedule shall agreed to in advance by the cognizant
describe the planned corrective or oversight agency for audit.
action as well as any partial (However, for fiscal years beginning
corrective action taken. on or before June 30, 1998, the audit
shall be completed and the data
(3) When corrective action taken is collection form and reporting package
significantly different from shall be submitted within the earlier
corrective action previously reported of 30 days after receipt of the
in a corrective action plan or in the auditor's report(s), or 13 months
Federal agency's or pass-through after the end of the audit period.)
entity's management decision, the Unless restricted by law or
summary schedule shall provide an regulation, the auditee shall make
explanation. copies available for public
inspection.
(4) When the auditee believes the
audit findings are no longer valid or (b) Data Collection. (1) The auditee
do not warrant further action, the shall submit a data collection form
reasons for this position shall be which states whether the audit was
described in the summary schedule. A completed in accordance with this
valid reason for considering an audit part and provides information about
finding as not warranting further the auditee,- its Federal programs,
action is that all of the following and the results of the audit. The
have occurred: form shall be approved by OMB,
available from the Federal
clearinghouse designated by OMB, and
86
include data elements similar to (ix) The Catalog of Federal Domestic
those presented in this paragraph. A Assistance (CFDA) number for each
senior level representative of the Federal program, as applicable.
auditee (e.g., State controller,
director of finance, chief executive
officer, or chief financial officer) (x) The name of each Federal program
shall sign a statement to be included and identification of each major
as part of the form certifying that: program. Individual programs within a
the auditee complied with the cluster of programs should be listed
requirements of this part, the form in the same level of detail as they
was prepared in accordance with this are listed in the schedule of
part (and the instructions expenditures of Federal awards.
accompanying the form), and the
information included in the form, in (xi) The amount of expenditures in
its entirety, are accurate and the schedule of expenditures of
complete. Federal awards associated with each
Federal program.
(2) The data collection form shall
include the following data elements: (xii) For each Federal program, a yes
or no statement as to whether there
(i) The type of report the auditor are audit findings in each of the
issued on the financial statements of following types of compliance
the auditee (i.e., unqualified requirements and the total amount of
opinion, qualified opinion, adverse any questioned costs:
opinion, or disclaimer of opinion) .
(A) Activities allowed or unallowed.
(ii) where applicable, a statement
that reportable conditions in (B) Allowable costs/cost principles.
internal control were disclosed by
the audit of the financial statements
and whether any such conditions were (C) Cash management.
material weaknesses.
(D) Davis-Bacon Act.
(iii) A statement as to whether the
audit disclosed any noncompliance (E) Eligibility.
which is material to the financial
statements of the auditee.
(F) Equipment and real property
(iv) Where applicable, a statement management.
that reportable conditions in
internal control over major programs (G) Matching, level of effort,
were disclosed by the audit and earmarking.
whether any such conditions were
material weaknesses. (H) Period of availability of Federal
funds.
(v) The type of report the auditor
issued on compliance for major (I) Procurement and suspension and
programs (i.e., unqualified opinion, debarment.
qualified opinion, adverse opinion,
or disclaimer of opinion) .
(J) Program income.
(vi) A list of the Federal awarding
agencies which will receive a copy of (K) Real property acquisition and
the reporting package pursuant to relocation assistance.
§_.320(d) (2) of OMB Circular A-133.
(L) Reporting.
(vii) A yes or no statement as to
whether the auditee qualified as a (M) Subrecipient monitoring.
low-risk auditee under §_.530 of
OMB Circular A-133.
(N) Special tests and provisions.
(viii) The dollar threshold used to
distinguish between Type A and Type B (xiii) Auditee Name, Employer
programs as defined in §_.520(b) of Identification Number(s), Name and
OMB Circular A-133. Title of Certifying Official,
87
Telephone Number, Signature, and (2) Each Federal awarding agency when
Date. the schedule of findings and
questioned costs disclosed audit
(xiv) Auditor Name, Name and Title of findings relating to Federal awards
Contact Person, Auditor Address, that the Federal awarding agency
Auditor Telephone Number, Signature, provided directly or the summary
and Date. schedule of prior audit findings
reported the status of any audit
findings relating to Federal awards
(xv) Whether the auditee has either a that the Federal awarding agency
cognizant or oversight agency for provided directly.
audit.
(e) Additional submission by
(xvi) The name of the cognizant or subrecipients. (1) In addition to the
oversight agency for audit determined requirements discussed in paragraph
in accordance with §_.400(a) and (d) of this section, auditees that
§_.400(b), respectively. are also subrecipients shall submit
to each pass-through entity one copy
(3) Using the information included in of the reporting package described in
the reporting package described in paragraph (c) of this section for
each pass-through entity when the
paragraph (c) of this section, the
auditor shall complete the applicable schedule of findings and questioned
sections of the form. The auditor costs disclosed audit findings
shall sign a statement to be included relating to Federal awards that the
as part of the data collection form pass-through entity provided or the
that indicates, at a minimum, the summary schedule of prior audit
source of the information included in findings reported the status of any
the form, the auditor's
audit findings relating to Federal responsibility for the information, awards that the pass-through entityprovided.
that the form is not a substitute for
the reporting package described in
paragraph (c) of this section, and (2) Instead of submitting the
that the content of the form is reporting package to a pass-through
limited to the data elements entity, when a subrecipient is not
prescribed by OMB. required to submit a reporting
package to a pass-through entity
pursuant to paragraph (e) (1) of this
Reporting package. The reporting section, the subrecipient shall
package shall include the: provide written notification to the
pass-through entity that: an audit of
(1) Financial statements and schedule the subrecipient was conducted in
of expenditures of Federal awards accordance with this part (including
discussed in §_.310(a) and the period covered by the audit and
§_.310(b), respectively; the name, amount, and CFDA number of
the Federal award(s) provided by the
pass-through entity); the schedule of
(2) Summary schedule of prior audit findings and questioned costs
findings discussed in §_.315(b); disclosed no audit findings relating
to the Federal award(s) that the
(3) Auditor's report(s) discussed in pass-through entity provided; and,
§_.505; and the summary schedule of prior audit
findings did not report on the status
of any audit findings relating to the
(4) Corrective action plan discussed Federal award(s) that the pass-
in §_.315(c) . through entity provided. A
subrecipient may submit a copy of the
(d) Submission to clearinghouse. All reporting package described in
auditees shall submit to the Federal paragraph (c) of this section to a
clearinghouse designated by OMB the pass-through entity to comply with
data collection form described in this notification requirement.
paragraph (b) of this section and one
copy of the reporting package (f) Requests for report copies. In
described in paragraph (c) of this response to requests by a Federal
section for: agency or pass-through entity,
auditees shall submit the appropriate
(1) The Federal clearinghouse to copies of the reporting package
retain as an archival copy; and described in paragraph (c) of this
section and, if requested, a copy of
88
any management letters issued by the Following is effective for fiscal
auditor. years ending on or before
December 31, 2003: To provide for
(g) Report retention requirements. continuity of cognizance, the
Auditees shall keep one copy of the determination of the predominant
data collection form described in amount of direct funding shall be
paragraph (b) of this section and one based upon direct Federal awards
copy of the reporting package expended in the recipient's fiscal
described in paragraph (c) of this years ending in 1995, 2000, 2005, and
section on file for three years from every fifth year thereafter. For
the date of submission to the Federal example, audit cognizance for periods
clearinghouse designated by OMB. ending in 1997 through 2000 will be
Pass-through entities shall keep determined based on Federal awards
subrecipients' submissions on file expended in 1995. (However, for
for three years from date of receipt. States and local governments that
expend more than $25 million a year
in Federal awards and have previously
(h) Clearinghouse responsibilities. assigned cognizant agencies for
The Federal clearinghouse designated audit, the requirements of this
by OMB shall distribute the reporting paragraph are not effective until
packages received in accordance with fiscal years beginning after June 30,
paragraph (d) (2) of this section and 2000.)
§_.235(c) (3) to applicable Federal
awarding agencies, maintain a data
base of completed audits, provide Following is effective for fiscal
appropriate information to Federal years ending after December 31, 2003:
agencies, and follow up with known The determination of the predominant
auditees which have not submitted the amount of direct funding shall be
required data collection forms and based upon direct Federal awards
reporting packages. expended in the recipient's fiscal
years ending in 2004, 2009, 2014, and
every fifth year thereafter. For
(i) Clearinghouse address. The example, audit cognizance for periods
address of the Federal clearinghouse ending in 2006 through 2010 will be
currently designated by OMB is determined based on Federal awards
Federal Audit Clearinghouse, Bureau expended in 2004. (However, for 2001
of the Census, 1201 E. 10th Street, through 2005, the cognizant agency
Jeffersonville, IN 47132. for audit is determined based on the
predominant amount of direct Federal
(j) Electronic filing. Nothing in awards expended in the recipent's
this art shall fiscal year ending in 2000) .
p preclude electronic
submissions to the Federal
clearinghouse in such manner as may Notwithstanding the manner in which
be approved by OMB. With OMB audit cognizance is determined, a
approval, the Federal clearinghouse Federal awarding agency with
may pilot test methods of electronic cognizance for an auditee may
submissions. reassign cognizance to another
Federal awarding agency which
Table of Contents provides substantial direct funding
and agrees to be the cognizant agency
for audit. Within 30 days after any
Subpart D--Federal Agencies and Pass- reassignment, o e old and the
Through Entities new cognizant agency for audit shall
notify the auditee, and, if known,
the auditor of the reassignment. The
x_.400 Responsibilities. cognizant agency for audit shall:
(a) Cognizant agency for audit (1) Provide technical audit advice
responsibilities. Recipients and liaison to auditees and auditors.
expending more than $25 million ($50
million for fiscal years ending after
December 31, 2003) a year in Federal (2) Consider auditee requests for
awards shall have a cognizant agency extensions to the report submission
for audit. The designated cognizant due date required by §_.320(a) . The
agency for audit shall be the Federal cognizant agency for audit may grant
awarding agency that provides the extensions for good cause.
predominant amount of direct funding
to a recipient unless OMB makes a (3) Obtain or conduct quality control
specific cognizant agency for audit reviews of selected audits made by
assignment. non-Federal auditors, and provide the
89
results, when appropriate, to other (1) Shall provide technical advice to
interested organizations. auditees and auditors as requested.
(4) Promptly inform other affected (2) May assume all or some of the
Federal agencies and appropriate responsibilities normally performed
Federal law enforcement officials of by a cognizant agency for audit.
any direct reporting by the auditee
or its auditor of irregularities or
illegal acts, as required by GAGAS or (c) Federal awarding agency
laws and regulations. responsibilities. The Federal
awarding agency shall perform the
following for the Federal awards it
(5) Advise the auditor and, where makes:
appropriate, the auditee of any
deficiencies found in the audits when
the deficiencies require corrective (1) Identify Federal awards made by
action by the auditor. When advised informing each recipient of the CFDA
of deficiencies, the auditee shall title and number, award name and
work with the auditor to take number, award year, and if the award
corrective action. If corrective is for R&D. When some of this
action is riot taken, the cognizant information is not available, the
agency for audit shall notify the Federal agency shall provide
auditor, the auditee, and applicable inforination necessary to clearly
Federal awarding agencies and pass- describe the Federal award.
through entities of the facts and
make recommendations for follow-up (2) Advise recipients of requirements
action. Major inadequacies or imposed on them by Federal laws,
repetitive substandard performance by regulations, and the provisions of
auditors shall be referred to contracts or grant agreements.
appropriate State licensing agencies
and professional bodies for
disciplinary action. (3) Ensure that audits are completed
and reports are received in a timely
manner and in accordance with the
(6) Coordinate, to the extent requirements of this part.
practical, audits or reviews made by
or for Federal agencies that are in
addition to the audits made pursuant (4) Provide technical advice and
to this part, so that the additional counsel to auditees and auditors as
audits or reviews build upon audits requested.
performed in accordance with this
part. (5) Issue a management decision on
audit findings within six months
(7) Coordinate a management decision after receipt of the audit report and
for audit findings that affect the ensure that the recipient takes
Federal programs of more than one appropriate and timely corrective
agency. action.
(8) Coordinate the audit work and (6) Assign a person responsible for
reporting responsibilities among providing annual updates of the
auditors to achieve the most cost- compliance supplement to OMB.
effective audit.
(d) Pass-through entity
(9) For biennial audits permitted responsibilities. A pass-through
under §_.220, consider auditee entity shall perform the following
requests to qualify as a low-risk for the Federal awards it makes:
auditee under § .530(a) .
(1) Identify Federal awards made by
(b) Oversight agency for audit informing each subrecipient of CFDA
responsibilities. An auditee which title and number, award name and
does not have a designated cognizant number, award year, if the award is
agency for audit will be under the R&D, and name of Federal agency. When
general oversight of the Federal some of this information is not
agency determined in accordance with available, the pass-through entity
§_.105. The oversight agency for shall provide the best information
audit: available to describe the Federal
award.
90
(3) Advise subrecipients of decision should describe any appeal
requirements imposed on them by process available to the auditee.
Federal laws, regulations, and the
provisions of contracts or grant
agreements as well as any (b) Federal agency. As provided in
supplemental requirements imposed by §_•400(a) (7), the cognizant agency
the pass-through entity. for audit shall be responsible for
coordinating a management decision
for audit findings that affect the
(3) Monitor the activities of programs of more than one Federal
subrecipients as necessary to ensure agency. As provided in
that Federal awards are used for §_.400(c) (5), a Federal awarding
authorized purposes in compliance agency is responsible for issuing a
with laws, regulations, and the management decision for findings that
provisions of contracts or grant relate to Federal awards it makes to
agreements and that performance goals recipients. Alternate arrangements
are achieved. may be made on a case-by-case basis
by agreement among the Federal
(4) Ensure that subrecipients agencies concerned.
expending $300,000 ($500,000 for
fiscal years ending after December (c) Pass-through entity. As provided
31, 2003) or more in Federal awards in § .400(d) (5), the pass-through
during the subrecipient's fiscal year entity shall be responsible for
have met the audit requirements of making the management decision for
this part for that fiscal year. audit findings that relate to Federal
awards it makes to subrecipients.
(5) Issue a management decision on
audit findings within six months (d) Time requirements. The entity
after receipt of the subrecipient's responsible for making the management
audit report and ensure that the decision shall do so within six
subrecipient takes appropriate and months of receipt of the audit
timely corrective action. report. Corrective action should be
initiated within six months after
(6) Consider whether subrecipient receipt of the audit report and
audits necessitate adjustment of the proceed as rapidly as possible.
pass-through entity's own records.
(e) Reference numbers. Management
(7) Require each subrecipient to decisions shall include the reference
permit the pass-through entity and numbers the auditor assigned to each
auditors to have access to the audit finding in accordance with
records and financial statements as §_•510(c) .
necessary for the pass-through entity
to comply with this part. Table of Contents
§_.405 Management decision. Subpart E--Auditors
(a) General. The management decision §_.500 Scope of audit.
shall clearly state whether or not
the audit finding is sustained, the
reasons for the decision, and the (a) General. The audit shall be
expected auditee action to repay conducted in accordance with GAGAS.
disallowed costs, make financial The audit shall cover the entire
adjustments, or take other action. If operations of the auditee; or, at the
the auditee has not completed option of the auditee, such audit
corrective action, a timetable for shall include a series of audits that
follow-up should be given. Prior to cover departments, agencies, and
issuing the management decision, the other organizational units which
Federal agency or pass-through entity expended or otherwise administered
may request Federal awards during such fiscal
year, provided that each such audit
shall encompass the financial
additional information or statements and schedule of
documentation from the auditee, expenditures of Federal awards for
including a request for auditor each such department, agency, and
assurance related to the other organizational unit, which
documentation, as a way of mitigating shall be considered to be a non-
disallowed costs. The management Federal entity. The financial
statements and schedule of
91
expenditures of Federal awards shall (2) The principal compliance
be for the same fiscal year. requirements applicable to most
Federal programs and the compliance
(b) Financial statements. The auditor requirements of the largest Federal
shall determine whether the financial programs are included in the
statements of the auditee are compliance supplement.
presented fairly in all material
respects in conformity with generally (3) For the compliance requirements
accepted accounting principles. The related to Federal programs contained
auditor shall also determine whether in the compliance supplement, an
the schedule of expenditures of audit of these compliance
Federal awards is presented fairly in requirements will meet the
all material respects in relation to requirements of this part. Where
the audi-tee's financial statements there have been changes to the
taken as a whole. compliance requirements and the
changes are not reflected in the
(c) Internal control. (1) In addition compliance supplement, the auditor
to the requirements of GAGAS, the shall determine the current
auditor shall perform procedures to compliance requirements and modify
obtain an understanding of internal the audit procedures accordingly. For
control over Federal programs those Federal programs not covered in
sufficient to plan the audit to the compliance supplement, the
support a low assessed level of auditor should use the types of
control risk for major programs. compliance requirements contained in
the compliance supplement as guidance
for identifying the types of
(2) Except as provided in paragraph compliance requirements to test, and
(c) (3) of this section, the auditor determine the requirements governing
shall: the Federal program by reviewing the
provisions of contracts and grant
(i) Plan the testing of internal agreements and the laws and
regulations referred to in such
control over major programs to
support a low assessed level of contracts and grant agreements.
control risk for the assertions
relevant to the compliance (4) The compliance testing shall
requirements for each major program; include tests of transactions and
and such other auditing procedures
necessary to provide the auditor
sufficient evidence to support an
(ii) Perform testing of internal
control as planned in paragraph opinion on compliance.
(e) (2) (i) of this section.
(e) Audit follow-up. The auditor
(3) When internal control over some shall follow-up on prior auditfindings, perform procedures to
or all of the compliance requirements assess the reasonableness of the
for a major program are likely to be schedule
ineffective in preventing or summary of prior audit
detecting noncompliance, the planning findings prepared by the auditee in
and performing of testing described accordance with report, as a current§_.315(b), and
ear audit
in paragraph (c) (2) of this section Y
are not required for those compliance finding, when the auditor concludes
requirements. However, the auditor that the summary schedule of prior
shall report a reportable condition audit findings materially
(including whether any such condition misrepresents the status of any prior
is a material weakness) in accordance audit finding. The auditor shall
with §_.510, assess the related perform audit follow-up procedures
control risk at the maximum, and regardless of whether a prior audit
consider whether additional finding relates to a major program in
compliance tests are required because the current year.
of ineffective internal control.
(f) Data Collection Form. As required
(d) Compliance. (1) In addition to in §_.320(b) (3), the auditor shall
the requirements of GAGAS, the complete and sign specified sections
auditor shall determine whether the of the data collection form.
auditee has complied with laws,
regulations, and the provisions of §_.505 Audit reporting.
contracts or grant agreements that
may have a direct and material effect
on each of its major programs.
92
The auditor's report(s) may be in the and whether any such conditions were
form of either combined or separate material weaknesses;
reports and may be organized
differently from the manner presented
in this section. The auditor's (iii) A statement as to whether the
report(s) shall state that the audit audit disclosed any noncompliance
was conducted in accordance with this which is material to the financial
part and include the following: statements of the auditee;
(a) An opinion (or disclaimer of (iv) where applicable, a statement
opinion) as to whether the financial that reportable conditions in
statements are presented fairly in internal control over major programs
all material respects in conformity were disclosed by the audit and
with generally accepted accounting whether any such conditions were
principles and an opinion (or material weaknesses;
disclaimer of opinion) as to whether
the schedule of expenditures of (v) The type of report the auditor
Federal awards is presented fairly in issued on compliance for major
all material respects in relation to programs (i.e., unqualified opinion,
the financial statements taken as a qualified opinion, adverse opinion,
whole. or disclaimer of opinion);
(b) A report on internal control (vi) A statement as to whether the
related to the financial statements audit disclosed any audit findings
and major programs. This report shall which the auditor is required to
describe the scope of testing of report under § .510(a);
internal control and the results of
the tests, and, where applicable,
refer to the separate schedule of (vii) An identification of major
findings and questioned costs programs;
described in paragraph (d) of this
section. �viii)The dollar threshold used to
distinguish between Type A and Type B
(c) A report on compliance with laws, programs, as described in
regulations, and the provisions of §_.520(b); and
contracts or grant agreements,
noncompliance with which could have a (ix) A statement as to whether the
material effect on the financial auditee qualified as a low-risk
statements. This report shall also auditee under § .530.
include an opinion (or disclaimer of
opinion) as to whether the auditee
complied with laws, regulations, and (2) Findings relating to the
the provisions of contracts or grant financial statements which are
agreements which could have a direct required to be reported in accordance
and material effect on each major with GAGAS.
program, and, where applicable, refer
to the separate schedule of findings (3) Findings and questioned costs for
and questioned costs described in Federal awards which shall include
paragraph (d) of this section. audit findings as defined in
§ .510(a) .
(d) A schedule of findings and
questioned costs which shall include (i) Audit findings (e.g., internal
the following three components: control findings, compliance
findings, questioned costs, or fraud)
(1) A summary of the auditor's which relate to the same issue should
results which shall include: be presented as a single audit
finding. Where practical, audit
findings should be organized by
(i) The type of report the auditor Federal agency or pass-through
issued on the financial statements of entity.
the auditee (i.e., unqualified
opinion, qualified opinion, adverse
opinion, or disclaimer of opinion); (ii) Audit findings which relate to
both the financial statements and
Federal awards, as reported under
(ii) Where applicable, a statement paragraphs (d) (2) and (d) (3) of this
that reportable conditions in section, respectively, should be
internal control were disclosed by reported in both sections of the
the audit of the financial statements schedule. However, the reporting in
93
one section of the schedule may be in program which is not audited as a
summary form with a reference to a major program. Except for audit
detailed reporting in the other follow-up, the auditor is not
section of the schedule. required under this part to perform
audit procedures for such a Federal
§_.510 Audit findings. program; therefore, the auditor will
normally not find questioned costs
for a program which is not audited as
(a) Audit findings reported. The a major program. However, if the
auditor shall report the following as auditor does become aware of
audit findings in a schedule of questioned costs for a Federal
findings and questioned costs: program which is not audited as a
major program (e.g., as part of audit
(1) Reportable conditions in internal follow-up or other audit procedures)
control over major programs. The and the known questioned costs are
auditor's determination of whether a greater than $10,000, then the
deficiency in internal control is a auditor shall report this as an audit
reportable condition for the purpose finding.
of reporting an audit finding is in
relation to a type of compliance (5) The circumstances concerning why.
requirement for a major program or an the auditor's report on compliance
audit objective identified in the for major programs is other than an
compliance supplement. The auditor unqualified opinion, unless such
shall identify reportable conditions circumstances are otherwise reported
which are individually or as audit findings in the schedule of
cumulatively material weaknesses. findings and questioned costs for
Federal awards.
(2) Material noncompliance with the
provisions of laws, regulations, (6) Known fraud affecting a Federal
contracts, or grant agreements award, unless such fraud is otherwise
related to a major program. The reported as an audit finding in the
auditor's determination of whether a schedule of findings and questioned
noncompliance with the provisions of costs for Federal awards. This
laws, regulations, contracts, or paragraph does not require the
grant agreements is material for the auditor to make an additional
purpose of reporting an audit finding reporting when the auditor confirms
is in relation to a type of that the fraud was reported outside
compliance requirement for a major of the auditor's reports under the
program or an audit objective direct reporting requirements of
identified in the compliance GAGAS.
supplement.
(7) Instances where the results of
(3) Known questioned costs which are audit follow-up procedures disclosed
greater than $10,000 for a type of that the summary schedule of prior
compliance requirement for a major audit findings prepared by the
program. Known questioned costs are auditee in accordance with
those specifically identified by the §_.315(b) materially misrepresents
auditor. In evaluating the effect of the status of any prior audit
questioned costs on the opinion on finding.
compliance, the auditor considers the
best estimate of total costs
questioned (likely questioned costs), (b) Audit finding detail. Audit
not just the questioned costs findings shall be presented in
specifically identified (known sufficient detail for the auditee to
questioned costs) . The auditor shall prepare a corrective action plan and
also report known questioned costs take corrective action and for
when likely questioned costs are Federal agencies and pass-through
greater than $10,000 for a type of entities to arrive at a management
compliance requirement for a major decision. The following specific
program. In reporting questioned information shall be included, as
costs, the auditor shall include applicable, in audit findings:
information to provide proper
perspective for judging the (1) Federal program and specific
prevalence and consequences of the Federal award identification
questioned costs. including the CFDA title and number,
Federal award number and year, name
(4) Known questioned costs which are of Federal agency, and name of the
greater than $10,000 for a Federal applicable pass-through entity. When
information, such as the CFDA title
94
and number or Federal award number, for audit, or pass-through entity to
is not available, the auditor shall extend the retention period. When the
provide the best information auditor is aware that the Federal
available to describe the Federal awarding agency, pass-through entity,
award. or auditee is contesting an audit
finding, the auditor shall contact
(2) The criteria or specific the parties contesting the audit
requirement upon which the audit finding for guidance prior to
finding is based, including destruction of the working papers and
statutory, regulatory, or other reports.
citation.
(b) Access to working papers. Audit
(3) The condition found, including working papers shall be made
facts that support the deficiency available upon request to the
identified in the audit finding. cognizant or oversight agency for
audit or its designee, a Federal
agency providing direct or indirect
(4) Identification of questioned funding, or GAO at the completion of
costs and how they were computed. the audit, as part of a quality
review, to resolve audit findings, or
(5) Information to provide proper to carry out oversight
perspective for judging the responsibilities consistent with the
ur
prevalence and consequences of the purposes of this part. Access to
working papers includes the right of
audit findings, such as whether the
audit findings represent an isolated Federal agencies to obtain copies of
working papers, as is reasonable and
instance or a systemic problem. Where
appropriate, instances identified necessary.
shall be related to the universe and
the number of cases examined and be §_.520 Major program determination.
quantified in terms of dollar value.
(a) General. The auditor shall use a
(6) The possible asserted effect to risk-based approach to determine
provide sufficient information to the which Federal programs are major
auditee and Federal agency, or pass- programs. This risk-based approach
through entity in the case of a shall include consideration of:
subrecipient, to permit them to Current and prior audit experience,
determine the cause and effect to oversight by Federal agencies and
facilitate prompt and proper pass-through entities, and the
corrective action. inherent risk of the Federal program.
The process in paragraphs (b) through
(7) Recommendations to prevent future (i) of this section shall befollowed.
occurrences of the deficiency
identified in the audit finding.
(b) Step 1. (1) The auditor shall
(8) Views of responsible officials of identify the larger Federal programs,
the auditee when there is which shall be labeled Type A
disagreement with the audit findings, programs. Type A programs are defined
to the extent practical. as Federal programs with Federal
awards expended during the audit
period exceeding the larger of:
(c) Reference numbers. Each audit
finding in the schedule of findings (i) $300,000 or three percent (.03)
and questioned costs shall include a of total Federal awards expended in
reference number to allow for easy the case of an auditee for which
referencing of the audit findings total Federal awards expended equal
during follow-up. or exceed $300,000 but are less than
or equal to $100 million.
§_.515 Audit working papers.
(ii) $3 million or three-tenths of
(a) Retention of working papers. The one percent (.003) of total Federal
auditor shall retain working papers awards expended in the case of an
and reports for a minimum of three auditee for which total Federal
years after the date of issuance of awards expended exceed $100 million
the auditor's report(s) to the but are less than or equal to $10
auditee, unless the auditor is billion.
notified in writing by the cognizant
agency for audit, oversight agency
95
(iii) $30 million or 15 hundredths of particular recipients to allow the
one percent (.0015) of total Federal Federal agency to comply with the
awards expended in the case of an Government Management Reform Act of
auditee for which total Federal 1994 (31 U.S.C. 3515) . The Federal
awards expended exceed $10 billion. agency shall notify the recipient
and, if known, the auditor at least
(2) Federal programs not labeled Type 180 days prior to the end of the
A under paragraph (b) (1) of this fiscal year to be audited of OMB's
section shall be labeled Type B approval.
programs.
(d) Step 3. (1) The auditor shall
(3) The inclusion of large loan and identify Type B programs which are
loan guarantees (loans) should not high-risk using professional judgment
result in the exclusion of other and the criteria in §_.525.
programs as Type A programs. When a However, should the auditor select
Federal program providing loans Option 2 under Step 4 (paragraph
significantly affects the number or (e) (2) (i) (B) of this section), the
size of Type A programs, the auditor auditor is not required to identify
shall consider this Federal program more high-risk Type B programs than
as a Type A program and exclude its the number of low-risk Type A
values in determining other Type A programs. Except for known reportable
programs. conditions in internal control or
compliance problems as discussed in
§_.525(b) (1), §_.525(b) (2), and
(4) For biennial audits permitted § .525(e) (1), a single criteria in
under §_.220, the determination of §_.525 would seldom cause a Type B
Type A and Type B programs shall be program to be considered high-risk.
based upon the Federal awards
expended during the two-year period.
(2) The auditor is not expected to
perform risk assessments on
(c) Step 2. (1) The auditor shall relatively small Federal programs.
identify Type A programs which are Therefore, the auditor is only
low-risk. For a Type A program to be required to perform risk assessments
considered low-risk, it shall have on Type B programs that exceed the
been audited as a major program in at larger of:
least one of the two most recent
audit periods (in the most recent
audit period in the case of a (i) $100,000 or three-tenths of one
biennial audit), and, in the most percent (.003) of total Federal
recent audit period, it shall have awards expended when the auditee has
had no audit findings under less than or equal to $100 million in
§_.510(a) . However, the auditor may total Federal awards expended.
use judgment and consider that audit
findings from questioned costs under (ii) $300,000 or three-hundredths of
§_.510(a) (3) and §_.510(a) (4), one percent (.0003) of total Federal
fraud under §_.510(a) (6), and audit awards expended when the auditee has
follow-up for the summary schedule of more than $100 million in total
prior audit findings under Federal awards expended.
§_.510(a) (7) do not preclude the
Type A program from being low-risk.
The auditor shall consider: the (e) Step 4. At a minimum, the auditor
criteria in §_.525(c), shall audit all of the following as
§_.525(d) (1), §_.525(d) (2), and major programs:
§_.525(d) (3); the results of audit
follow-up; whether any changes in (1) All Type A programs, except the
personnel or systems affecting a Type auditor may exclude any Type A
A program have significantly programs identified as low-risk under
increased risk; and apply Step 2 (paragraph (c) (1) of this
professional judgment in determining section) .
whether a Type A program is low-risk.
(2) (i) High-risk Type B programs as
(2) Notwithstanding paragraph (c) (1) identified under either of the
of this section, OMB may approve a following two options:
Federal awarding agency's request
that a Type A program at certain
recipients may not be considered low- (A) Option 1. At least one half of
risk. For example, it may be the Type B programs identified as
necessary for a large Type A program high-risk under Step 3 (paragraph (d)
to be audited as major each year at of this section), except this
96
paragraph (e) (2) (i) (A) does not (i) Deviation from use of risk
require the auditor to audit more criteria. For first-year audits, the
high-risk Type B programs than the auditor may elect to determine major
number of low-risk Type A programs programs as all Type A programs plus
identified as low-risk under Step 2. any Type B programs as necessary to
meet the percentage of coverage rule
(B) Option 2. One high-risk Type B discussed in paragraph (£) of this
program for each Type A program section. Under this option, the
identified as low-risk under Step 2. auditor would not be required to
perform the procedures discussed in
paragraphs (c), (d), and (e) of this
(ii) When identifying which high-risk section.
Type B programs to audit as major
under either Option 1 or 2 in
paragraph (e) (2) (i) (A) or (B), the (1) A first-year audit is the first
auditor is encouraged to use an year the entity is audited under this
approach which provides an part or the first year of a change of
opportunity for different high-risk auditors.
Type B programs to be audited as
major over a period of time. (2) To ensure that a frequent change
of auditors would not preclude audit
(3) Such additional programs as may of high-risk Type B programs, this
be necessary to comply with the election for first-year audits may
percentage of coverage rule discussed not be used by an auditee more than
in paragraph (f) of this section. once in every three years.
This paragraph (e) (3) may require the
auditor to audit more programs as .525 Criteria for Federal program
major than the number of Type A risk.
programs.
(a) General. The auditor's
(f) Percentage of coverage rule. The determination should be based on an
auditor shall audit as major programs overall evaluation of the risk of
Federal programs with Federal awards noncompliance occurring which could
expended that, in the aggregate, be material to the Federal program.
encompass at least 50 percent of The auditor shall use auditor
total Federal awards expended. If the judgment and consider criteria, such
auditee meets the criteria in as described in paragraphs (b), (c),
§_.530 for a low-risk auditee, the and (d) of this section, to identify
auditor need only audit as major risk in Federal programs. Also, as
programs Federal programs with part of the risk analysis, the
Federal awards expended that, in the auditor may wish to discuss a
aggregate, encompass at least 25 particular Federal program with
percent of total Federal awards auditee management and the Federal
expended. agency g y or pass-through entity.
(g) Documentation of risk. The (b) Current and prior audit
auditor shall document in the working experience. (1) Weaknesses in
papers the risk analysis process used internal control over Federal
in determining major programs. programs would indicate higher risk.
Consideration should be given to the
(h) Auditor's judgment. When the control environment over Federal
major program determination was programs and such factors as the
performed and documented in expectation of management's adherence
accordance with this part, the to applicable laws and regulations
auditor's judgment in applying the and the provisions of contracts and
risk-based approach to determine grant agreements and the competence
major programs shall be presumed and experience of personnel who
correct. Challenges by Federal administer the Federal programs.
agencies and pass-through entities
shall only be for clearly improper (i) A Federal program administered
use of the guidance in this part. under multiple internal control
However, Federal agencies and pass- structures may have higher risk. When
through entities may provide auditors assessing risk in a large single
guidance about the risk of a audit, the auditor shall consider
particular Federal program and the whether weaknesses are isolated in a
auditor shall consider this guidance single operating unit (e.g., one
in determining major programs in college campus) or pervasive
audits not yet completed. throughout the entity.
97
(ii) When significant parts of a Federal program with new or interim
Federal program are passed through to regulations may have higher risk than
subrecipients, d weak system for an established program with time-
monitoring subrecipients would tested regulations. Also, significant
indicate higher risk. changes in Federal programs, laws,
regulations, or the provisions of
(iii) The extent to which computer contracts or grant agreements may
processing is used to administer increase risk.
Federal programs, as well as the
complexity of that processing, should (3) The phase of a Federal program in
be considered by the auditor in its life cycle at the auditee may
assessing risk. New and recently indicate risk. For example, during
modified computer systems may also the first and last years that an
indicate risk. auditee participates in a Federal
program, the risk may be higher due
(2) Prior audit findings would to start-up or closeout of program
indicate higher risk, particularly activities and staff.
when the situations identified in the
audit findings could have a (4) Type B programs with larger
significant impact on a Federal Federal awards expended would be of
program or have not been corrected. higher risk than programs with
substantially smaller Federal awards
(3) Federal programs not recently expended.
audited as major programs may be of
higher risk than Federal programs §_.530 Criteria for a low-risk
recently audited as major programs auditee.
without audit findings.
An auditee which meets all of the
(c) Oversight exercised by Federal following conditions for each of the
agencies and pass-through entities. preceding two years (or, in the case
(1) Oversight exercised by Federal of biennial audits, preceding two
agencies or pass-through entities audit periods) shall qualify as a
could indicate risk. For example, low-risk auditee and be eligible for
recent monitoring or other reviews reduced audit coverage in accordance
performed by an oversight entity with §_.520:
which disclosed no significant
problems would indicate lower risk.
However, monitoring which disclosed (a) Single audits were performed on
significant problems would indicate an annual basis in accordance with
higher risk. the provisions of this part. A non-
Federal entity that has biennial
audits does not qualify as a low-risk
(2) Federal agencies, with the auditee, unless agreed to in advance
concurrence of OMB, may identify by the cognizant or oversight agency
Federal programs which are higher for audit.
risk. OMB plans to provide this
identification in the compliance
supplement. (b) The auditor's opinions on the
financial statements and the schedule
of expenditures of Federal awards
(d) Inherent risk of the Federal were unqualified. However, the
program. (1) The nature of a Federal cognizant or oversight agency for
program may indicate risk. audit may judge that an opinion
Consideration should be given to the qualification does not affect the
complexity of the program and the management of Federal awards and
extent to which the Federal program provide a waiver.
contracts for goods and services. For
example, Federal programs that
disburse funds through third party (c) There were no deficiencies in
contracts or have eligibility internal control which were
criteria may be of higher risk. identified as material weaknesses
Federal programs primarily involving under the requirements of GAGAS.
staff payroll costs may have a high- However, the cognizant or oversight
risk for time and effort reporting, agency for audit may judge that any
but otherwise be at low-risk. identified material weaknesses do not
affect the management of Federal
(2) The phase of a Federal program in awards and provide a waiver.
its life cycle at the Federal agency
may indicate risk. For example, a new
98
(d) None of the Federal programs had
audit findings from any of the
following in either of the preceding
two years (or, in the case of
biennial audits, preceding two audit
periods) in which they were
classified as Type A programs:
(1) Internal control deficiencies
which were identified as material
weaknesses;
(2) Noncompliance with the provisions
of laws, regulations, contracts, or
grant agreements which have a
material effect on the Type A
program; or(3) Known or likely
questioned costs that exceed five
percent of the total Federal awards
expended for a Type A program during
the year
99
Appendix C
24 CFR 570 CDBG Regulations Subpart C, Eligible Activities
100
WAIS Document Retrieval[Code of Federal facilities and not subject to the
Regulations] prohibition of new housing construction
[Title 24, Volume 3] described in Sec. 570.207(b) (3) . Such
[Revised as of April 1, 2004] facilities include shelters for the
From the U.S. Government Printing Office via homeless; convalescent homes; hospitals,
GPO Access nursing homes; battered spouse shelters;
[CITE: 24CFR570.201] halfway houses for run-away children, drug
[Page 41-44]
offenders or parolees; group homes for
mentally retarded persons and temporary
TITLE 24--HOUSING AND URBAN DEVELOPMENT housing for disaster victims. In certain
cases, nonprofit entities and subrecipients
CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR including those specified in Sec. 570.204
COMMUNITY PLANNING AND may acquire title to public facilities. When
DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN such facilities are owned by nonprofit
DEVELOPMENT entities or subrecipients, they shall be
operated so as [[Page 42]] to be open for
PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS- use by the general public during all normal
-Table of Contents hours of operation. Public facilities and
improvements eligible for assistance under
Subpart C Eligible Activities this paragraph are subject to the policies
in Sec. 570.200(b) .
Sec. 570.201 Basic eligible activities. (d) Clearance activities. Clearance,
demolition, and removal of buildings and
CDBG funds may be used for the following improvements, including movement of
activities: structures to other sites. Demolition of
(a) Acquisition. Acquisition in whole or in HUD-assisted or-HUD-owned housing units may
part by the recipient, or other public or be undertaken only with the prior approval
private nonprofit entity, by purchase, long- of HUD.
term lease, donation, or otherwise, of real (e) Public services. Provision of public
property (including air rights, water services (including labor, supplies, and
rights, rights-of-way, easements, and other materials) including but not limited to
interests therein) for any public purpose, those concerned with employment, crime
subject to the limitations of Sec. 570.207. prevention, child care, health, drug abuse,
(b) Disposition. Disposition, through sale, education, fair housing counseling, energy
lease, donation, or otherwise, of any real conservation, welfare (but excluding the
property acquired with CDBG funds or its provision of income payments identified
retention for public purposes, including under Sec. 570.207(b) (4)), homebuyer
reasonable costs of temporarily managing downpayment assistance, or recreational
such property or property acquired under needs. To be eligible for CDBG assistance, a
urban renewal, provided that the proceeds public service must be either a new service
from any such disposition shall be program or a quantifiable increase in the level of
income subject to the requirements set forth an existing service above that which has
in Sec. 570.504. been provided by or on behalf of the unit of
(c) Public facilities and improvements. general local government (through funds
Acquisition, construction, reconstruction, raised by the unit or received by the unit
rehabilitation or installation of public from the State in which it is located) in
facilities and improvements, except as the 12 calendar months before the submission
provided in Sec. 57O.207(a), carried out by of the action plan. (An exception to this
the recipient or other public or private requirement may be made if HUD determines
nonprofit entities. (However, activities that any decrease in the level of a service
under this paragraph may be directed to the was the result of events not within the
removal of material and architectural control of the unit of general local
barriers that restrict the mobility and government.) The amount of CDBG funds used
accessibility of elderly or severely for public services shall not exceed
disabled persons to public facilities and paragraphs (e) (1) or (2) of this section,
improvements, including those provided for as applicable:
in Sec. 57O.207(a) (1) .) In undertaking such (1) The amount of CDBG funds used for
activities, design features and improvements public services shall not exceed 15 percent
which promote energy efficiency may be of each grant, except that for entitlement
included. Such activities may also include grants made under subpart D of this part,
the execution of architectural design the amount shall not exceed 15 percent of
features, and similar treatments intended to the grant plus 15 percent of program income,
enhance the aesthetic quality of facilities as defined in Sec. 570.500(a) . For
and improvements receiving CDBG assistance, entitlement grants under subpart D of this
such as decorative pavements, railings, part, compliance is based on limiting the
sculptures, pools of water and fountains, amount of CDBG funds obligated for public
and other works of art. Facilities designed service activities in each program year to
for use in providing shelter for persons an amount no greater than 15 percent of the
having special needs are considered public entitlement grant made for that program year
101
plus 15 percent of the program income (g) Payment of non-Federal share. Payment
received during the grantee's immediately of the non-Federal share required in
preceding program year. connection with a Federal grant-in-aid
(2) A recipient which obligated more CDBG program undertaken as part of CDBG
funds for public services than 15 percent of activities, provided, that such payment
its grant funded from Federal fiscal year shall be limited to activities otherwise
1982 or 1983 appropriations (excluding eligible and in compliance with applicable
program income and any assistance received requirements under this subpart.
under Public Law 98-8), may obligate more (h) Urban renewal completion. Payment of
CDBG funds than allowable under paragraph the cost of completing an urban renewal
(e) (1) of this section, so long as the total project funded under title I of the Housing
amount obligated in any program year does Act of 1949 as amended. Further information
not exceed: regarding the eligibility of such costs is
(i) For an entitlement grantee, 15 : set forth in Sec. 570.801.
of the program income it received during the (i) Relocation. Relocation payments and
preceding program year; plus other assistance for permanently and
(ii) A portion of the grant received temporarily relocated individuals families,
for the program year which is the highest of businesses, nonprofit organizations, and
the following amounts: farm operations where the assistance is
(A) The amount determined by (1) required under the provisions of
applying the percentage of the grant it Sec. 570.606 (b) or (c); or
obligated for public services in the 1982 (2) determined by the grantee to be
program year against the grant for its appropriate under the provisions of Sec.
current program year; 570.606(d) .
(B) The amount determined by (j) Loss of rental income. Payments to
applying the percentage of the grant it housing owners for losses of rental income
obligated for public services in the 1983 incurred in holding, for temporary periods,
program year against the grant for its housing units to be used for the relocation
current program year; of individuals and families displaced by
(C) The amount of funds it program activities assisted under this part.
obligated for public services in the 1982
program year; or, (k) Housing services. Housing services, as
provided in section 105(a) (21) of the Act
(D) The amount of funds it (42 U.S.C. 5305(a) (21) ) .
obligated for public services in the 1983
program year. (1) Privately owned utilities. CDBG funds
may be used to acquire, construct,
(f) Interim assistance. reconstruct, rehabilitate, or install the
(1) The following activities may be distribution lines and facilities of
undertaken on an interim basis in areas privately owned utilities, including the
exhibiting objectively determinable signs of placing underground of new or existing
physical deterioration where the recipient distribution facilities and lines.
has determined that immediate action is (m) Construction of housing. CDBG funds may
necessary to arrest the deterioration and be used for the construction of housing
that permanent improvements will be carried assisted under section 17 of the United
out as soon as practicable: States Housing Act of 1937.
(i) The repairing of streets, (n) Homeownership assistance. CDBG funds
sidewalks, parks, playgrounds, publicly may be used to provide direct homeownership
owned utilities, and public buildings; and assistance to low- or moderate-income
(ii) The execution of special garbage, households in accordance with section 105(a)
trash, and denris removal, including of the Act.
neighborhood cleanup campaigns, but not the (n)
regular curbside collection of garbage or (1) The provision of assistance either
trash in an area. through the recipient directly or through
(2) In order to alleviate emergency public and private organizations, agencies,
conditions threatening the public health and and other subrecipients (including nonprofit
safety in areas where the chief executive and for-profit subrecipients) to facilitate
officer of the recipient determines that economic development by:
such an emergency [[Page 43]] condition (i) Providing credit, including, but
exists and requires immediate resolution, not limited to, grants, loans, loan
CDBG funds may be used for: guarantees, and other forms of financial
(i) The activities specified in support, for the establishment,
paragraph (f) (1) of this section, except for stabilization, and expansion of
the repair of parks and playgrounds; microenterprises;
(ii) The clearance of streets, (ii) Providing technical assistance,
including snow removal and similar advice, and business support services to
activities, and owners of microenterprises and persons
(iii) The improvement_ of private developing microenterprises; and
properties. (iii) Providing general support,
(3) All activities authorized under including, but not limited to, peer support
paragraph (f) (2) of this section are limited programs, counseling, child care,
to the extent necessary to alleviate transportation, and other similar services,
emergency conditions.
102
to owners of microenterprises and persons assistance, that the activity for which it
developing microenterprises. is attempting to build capacity would be
(2) Services provided this paragraph (o) eligible for assistance under this subpart
shall not be subject to the restrictions on C, and that the national objective claimed
public services contained in paragraph (e) by the grantee for this assistance can
of this section. reasonably be expected to be met once the
(3) For purposes of this paragraph (o), entity has received the technical assistance
persons developing microenterprises' ' and undertakes the activity.) Capacity
means such persons who have expressed building for private or public entities
interest and who are, or after an initial (including grantees) for other purposes may
screening process are expected to be, be eligible under Sec. 570.205.
actively working toward developing (q) Assistance to institutions of higher
businesses, each of which is expected to be education. Provision of assistance by the
a microenterprise at the time it is formed. recipient to institutions of higher
(4) Assistance under this paragraph (o) education when the grantee determines that
may also include training, technical such an institution has demonstrated a
assistance, or other support services to capacity to carry out eligible activities
increase the capacity of the recipient or under this subpart C.
subrecipient to carry out the activities
under this paragraph (o) . [53 FR 34439, Sept. 6, 1988, as amended at
(p) Technical assistance. Provision of 53 FR 31239, Aug. 17, 1988; 55 FR 29308,
technical assistance to public or nonprofit July 18, 1990; 57 FR 27119, June 17, 1992;
entities to increase the capacity of such 60 FR 1943, Jan. 5, 1995; 60 FR 56911, Nov.
entities to carry out eligible neighborhood 9, 1995; 61 FR 18674, Apr. 29, 1996; 65 FR
revitalization or economic development 70215, Nov. 21, 2000; 67 FR 47213, July 17,
activities. (The recipient must determine, 20021
prior to the [ [Page 44] ] provision of the
103
Appendix D
24 CFR 570 CDBG Regulations Subpart J, Grant Administration
104
WAIS Document Retrieval[Code of Federal and standards of OMB Circular No. A-87,
Regulations] Cost Principles for State, Local, and
[Title 24, .Volume 31 Indian Tribal Governments' '; OMB Circular A-
[Revised as of April 1, 2004] 12.8, ' Audits of State and Local
From the U.S. Government Printing Office via Governments' ' (implemented at 24 CFR part
GPO Access 44) ; and with the following sections of 24
[CITE: 24CFR570.501] CFR part 85 ' 'Uniform Administrative
[Page 131-132] Requirements for Grants and Cooperative
Agreements to State and Local Governments' '
or the related CDBG provision, as specified
TITLE 24--HOUSING AND URBAN DEVELOPMENT in this paragraph:
(1) Section 85.3, ' 'Definitions' ';
CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR (2) Section 85.6, ' 'Exceptions' ';
COMMUNITY PLANNING ANDDEVELOPMENT, (3) Section 85.12, ' 'Special grant or
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT subgrant conditions for high-risk'
grantees' ';
PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS- (4) Section 85.20, ' 'Standards for
-Table of Contents financial management systems, ' ' except
paragraph (a) ;
Subpart J Grant Administration (5) Section 85.21, ' Payment, ' ' except as
modified by Sec. 570.513;
Sec. 570.501 Responsibility for grant (6) Section 85.22, ' 'Allowable costs' ';
administration. (7) Section 85.26, ' 'Non-federal
audits' ,
(a) One or more public agencies, including (8) Section 85.32, "Equipment, ' ' except
existing local public agencies, may * be in all cases in which the equipment is sold,
designated by the chief executive officer of the proceeds shall be program income;
the recipient to undertake activities (9) Section 85.33, ' Supplies' ';
assisted by this part. A public agency so (10) Section 85.34, ' 'Copyrights' ';
designated shall be subject to the same (11) Section 85.35, ' 'Subawards to
requirements as are applicable to debarred and suspended parties' ';
subrecipients. (12) Section 85.36, ' 'Procurement, ' '
(b) The recipient is responsible for except paragraph (a);
ensuring that CDBG funds are used in (13) Section 85.37, "Subgrants' ';
accordance with all program requirements. (14) Section 85.40, ' 'Monitoring and
The use of designated public agencies, reporting program performance, ' ' except
subrecipients, or contractors [[Page 132]] paragraphs (b) through (d) and paragraph
does not relieve the recipient of this (f) ;
responsibility. The recipient is also (15) Section 85.41, ' 'Financial
responsible for determining the adequacy of reporting, ' ' except paragraphs (a),
performance under subrecipient agreements (b), and (e);
and procurement contracts, and for taking (16) Section 85.42, ' 'Retention and
appropriate action when performance problems access requirements for records, ' ' except
arise, such as the actions described in Sec. that the period shall be four years;
570.910. Where a unit of general local (17) Section 85.43, ' 'Enforcement' ';
government is participating with, or as part (18) Section 85.44, ' 'Termination for
of, an urban county, or as part of a convenience' ';
metropolitan city, the recipient is (19) Section 85.51 ' 'Later disallowances
responsible for applying to the unit of and adjustments' ' and
general local government the same (20) Section 85.52, ' 'Collection of
requirements as are applicable to amounts due. ' '
subrecipients, except that the five-year (b) Subrecipients, except subrecipients
period identified under Sec. that are governmental entities, shall comply
57O.503(b) (8) (i) shall begin with the date with the requirements and standards of OMB
that the unit of general local government is Circular No. A-122, ' 'Cost Principles for
no longer considered by HUD to be a part of Non-profit Organizations, ' ' or OMB Circular
the metropolitan city or urban county, as No. A-21, ' 'Cost Principles for Educational
applicable, instead of the date that the Institutions, ' ' as applicable, and OMB
subrecipient agreement expires. Circular A-133, ' 'Audits of Institutions of
Higher Education and Other Nonprofit
[53 FR 8058, Mar. 11, 1988, as amended at 57 Institutions' ' (as set forth in 24 CFR part
FR 27120, June 17, 1992) 45) . Audits shall be conducted annually.
Such subrecipients shall also comply with
Sec. 570.502 Applicability of uniform the following provisions of the Uniform
administrative requirements. Administrative requirements of OMB Circular
A-110 (implemented at 24 CFR part 84,
(a) Recipients and subrecipients that are ''Uniform Administrative Requirements for
governmental entities (including public Grants and Agreements With Institutions of
agencies) shall comply with the requirements Higher Education, Hospitals and other Non-
105
Profit Organizations' ') or the related CDBG Sec. 570.503 Agreements with subrecipients.
provision, as specified in this paragraph:
(1) Subpart A--' 'General' '; (a) Before disbursing any CDBG funds to a
(2) Subpart B"Pre-Award Pre-Award subrecipient, the recipient shall sign a
Requirements, ' ' except for Sec. 84.12, written agreement with the subrecipient. The
11 Forms for Applying for Federal agreement shall remain in effect during any
Assistance' '; period that the subrecipient has control
(3) Subpart C--' 'Post-Award over CDBG funds, including program income.
Requirements, ' ' except for: (b) At a minimum, the written agreement
(i) Section 84.22, "Payment with the subrecipient shall include
Requirements. ' ' Grantees shall follow the provisions concerning the following items:
standards of Sec. Sec. 85.20(b) (7) and 85.21 (1) Statement of work. The agreement
in making payments to subrecipients; [[Page shall include a description of the work to
133] ] be performed, a schedule for completing the
(ii) Section 84.23, ' 'Cost Sharing work, and a budget. These items shall be in
and Matching' '; sufficient detail to provide a sound basis
(iii) Section 84.24, ' 'Program for the recipient effectively to monitor
income. ' ' In lieu of Sec. 84.24, CDBG performance under the agreement.
subrecipients shall follow Sec. 570.504; (2) Records and reports. The recipient
(iv) Section 84.25, ' 'Revision of shall specify in the agreement the
Budget and Program Plans' '; particular records the subrecipient must
(v) Section 84.32, ' 'Real Property. ' ' maintain and the particular reports the
In lieu of Sec. 84.32, CDBG subrecipients subrecipient must submit in order to assist
shall follow Sec. 570.505; the recipient in meeting its recordkeeping
(vi) Section 84.34(g), ' 'Equipment. ' ' and reporting requirements.
In lieu of the disposition provisions of (3) Program income. The agreement shall
Sec. 84.34(g), the following applies: include the program income requirements set
(A) In all cases in which forth in Sec. 570.504(c) . The agreement
equipment is sold, the proceeds shall be shall also specify that, at the end of the
program income (prorated to reflect the program year, the grantee may require
extent to which CDBG funds were used to remittance of all or part of any program
acquire the equipment); and income balances (including investments
(B) Equipment not needed by the thereof) held by the subrecipient (except
subrecipient for CDBG activities shall be those needed for immediate cash needs, cash
transferred to the recipient for the CDBG balances of a revolving loan fund, cash
program or shall be retained after balances from a lump sum drawdown, or cash
compensating the recipient; or investments held for section 108 security
(vii) Section 84.51 (b), (c) , (d) , needs) .
(e), (f), (g) , and (h), Monitoring and (4) Uniform administrative requirements.
Reporting Program Performance' '; The agreement shall require the subrecipient
(viii) Section 84.52, ' 'Financial to comply with applicable uniform
Reporting' '; administrative requirements, as described
(ix) Section 84.53(b) , ' 'Retention in Sec. 570.502.
and access requirements for records. ' ' (5) Other program requirements. The
Section 84.53(b) applies with the following agreement shall require the subrecipient to
exceptions: carry out each activity in compliance with
(A) The retention period all Federal laws and regulations described
referenced in Sec. 84.53(b) pertaining to in subpart K of these regulations, except
individual CDBG activities shall be four that:
years; and (i) The subrecipient does not assume
(B) The retention period starts the recipient's environmental
from the date of submission of the annual responsibilities described at Sec. 570.604;
performance and evaluation report, as and
prescribed in 24 CFR 91.520, in which the (ii) The subrecipient does not assume
specific activity is reported on for the the recipient's responsibility for
final time rather than from the date of initiating the review process under the
submission of the final expenditure report provisions of 24 CFR part 52.
for the award; (6) Suspension and termination. The
(x) Section 84.61, ' 'Termination. ' ' agreement shall specify that, in accordance
In lieu of the provisions of Sec. 84.61, with 24 CFR 85.43, suspension [[Page
CDBG subrecipients shall comply with Sec. 134]] or termination may occur if the
570.503(b) (7); and subrecipient materially fails to comply with
(4) Subpart D--' 'After-the-Award any term of the award, and that the award
Requirements, ' ' except for Sec. 84.71, may be terminated for convenience in
''Closeout Procedures. ' ' accordance with 24 CFR 85.44.
(7) Reversion of assets. The agreement
[53 FR 8058, Mar. 11, 1988, as amended at shall specify that upon its expiration the
60 FR 1916, Jan. 5, 1995; 60 FR 56915, Nov. subrecipient shall transfer to the recipient
9, 19951 any CDBG funds on hand at the time of
expiration and any accounts receivable
attributable to the use of CDBG funds. It
106
shall also include provisions designed to year, exceeds one-twelfth of the most recent
ensure that any real property under the grant made pursuant to Sec. 570.304 shall be
subrecipient's control that was acquired or remitted to HUD as soon as practicable
improved in whole or in part with CDBG thereafter, to be placed in the recipient's
funds (including CDBG funds provided to the line of credit. This provision applies to
subrecipient in the form of a loan) in program income cash balances and investments
excess of $25,000 is either: thereof held by the grantee and its
(i) Used to meet one of the national subrecipients. (This provision shall be
objectives in Sec. 570.208 (formerly Sec. applied for the first time at the end of the
570.901) until five years after expiration program year for which Federal Fiscal Year
of the agreement, or for such longer period 1996 funds are provided.)
of time as determined to be appropriate by (3) Program income on hand at the time of
the recipient; or closeout shall continue to be subject to the
(ii) Not used in accordance with eligibility requirements in subpart C and
paragraph (b) (7) (i) of this section, in all other applicable provisions of this part
which event the subrecipient shall pay to until it is expended.
the recipient an amount equal to the current (4) Unless otherwise provided in any
market value of the property less any grant closeout agreement, and subject to the
portion of the value attributable to requirements of paragraph (b) (5) of this
expenditures of non-CDBG funds for the section, .income received after closeout
acquisition of, or improvement to, the shall not be governed by the provisions of
property. The payment is program income to this part, except that, if at the time of
the recipient. (No payment is required after closeout the recipient has another ongoing
the period of time specified in paragraph CDBG grant received directly from HUD, funds
(b) (7) (i) of this section.) received after closeout shall be treated as
program income of the ongoing grant
[•53 FR 8058, Mar. 11, 1988, as amended at 53 program. [ [Page 135]]
FR 41331, Oct. 21, 1988; 57 FR 27120, June (5) If the recipient does not have
17, 1992; 60 FR 56915, Nov. 9, 1995; 68 FR another ongoing grant received directly from
56405, Sept. 30, 20031 HUD at the time of closeout, income received
after closeout from the disposition of real
Sec. 570.504 Program income. property or from loans outstanding at the
time of closeout shall not be governed by
(a) Recording program income. The receipt the provisions of this part, except that
and expenditure of program income as defined such income shall be used for activities
in Sec. 570.500(a) shall be recorded as part that meet one of the national objectives in
of the financial transactions of the grant Sec. 570.901 and the eligibility
program. requirements described in section 105 of the
(b) Disposition of program income received Act.
by recipients. (c) Disposition of program income received
(1) Program income received before grant by subrecipients. The written agreement
closeout may be retained by the recipient if between the recipient and the subrecipient,
the income is treated as additional CDBG as required by Sec. 570.503, shall specify
funds subject to all applicable requirements whether program income received is to be
governing the use of CDBG funds. returned to the recipient or retained by the
(2) If the recipient chooses to retain subrecipient. Where program income is to be
program income, that program income shall be retained by the subrecipient, the agreement
disposed of as follows: shall specify the activities that will be
(i) Program income in the form of undertaken with the program income and that
repayments to, or interest earned in, a all provisions of the written agreement
revolving fund as defined in Sec. 570.500(b) shall apply to the specified activities.
shall be substantially disbursed from the When the subrecipient retains program
fund before additional cash withdrawals are income, transfers of grant funds by the
made from the U.S. Treasury for the same recipient to the subrecipient shall be
activity. (This rule does not prevent a lump adjusted according to the principles
sum disbursement to finance the described in paragraphs (b) (2) (i) and (ii)
rehabilitation of privately owned properties of this section. Any program income on hand
as provided for in Sec. 570.513.) when the agreement expires, or received
(ii) Substantially all other program after the agreement's expiration, shall be
income shall be disbursed for eligible paid to the recipient as required by Sec.
activities before additional cash 570.503(b) (8) .
withdrawals are made from the U.S. Treasury. (d) Disposition of certain program income
(iii) At the end of each program received by urban counties. Program income
year, the aggregate amount of program income derived from urban county program activities
cash balances and any investment thereof undertaken by or within the jurisdiction of
(except those needed for immediate cash a unit of general local government which
needs, cash balances of a revolving loan thereafter terminates its participation in
fund, cash balances from a lump-sum the urban county shall continue to be
drawdown, or cash or investments held for program income of the urban county. The
section 108 loan guarantee security needs) urban county may transfer the program income
that, as of the last day of the program to the unit of general local government,
107
upon its termination of urban county the requirements of this part. At a minimum,
participation, provided that the unit of the following records are needed:
general local government has become an (a) Records providing a full description of
entitlement grantee and agrees to use the each activity assisted (or being assisted)
program income in its own CDBG entitlement with CDBG funds, including its location (if
program. the activity has a geographical locus), the
amount of CDBG funds budgeted, obligated and
[53 FR 8058, Mar. 11, 1988, as amended at 60 expended for the activity, and the provision
FR 56915, Nov. 9, 1995] in subpart C under which it is eligible.
(b) Records demonstrating that each
Sec. 570.505 Use of real property. activity undertaken meets one of the
criteria set forth in Sec. 570.208. (Where
The standards described in this section information on income by family size is
apply to real property within the required, the recipient may substitute
recipient's control which was acquired or evidence establishing that the person
improved in whole or in part using CDBG assisted qualifies under another program
funds in excess of $25,000. These standards having income qualification criteria at
shall apply from the date CDBG funds are least as restrictive as that used in the
first spent for the property until five definitions of ' 'low and moderate income
years after closeout of an entitlement person' ' and ' 'low and moderate income
recipient's participation in the entitlement household' ' (as applicable) at Sec. 570.3,
CDBG program or, with respect to other such as Job Training Partnership Act (DTPA)
recipients, until five years after the and welfare programs; or the recipient may
closeout of the grant from which the substitute evidence that the assisted person
assistance to the property was provided. is homeless; or the recipient may substitute
(a) A recipient may not change the use or a copy of a verifiable certification from
planned use of any such property (including the assisted person that his or her family
the beneficiaries of such use) from that for income does not exceed the applicable income
which the acquisition or improvement was limit established in accordance with Sec.
made unless the recipient provides affected 570.3; or the recipient may substitute a
citizens with reasonable notice of, and notice that the assisted person is a
opportunity to comment on, any proposed referral from a state, county or local
change, and either: employment agency or other entity that
(1) The new use of such property agrees to refer individuals it determines to
qualifies as meeting one of the national be low and moderate income persons based on
objectives in Sec. 570.208 (formerly Sec. HUD's criteria and agrees to maintain
570.901) and is not a building for the documentation supporting these
general conduct of government; or determinations.) Such records shall include
(2) The requirements in paragraph (b) of the following information:
this section are met. (1) For each activity determined to
(b) If the recipient determines, after benefit low and moderate income persons, the
consultation with affected citizens, that it income limits applied and the point in time
is appropriate to change the use of the when the benefit was determined.
property to a use which does not qualify (2) For each activity determined to
under paragraph (a) (1) of this section, it benefit low and moderate income persons
may retain or dispose of the property for based on the area served by the activity:
the changed use if the recipient's CDBG (i) The boundaries of the service
program is reimbursed in the amount of the area;
current fair market value of the property, (ii) The income characteristics of
less any portion of the value attributable families and unrelated individuals in the
to expenditures of non-CDBG funds for service area; and
acquisition of, and improvements to, the (iii) If the percent of low and
property. moderate income persons in the service area
(c) If the change of use occurs after is less than 51 percent, data showing that
closeout, the provisions governing income the area qualifies under the exception
from the disposition of the real property in criteria set forth at Sec.
Sec. 570.504(b) (4) or (5), as applicable, 570.208(a) (1) (ii) .
shall apply to the use of funds reimbursed. (3) For each activity determined to
(d) Following the reimbursement of the CDBG benefit low and moderate income persons
program in accordance with paragraph (b) of because the activity involves a facility or
this section, the property no longer will be service designed for use by a limited
subject, to any CDBG requirements. clientele consisting exclusively or
predominantly of low and moderate income
[53 FR 8058, Mar. 11, 1988, as amended at persons:
53 FR 41331, Oct. 21, 1988] [[Page 136]] (i) Documentation establishing that
the facility or service is designed for the
Sec. 570.506 Records to be maintained. particular needs of or used exclusively by
senior citizens, adults meeting the Bureau
Each recipient shall establish and maintain of the Census' Current Population Reports
sufficient records to enable the Secretary definition of ' 'severely disabled, ' ' persons
to determine whether the recipient has met living with AIDS, battered spouses, abused
108
children, the homeless, .illiterate adults, (i) Where the recipient chooses to
or migrant farm workers, for which the document that at least 51 percent of the
regulations provide a presumption concerning jobs will be available to low and moderate
the extent to which low- and moderate-income income persons, documentation for each
persons benefit; or assisted business shall include:
(ii) Documentation describing how the (A) A copy of a written agreement
nature and, if applicable, the location of containing:
the facility or service establishes that it (1) A commitment by the
is used predominantly by low and moderate business that it will make at least 51
income persons; or percent of the jobs available to low and
(iii) Data showing the size and moderate income persons and will provide
annual income of the family of each person training for any of those jobs requiring
receiving the benefit. special skills or education;
(4) For each activity carried out for (2) A listing by job title of
the purpose of providing or improving the permanent jobs to be created indicating
housing which is determined to benefit low which jobs will be available to low and
and moderate income persons: moderate income persons, which jobs require
(i) A copy of a written agreement special skills or education, and which jobs
with each landlord or developer receiving are part-time, if any; and
CDBG assistance indicating the total number (3) A description of actions
of dwelling units in each multifamily to be taken by the recipient and business to
structure assisted and the number of those ensure that low and moderate income persons
units which will be occupied by low and receive first consideration for those jobs;
moderate income households after assistance; and
(ii) The total cost of the activity, (B) A listing by job title of
including both CDBG and non-CDBG funds. the permanent jobs filled, and which jobs of
(iii) For each unit occupied by a low those were available to low and moderate
and moderate income household, the size and income persons, and a description of how
income of the household; first consideration was given to such
(iv) For rental housing only: persons for those jobs. The description
(A) The rent charged (or to be shall include what hiring process was used;
charged) after assistance for each [[Page which low and moderate income persons were
137] ) dwelling unit in each structure interviewed for a particular job; and which
assisted; and low and moderate income persons were hired.
(B) Such information as necessary (ii) Where the recipient chooses to
to show the affordability of units occupied document that at least 51 percent of the
(or to be occupied) by low and moderate jobs will be held by low and moderate income
income households pursuant to criteria persons, documentation for each assisted
established and made public by the business shall include:
recipient; (A) A copy of a written agreement
(v) For each property acquired on containing:
which there are no structures, evidence of (1) A commitment by the
commitments ensuring that the criteria in business that at least 51 percent of the
Sec. 570.208(a) (3) will be met when the jobs, on a full-time equivalent basis, will
structures are built; be held by low and moderate income persons;
(vi) Where applicable, records and
demonstrating that the activity qualifies (2) A listing by job title of
under the special conditions at Sec. the permanent jobs to be created,
570.208(a) (3) (i); identifying which are part-time, if any;
(vii) For any homebuyer assistance (B) A listing by job title of the
activity qualifying under Sec. 570.201(e), permanent jobs filled and which jobs were
570.201(n), or 570.204, identification of initially held by low and moderate income
the applicable eligibility paragraph and persons; and
evidence that the activity meets the (C) For each such low and
eligibility criteria for that provision; for moderate income person hired, the size and
any such activity qualifying under Sec. annual income of the person's family prior
570.208(a), the size and income of each to the person being hired for the job.
homebuyer's household; and (6) For each activity determined to
(viii) For a Sec. 570.201(k) housing benefit low and moderate income persons
services activity, identification of the based on the retention of jobs:
HOME project(s) or assistance that the (i) Evidence that in the absence of
housing services activity supports, and CDBG assistance jobs would be lost;
evidence that project(s) or assistance meet (ii) For each business assisted, a
the HOME program income targeting listing by job title of permanent jobs
requirements at 24 CFR 92.252 or 92.254. retained, indicating which of those jobs are
(5) For each activity determined to part-time and (where it is known) which are
benefit low and moderate income persons held by low and moderate income persons at
based on the creation of jobs, the recipient the time the CDBG assistance is provided.
shall provide the documentation described Where applicable, identification of any of
in either paragraph (b) (5) (i) or (ii) of the retained jobs (other than those known to
this section. be held by low and moderate income persons)
109
which are projected to become available to (iii) Details and scope of CDBG
low and moderate income [(Page 138]] assisted rehabilitation, by structure.
persons through job turnover within two (10) For each activity determined to aid
years of the time CDBG assistance is in the prevention or elimination of slums or
provided. Information upon which the job blight based on the elimination of specific
turnover projections were based shall also conditions of blight or physical decay not
be included in the record; located in a slum or blighted area:
(iii) For each retained job claimed (i) A description of the specific
to be held by a low and moderate income condition of blight or physical decay
person, information on the size and annual treated; and
income of the person's family; (ii) For rehabilitation carried out
(iv) For jobs claimed to be available under this category, a description of the
to low and moderate income persons based on specific conditions detrimental to public
job turnover, a description covering the health and safety which were identified and
items required for ' 'available to' ' jobs in the details and scope of the CDBG assisted
paragraph (b) (5) of this section; and rehabilitation by structure.
(v) Where jobs were claimed to be (11) For each activity determined to aid
available to low and moderate income in the prevention or elimination of slums or
persons through turnover, a listing of each blight based on addressing slums or blight
job which has turned over to date, in an urban renewal area, a copy of the
indicating which of those jobs were either Urban Renewal Plan, as in effect at the time
taken by, or available to, low and moderate the activity is carried out, including maps
income persons. For jobs made available, a and supporting documentation.
description of how first consideration was (12) For each activity determined to meet
given to such persons for those jobs shall a community development need having a
also be included in the record. particular urgency:
(7) For purposes of-documenting, pursuant (i) Documentation ooncerning the
to paragraph (b) (5) (i) (B), (b) (5) (ii) (C) , nature and degree of seriousness of the
(b) (6) (iii) or (b) (6) (v) of this section, condition requiring assistance;
that the person for whom a job was either (ii) Evidence that the recipient
filled by�or made available to a low- or ccAtified that the CDBG activity was
moderate-income person based upon the census designed to address the urgent need;
tract where the person resides or in which (iii) Information on the timing of
the business is located, the recipient, in the development of the serious condition;
lieu of maintaining records showing the and
person's family size and income, may (iv) Evidence confirming that other
substitute records showing either the financial resources to alleviate the need
person's address at the time the were not available. [[Page 139] ]
determination of income status was made or (c) Records that demonstrate that the
the address of the.business providing the recipient has made the determinations
job, as applicable, the census tract in required as a condition of eligibility of
which that address was located, the percent certain activities, as prescribed in Sec.
of persons residing in that tract who either Sec. 570.201(f), 570.201(i) (2), 570.201(p),
are in poverty or who are low- and moderate- 570.201(q), 570.202(b) (3), 570.206(f),
income, as applicable, the data source used 570.209, and 570.309.
for determining the percentage, and a (d) Records which demonstrate compliance
description of the pervasive poverty and with Sec. 570.505 regarding any change of
general distress in the census tract in use of real property acquired or improved
sufficient detail to demonstrate how the with CDBG assistance.
census tract met the criteria in Sec. (e) Records that demonstrate compliance
570.208(a) (4) (v), as applicable. with the citizen participation requirements
(8) For each activity determined to aid prescribed in 24 CFR part 91, subpart B, for
in the prevention or elimination of slums or entitlement recipients, or in 24 CFR part
blight based on addressing one or more of 91, subpart C, for HUD-administered small
the conditions which qualified an area as a cities recipients.
slum or blighted area: (f) Records which demonstrate compliance
(i) The boundaries of the area; and with the requirements in Sec. 570.606
(ii) A description of the conditions regarding acquisition, displacement,
which qualified the area at the time of its relocation, and replacement housing.
designation in sufficient detail to (g) Fair housing and equal opportunity
demonstrate how the area met the criteria in records containing:
Sec. 570.208(b) (1) . (1) Documentation of the analysis of
(9) For each residential rehabilitation impediments and the actions the recipient
activity determined to aid in the prevention has carried out with its housing and
or elimination of slums or blight in a slum community development and other resources to
or blighted area: remedy or ameliorate any impediments to fair
(i) The local definition of housing choice in the recipient's community.
substandard' '; (2) Data on the extent to which each
(ii) A pre-rehabilitation inspection racial and ethnic group and single-headed
report describing the deficiencies in each households (by gender of household head)
structure to be rehabilitated; and have applied for, participated in, or
110
benefited from, any program or activity activity funded in whole or in part with
funded in whole or in part with CDBG funds. CDBG funds. [ [Page 140] ]
Such information shall be used only as a (h) Financial records, in accordance with
basis for further investigation as to the applicable requirements listed in Sec.
compliance with nondiscrimination 570.502, including source documentation for
requirements. No recipient is required to entities not subject to parts 84 and 85 of
attain or maintain any particular this title. Grantees shall maintain evidence
statistical measure by race, ethnicity, or to support how the CDBG funds provided to
gender in covered programs. such entities are expended. Such
(3) Data on employment in each of the documentation must include, to the extent
recipient's operating units funded in whole applicable, invoices, schedules containing
or in part with CDBG funds, with such data comparisons of budgeted amounts and actual
maintained in the categories prescribed on expenditures, construction progress
the Equal Employment Opportunity schedules signed by appropriate parties
Commission's EEO-4 form; and documentation (e.g., general contractor and/or a project
of any actions undertaken to assure equal architect) , and/or other documentation
employment opportunities to all persons appropriate to the nature of the activity.
regardless of race, color, national origin, (i) Agreements and other records related to
sex or handicap in operating units funded in lump sum disbursements to private financial
whole or in part under this part. institutions for financing rehabilitation as
(4) Data indicating the race and prescribed in Sec. 570.513; and
ethnicity of households (and gender of (j) Records required to be maintained in
single heads of households) displaced as a accordance with other applicable laws and
result of CDBG funded activities, together regulations set forth in subpart K of this
with the address and census tract of the part. (Approved by the Office of Management
housing units to which each displaced and Budget under control number 2506-0077)
household relocated. Such information shall
be used only as a basis for further [53 FR 34454, Sept. 6, 1988; 53 FR 41330,
investigation as to compliance with Oct. 21, 1988, as amended at 60 FR 1916,
nondiscrimination requirements. No recipient 1953, Jan. 5, 1995; 60 FR 56915, Nov. 9,
is required to attain or maintain any 1995; 61 FR 18674, Apr. 29, 1996; 64 FR
particular statistical measure by race, 38813, July 19, 19991
ethnicity, or gender in covered programs.
(5) Documentation of actions undertaken Sec. 570.508 Public access to program
to meet the requirements of Sec. 570.607(b) records.
which implements section 3 of the Housing
Development Act of 1968, as amended (12 Notwithstanding 24 CFR 85.42(f), recipients
U.S.C. 1701U) relative to the hiring and shall provide citizens with reasonable
training of low and moderate income persons access to records regarding the past use of
and the use of local businesses. CDBG funds, consistent with applicable State
(6) Data indicating the racial/ethnic and local laws regarding privacy and
character of each business entity receiving obligations of confidentiality.
a contract or subcontract of $25,000 or more
paid, or to be paid, with CDBG funds, data Sec. 570.509 Grant closeout procedures.
indicating which of those entities are
women's business enterprises as defined in (a) Criteria for closeout. A grant will be
Executive Order 12138, the amount of the closed out when HUD determines, in
contract or subcontract, and documentation consultation with the recipient, that the
of recipient's affirmative steps to assure following criteria have been met:
that minority business and women's business (1) All costs to be paid with CDBG funds
enterprises have an equal opportunity to have been incurred, with the exception of
obtain or compete for contracts and closeout costs (e.g., audit costs) and costs
subcontracts as sources of supplies, resulting from contingent liabilities
equipment, construction and services. Such described in the closeout agreement pursuant
affirmative steps may include, but are not to paragraph (c) of this section. Contingent
limited to, technical assistance open to all liabilities include, but are not limited to,
businesses but designed to enhance third-party claims against the recipient, as
opportunities for these enterprises and well as related administrative costs.
special outreach efforts to inform them of (2) With respect to activities (such as
contract opportunities. Such steps shall not rehabilitation of privately owned
include preferring any business in the award properties) which are financed by means of
of any contract or subcontract solely or in escrow accounts, loan guarantees, or similar
part on the basis of race or gender. mechanisms, the work to be assisted with
(7) Documentation of the affirmative CDBG funds (but excluding program income)
action measures the recipient has taken to has actually been completed.
overcome prior discrimination, where the (3) Other responsibilities of the
courts or HUD have found that the recipient recipient under the grant agreement and
has previously discriminated against persons applicable laws and regulations appear to
on the ground of race, color, national have been carried out satisfactorily or
origin or sex in administering a program or there is no further Federal interest in
111
keeping the grant agreement open for the obligations in paragraphs (c) (1) through (4)
purpose of securing performance. of this section. The agreement shall
(b) Closeout actions. authorize monitoring by HUD, and shall
(1) Within 90 days of the date it is provide that findings of noncompliance may
determined that the criteria for closeout be taken into account by HUD, as
have been met, the recipient shall submit to unsatisfactory performance of the recipient,
HUD a copy of the final performance and in the consideration of any future grant
evaluation report described in 24 CFR part award under this part.
91. If an acceptable report is not (d) Status of consolidated plan after
submitted, an audit of the recipient's grant closeout. Unless otherwise provided in a
activities may be conducted by HUD. closeout agreement, the Consolidated Plan
(2) Based on the information provided in will remain in effect after closeout until
the performance report and other relevant the expiration of the program year covered
information, HUD, in consultation with the by the last approved consolidated plan.
recipient, will prepare a closeout agreement (e) Termination of grant for convenience.
in accordance with paragraph (c) of this Grant assistance provided under this part
section. may be terminated for convenience in whole
(3) HUD will cancel any unused portion of or in part before the completion of the
the awarded grant, as shown in the signed assisted activities, in accordance with the
grant closeout agreement. Any unused grant provisions of 24 CFR 85.44. The recipient
funds disbursed from the U.S. Treasury which shall not incur new obligations for the
are in the possession of the recipient shall terminated portions after the effective
be refunded to HUD. date, and shall cancel as many outstanding
(4) Any costs paid with CDBG funds which obligations as possible. HUD shall allow
were not audited previously shall be subject full credit to the recipient for those
to coverage in the recipient's next single portions of obligations which could not be
audit performed in accordance with 24 CFR canceled and which had been properly
part 44. The recipient may be required to incurred by the recipient in carrying out
repay HUD any disallowed costs based on the the activities before the termination. The
results of the audit, or on additional HUD closeout policies contained in this section
reviews provided for in the closeout shall apply in such cases, except where the
agreement. approved grant is terminated in its
(c) Closeout agreement. Any obligations entirety. Responsibility for the
remaining as of the date of the closeout environmental review to be performed under
shall be covered by the terms of a closeout 24 CFR part 50 or 24 CFR part 58, as
agreement. The agreement shall be prepared applicable, shall be determined as part of
by the HUD field office in consultation with the closeout process.
the recipient. The agreement shall identify (f) Termination for cause. In cases in
the grant being closed out, and include which the Secretary terminates the
provisions with respect to the following: recipient's grant under the authority of
(1) Identification of any closeout costs subpart O of this part, or under the terms
or contingent liabilities subject to payment of the grant agreement, the closeout
with CDBG funds after the closeout agreement policies contained in this section shall
is signed; apply, except where the approved grant is
(2) Identification of any unused grant cancelled in its entirety. The provisions in
funds to be canceled by HUD; 24 CFR 85.43(c) on the effects of
(3) Identification of any program income termination shall also apply. HUD shall
on deposit in financial institutions at the determine whether an environmental
time the closeout agreement is signed: assessment or finding of inapplicability is
(4) Description of the recipient's required, and if such review is required,
responsibility after closeout for: HUD shall perform it in accordance with 24
(i) Compliance with all program CFR part 50.
requirements, certifications and assurances
in using program income on deposit at the [53 FR 8058, Mar. 11, 1988, as amended at 56
time the closeout agreement is signed and in FR 56128, Oct. 31, 1991; 60 FR 1916, Jan.
using any other remaining CDBG funds 5, 1995; 60 FR 16379, Mar. 30, 1995]
available for closeout costs and contingent
liabilities; [[Page 142]] Sec. 570.510 Transferring projects from
(ii) Use of real property assisted with urban counties to metropolitan cities.
CDBG funds in accordance with the principles
described in Sec. 570.505; Section 106(c) (3) of the Act authorizes the
(iii) Compliance with requirements Secretary to transfer unobligated grant
governing program income received subsequent funds from an urban county to a new
to grant closeout, as described in Sec. metropolitan city, provided: the city was an
570.504(b) (4) and (5); and included unit of general local government in
(iv) Ensuring that flood insurance the urban county immediately before its
coverage for affected property owners is qualification as a metropolitan city; the
maintained for the mandatory period; funds to be transferred were received by the
(5) Other provisions appropriate to any county before the qualification of the city
special circumstances of the grant closeout, as a metropolitan city; the funds to be
in modification of or in addition to the transferred had been programmed by the urban
112
county for use in the city before such dwelling units (and accessory neighborhood-
qualification; and the city and county agree scale non-residential space within the same
to transfer responsibility for the structure, if any, e.g., a store front below
administration of the funds being a dwelling unit) .
transferred from the county's letter of (2) An escrow account shall not be used
credit to the city's letter of credit. The unless the contract between the property
following rules apply to the transfer of owner and the contractor selected to do the
responsibility for an activity from an urban rehabilitation work specifically provides
county to the new metropolitan city. that payment to the contractor shall be made
(a) The urban county and the metropolitan through an escrow account maintained by the
city must execute a legally binding recipient, by a subrecipient as defined in
agreement which shall specify: Sec. 570.500(c), by.a public agency
(1) The amount of funds to be transferred designated under Sec. 570.501(a) , or by an
from the urban county's letter_ of credit to agent under a procurement contact governed
the metropolitan city's letter of credit; by the requirements of 24 CFR 85.36. No
(2) The activities to be carried out by deposit to the escrow account shall be made
the city with the funds being transferred; until after the contract has been executed
(3) The county's responsibility for all between the property owner and the
expenditures and unliquidated obligations rehabilitation contractor.
associated with the activities before the (3) All funds withdrawn under this
time of transfer, including a statement that section shall be deposited into one interest
responsibility for all audit and monitoring earning account with a financial
findings associated with those expenditures institution. Separate bank accounts shall
and obligations shall remain with the not be established for individual loans and
county; [[Page 143]] grants.
(4) The responsibility of the (4) The amount of funds deposited into an
metropolitan city for all other audit and escrow account shall be limited to the
monitoring findings; amount expected to be disbursed within 10
(5) How program income (if any) from the working days from the date of deposit. If
activities specified shall be divided the escrow account, for whatever reason, at
between the metropolitan city and the urban any time contains funds exceeding 10 days
county; and cash needs, the grantee immediately shall
(6) Such other provisions as may be transfer the excess funds to its program
required by HUD. account. In the program account, the excess
(b) Upon receipt of a request for the funds shall be treated as funds erroneously
transfer of funds from an urban county to a drawn in accordance with the requirements of
metropolitan city and a copy of the executed U.S. Treasury Financial Manual, paragraph 6-
agreement, HUD, in consultation with the 2075.30.
Department of the Treasury, shall establish (5) Funds deposited into an escrow
a date upon which the funds shall be account shall be used only to pay the actual
transferred from the letter of credit of costs of rehabilitation incurred by the
the urban county to the letter of credit of owner under the contract with a private
the metropolitan city, and shall take all contractor. Other eligible costs related to
necessary actions to effect the requested the rehabilitation loan or grant, e.g., the
transfer of funds. recipient's administrative costs under Sec.
(c) HUD shall notify the metropolitan city 570.206 or rehabilitation services costs
and urban county of any special audit and under Sec. 570.202(b) (9), are not
monitoring rules which apply to the permissible uses of escrowed funds. Such
transferred funds when the date of the other eligible rehabilitation costs shall be
transfer is communicated to the city and the paid under normal CDBG payment procedures
county. (e.g., from withdrawals of grant funds under
the recipient's letter of credit with the
Sec. 570.511 Use of escrow accounts for Treasury) .
rehabilitation of privately owned (b) Interest. Interest earned on escrow
residential property. accounts established in accordance with this
section, less any service charges for the
(a) Limitations. A recipient may withdraw account, shall be remitted to HUD at least
funds from its letter of credit for quarterly but not more frequently than
immediate deposit into an escrow account for monthly. Interest earned on escrow accounts
use in funding loans and grants for the is not required to be remitted to HUD to the
rehabilitation of privately owned extent the interest is attributable to the
residential property under Sec. investment of program income.
570.202(a) (1) . The following additional (c) Remedies for noncompliance. If HUD
limitations apply to the use of escrow determines that a recipient has failed to
accounts for residential rehabilitation use an escrow account in accordance [[Page
loans and grants closed after September 7, 144]]with this section, HUD may, in addition
1990: to imposing any other sanctions provided for
(1) The use of escrow accounts under this under this part, require the recipient to
section is limited to loans and grants for discontinue the use of escrow accounts, in
the rehabilitation of primarily residential whole or in part.
properties containing no more than four
113
[55 FR 32369, Aug. 8, 19901 Sec. 570.512 which CDBG funds are to be deposited and
[Reserved] used or returned, the anticipated level of
rehabilitation activities by the financial
Sec. 570.513 Lump sum drawdown for institution, the rate of interest and other
financing of property rehabilitation benefits to be provided by the financial
activities. institution in return for the lump sum
deposit, and such other terms as are
Subject to the conditions prescribed in this necessary for compliance with the provisions
section, recipients may draw funds from the of this section. Upon execution of the
letter of credit in a lump sum to establish agreement, a copy must be provided to the
a rehabilitation fund in one or more private HUD field office for its record and use in
financial institutions for the purpose of monitoring. Any modifications made during
financing the rehabilitation of privately the term of the agreement must also be
owned properties. The fund may be used in provided to HUD.
conjunction with various rehabilitation (3) Period to undertake activities. The
financing techniques, including loans, agreement must provide that the
interest subsidies, loan guarantees, loan rehabilitation fund may only be used for
reserves, or such other uses as may be authorized activities during a period of no
approved by HUD consistent with the more than two years. The lump sum deposit
objectives of this section. The fund may shall be made only after the agreement is
also be used for making grants, but only for fully executed.
the purpose of leveraging non-CDBG funds for (4) Time limit on use of deposited funds.
the rehabilitation of the same property. Use of the deposited funds for
(a) Limitation on drawdown of grant funds. rehabilitation financing assistance must
(1) The funds that a recipient deposits start (e.g., first loan must be made,
to a rehabilitation fund shall not exceed subsidized or guaranteed) within 45 days of
the grant amount that the recipient the deposit. In addition, substantial
reasonably expects will be required, disbursements from the fund must occur
together with anticipated program income within 180 days of the receipt of the
from interest and loan repayments, for the deposit. (Where CDBG funds are used as a
rehabilitation activities during the period guarantee, the funds that must be
specified in the agreement to undertake substantially disbursed are the guaranteed
activities, based on either: funds.) For a recipient with an agreement
(i) Prior .level of rehabilitation specifying two years to [[Page 145] ]
activity; or undertake activities, the disbursement of 25
(ii) Rehabilitation staffing and percent of the fund (deposit plus any
management capacity during the period interest earned) within 180 days will be
specified in the agreement to undertake regarded as meeting this requirement. If a
activities. recipient with an agreement specifying two
(2) No grant funds may be deposited under years to undertake activities determines
this section solely for the purpose of that it has had substantial disbursement
investment, notwithstanding that the from the fund within the 180 days although
interest or other income is to be used for it had not met this 25 percent threshold,
the rehabilitation activities. the justification for the recipient's
(3) The recipient's rehabilitation determination shall be included in the
program administrative costs and the program file. Should use of deposited funds
administrative costs of the financial not start within 45 .days, or substantial
institution may not be funded through lump disbursement from such fund not occur within
sum drawdown. Such costs must be paid from 180 days, the recipient may be required by
periodic letter of credit withdrawals in HUD to return all or part of the deposited
accordance with standard procedures or from funds to the recipient's letter of credit.
program income, other than program income (5) Program activity. Recipients shall
generated by the lump sum distribution. review the level of program activity on a
(b) Standards to be met. The following yearly basis. Where activity is
standards shall apply to all lump sum substantially below that anticipated,
drawdowns of CDBG funds for rehabilitation: program funds shall be returned to the
(1) Eligible rehabilitation activities. recipient's letter of credit.
The rehabilitation fund shall be used to (6) Termination of agreement. In the case
finance the rehabilitation of privately of substantial failure by a private
owned properties eligible under the general financial institution to comply with the
policies in Sec. 570.200 and the specific terms of a lump sum drawdown agreement, the
provisions of either Sec. 570.202, including recipient shall terminate its agreement,
the acquisition of properties for provide written justification for the
rehabilitation, or Sec. 570.203. action, withdraw all unobligated deposited
(2) Requirements for agreement. The funds from the private financial
recipient shall execute a written agreement institution, and return the funds to the
with one or more private financial recipient's letter of credit.
institutions for the operation of the (7) Return of unused deposits. At the end
rehabilitation fund. The agreement shall of the period specified in the agreement for
specify the obligations and responsibilities undertaking activities, all unobligated
of the parties, the terms and conditions on deposited funds shall be returned to the
114
recipient's letter of credit unless the (ii) In addition to the payment of
recipient enters into a new agreement interest, at least one of the following
conforming to the requirements of this benefits must be provided by the financial
section. In addition, the recipient shall institution:
reserve the right to withdraw any (A) Leverage of the deposited
unobligated deposited funds required by HUD funds so that the financial institution
in the exercise of corrective or remedial commits private funds for loans in the
actions authorized under Sec. 570.910(b), rehabilitation program in an amount
Sec. 570.911, Sec. 570.912 or Sec. 570.913. substantially in excess of the amount of the
(8) Rehabilitation loans made with non- lump sum deposit;
CDBG funds. If the deposited funds or (B) Commitment of private funds
program income derived from deposited funds by the financial institution for
are used to subsidize or guarantee repayment rehabilitation loans at below market
of rehabilitation loans made with non-CDBG interest rates, at higher than normal risk,
funds, or to provide a supplemental loan or or with longer than normal repayment
grant to the borrower of the non-CDBG funds, periods; or
the rehabilitation activities are considered (C) Provision of administrative
to be CDBG-assisted activities subject to services in support of the rehabilitation
the requirements applicable to such program by the participating financial
activities, except that repayment of non- institution at no cost or at lower than
CDBG funds shall not be treated as program actual cost.
income. (c) Program income. Interest earned on lump
(9) Provision of consideration. In sum deposits and payments on loans made from
consideration for the lump sum deposit by such deposits are program income and, during
the recipient in a private financial the period of [[Page 146]] the agreement,
institution, the deposit must result in shall be used for rehabilitation activities
appropriate benefits in support of the under the provisions of this section.
recipient's local rehabilitation program. (d) Outstanding findings. Notwithstanding
Minimum requirements for such benefits are: any other provision of this section, no
(i) Grantees shall require the recipient shall enter into a new agreement
financial institution to pay interest on the during any period of time in which an audit
lump sum deposit. or monitoring finding on a previous lump sum
(A) The interest rate paid by the drawdown agreement remains unresolved.
financial institution shall be no more than (e) Prior notification. The recipient shall
three points below the rate on one year provide the HUD field office with written
Treasury obligations at constant maturity. notification of the amount of funds to be
(B) When an agreement sets a distributed to a private financial
fixed interest rate for the entire term of institution before distribution under the
the agreement, the rate should be based on provisions of this section.
the rate at the time the agreement is (f) Recordkeeping requirements. The
executed. recipient shall maintain in its files a copy
(C) The agreement may provide for of the written agreement and related
an interest rate that would fluctuate documents establishing conformance with this
periodically during the term of the section and concerning performance by a
agreement, but at no time shall the rate be financial institution in accordance with the
established at more than three points below agreement.
the rate on one year Treasury obligations at
constant maturity.
115
Appendix E
24 CFR 570 CDBG Regulations Subpart K, Other Program Requirements
116
Section Sec. 570.601 Public Law 88-352 and Public
Law 90-284; affirmatively furthering fair
[Code of Federal Regulations] housing; Executive Order 11063.
[Title 24, Volume 3] (a) The following requirements apply
[Revised as of April 1, 2004] according to sections 104(b) and 107 of the
From the U.S. Government Printing Cffice via Act:
GPO Access (1) Public Law 88-352, which is title
[CITE: 24CFR570.600] VI of the Civil Rights Act of 1964 (42
U.S.C. 2000d et seq.), and implementing
[Page 14661 regulations in 24 CFR part 1.
(2) Public Law 90-284, which is the
TITLE 24- -HOUSING AND URBAN DEVELOPMENT Fair Housing Act (42 U.S.C. 3601-3620) . In
accordance with the Fair Housing Act, the
CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR Secretary requires that grantees administer
COMMUNITY PLANNING AND DEVELOPMENT, all programs and activities related to
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT housing and community development in a
manner to affirmatively further the policies
PART 570_COMMUNITY DEVELOPMENT BLOCK GRANTS- of the Fair Housing Act. Furthermore, in
-Table of Contents accordance with section 104(b) (2) of the
Subpart K Other Program Requirements
Act, for each community receiving a grant
under subpart D of this part, the
certification that the grantee will
Sec. 570.600 General. affirmatively further fair housing shall
specifically require the grantee to assume
Source: 53 FR 34456, Sept. 6, 1988, unless the responsibility of fair housing planning
otherwise noted. by conducting an analysis to identify
impediments to fair housing choice within
(a) This subpart K enumerates laws that its jurisdiction, taking appropriate actions
the Secretary will treat as applicable to to overcome the effects of any impediments
grants made under section 106 of the Act, identified through that analysis, and
other than grants to States made pursuant to maintaining records reflecting the analysis
section 106(d) of the Act, for purposes of and actions in this regard.
the Secretary's determinations under section (b) Executive Order 11063, as amended by
104(e) (1) of the Act, including statutes Executive Order 12259 (3 CFR, 1959-1963
expressly made applicable by the Act and Comp., p. 652; 3 CFR, 1980 Comp., p. 307)
certain other statutes and Executive Orders (Equal Opportunity in Housing) , [[Page 147] ]
for wtiich the Secretary has enforcement and implementing regulations in 24 CFR part
responsibility. This subpart K applies to 107, also apply.
grants made under the Insular areas program
in Sec. 570.405, with the exception of Sec. [61 FR 11477, Mar. 20, 19961
570.612. The absence of mention herein of
any other statute for which the Secretary Sec. 570.602 Section 109 of the Act.
does not have direct enforcement
responsibility is not intended to be taken Section 109 of the Act requires that no
as an indication that, in the Secretary's person in the United States shall on the
opinion, such statute or Executive Order is grounds of race, color, national origin,
not applicable to activities assisted under religion, or sex be excluded from
the Act. For laws that the Secretary will participation in, be denied the benefits of,
treat as applicable to grants made to States or be subjected to discrimination under any
under section 106(d) of the Act for purposes program or activity receiving Federal
of the determination required to be made by financial assistance made available pursuant
the Secretary pursuant to section 104(e) (2) to the Act. Section 109 also directs that
of the Act, see Sec. 570.487. the prohibitions against discrimination on
(b) This subpart also sets forth certain the basis of age under the Age
additional program requirements which the Discrimination Act and the prohibitions
Secretary has determined to be applicable to against discrimination on the basis of
grants provided under the Act as a matter of disability under Section 504 shall apply to
administrative discretion. programs or activities receiving Federal
(c) In addition to grants made pursuant to financial assistance under Title I programs.
section 106(b) and 106(d) (2) (B) of the Act The policies and procedures necessary to
(subparts D and F, respectively), the ensure enforcement of section 109 are
requirements of this subpart K are codified in 24 CFR part 6.
applicable to grants made pursuant to
sections 107 and 119 of the Act (subparts E [64 FR 3802, Jan. 25, 1999]
and G, respectively), and to loans
guaranteed pursuant to subpart M. Sec. 570.603 Labor standards.
[53 FR 34456, Sept. 6, 1988, as amended at
61 FR 11477, Mar. 20, 19961 (a) Section 110(a) of the Act contains
labor standards that apply to non volunteer
labor financed in whole or in part with
117
assistance received under the Act. In (i) For purposes of paragraph (b)
accordance with section 110(a) of the Act, of this section, the term ' 'displaced
the Contract work Hours and Safety Standards person' ' means any person (family,
Act (40 U.S.C. 327 et seq.) also applies. individual, business, nonprofit
However, these requirements apply to the organization, or farm) that moves from real
rehabilitation of residential property only property, or moves his or her personal
if such property contains not less than 8 property from real property, permanently and
units. involuntarily, as a direct result of
(b) The regulations in 24 CFR part 70 rehabilitation, demolition, or acquisition
apply to the use of volunteers. for an activity assisted under this part. A
[61 FR 11477, Mar. 20, 1996] permanent, involuntary move for an assisted
activity includes a permanent move from real
Sec. 570.604 Environmental standards. property that is made:
(A) After notice by the grantee
For purposes of section 104(g) of the Act, (or the state recipient, if applicable) to
the regulations in 24 CFR part 58 specify move permanently from the property, if the
the other provisions of law which further move occurs after the initial official
the purposes of the National Environmental submission to HUD (or the State, [ [Page
Policy Act of 1969, and the procedures by 148] ] as applicable) for grant, loan, or
which grantees must fulfill their loan guarantee funds under this part that
environmental responsibilities. In certain are later provided or granted.
cases, grantees assume these environmental (B) After notice by the
review, decision making, and action property owner to move permanently from the
responsibilities by execution of grant property, if the move occurs after the date
agreements with the Secretary. of the submission of a request for financial
assistance by the property owner (or person
[61 FR 11477, Mar. 20, 19961• in control of the site) that is- later
approved for the requested activity.
Sec. 570.605 National Flood Insurance (C) Before the date described
Program. in paragraph (b) (2) (i) (A) or (B) of this
section, if either HUD or the grantee (or
Notwithstanding the date of HUD approval of State, as applicable) determines that the
the recipient's application (or, in the case displacement directly resulted from
of grants made under subpart D of this part acquisition, rehabilitation, or demolition
or HUD-administered small cities recipients for the requested activity.
in Hawaii, the date of submission of the (D) After the ' 'initiation of
grantee's consolidated plan, in accordance negotiations' ' if the person is the tenant-
with 24 CFR part 91), section 202(a) of the occupant of a dwelling unit and any one of
Flood Disaster Protection Act of 1973 (42 the following three situations occurs:
U.S.C. 4106) and the regulations in 44 CFR (1) The tenant has not been
parts 59 through 79 apply to funds provided provided with a reasonable opportunity to
under this part 570. lease and occupy a suitable decent, safe,
and sanitary dwelling in the same
[61 FR 11477, Mar. 20, 1996] building/complex upon the completion of the
project, including a monthly rent that does
Sec. 570.606 Displacement, relocation, not exceed the greater of the tenant's
acquisition, and replacement of housing, monthly rent and estimated average utility
costs before the initiation of negotiations
(a) General policy for minimizing or 30 percent of the household's average
displacement. Consistent with the other monthly gross income; or
goals and objectives of this part, grantees (2) The tenant is required
(or States or state recipients, as to relocate temporarily for the activity but
applicable) shall assure that they have the tenant is not offered payment for all
taken all reasonable steps to minimize the reasonable out-of-pocket expenses incurred
displacement of persons (families, in connection with the temporary relocation,
individuals, businesses, nonprofit including the cost of moving to and from the
organizations, and farms) as a result of temporary location and any increased housing
activities assisted under this part. costs, or other conditions of the temporary
(b) Relocation assistance for displaced relocation are not reasonable; and the
persons at URA levels. tenant does not return to the
(1) A displaced person shall be building/complex; or
provided with relocation assistance at the (3) The tenant is required
levels described in, and in accordance with to move to another unit in the
the requirements of 49 CFR part 24, which building/complex, but is not offered
contains the government-wide regulations reimbursement for all reasonable out-of-
implementing the Uniform Relocation pocket expenses incurred in connection with
Assistance and Real Property Acquisition the move.
Policies Act of 1970 (URA) (42 U.S.C. 4601- (ii) Notwithstanding the provisions of
4655) . paragraph (b) (2) (i) of this section, the
(2) Displaced person. term ' 'displaced
person-' ' does not include:
118
(A) A person who is evicted for equal relocation assistance within each
cause based upon serious or repeated class of displaced persons.
violations of material terms of the lease or (e) Acquisition of real property. The
occupancy agreement. To exclude a person on acquisition of real property for an assisted
this basis, the grantee (or State or state activity is subject to 49 CFR part 24,
recipient, as applicable) must determine subpart B.
that the eviction was not undertaken for the (f) Appeals. If a person disagrees with
purpose of evading the obligation to provide the determination of the grantee (or the
relocation assistance under this section; state recipient, as applicable) concerning
(B) A person who moves into the the person's eligibility for, or the amount
property after the date of the notice of, a relocation payment under this section,
described in paragraph (b) (2) (i) (A) or (B) the person may file a written appeal of that
of this section, but who received a written determination with the grantee (or state
notice of the expected displacement before recipient, as applicable) . The appeal
occupancy. procedures to be followed are described in
(C) A person who is not displaced 49 CFR 24.10. In addition, a low- or
as described in 49 CFR 24.2(g) (2) . moderate-income household that has been
(D) A person who the grantee (or displaced from a dwelling may file a written
State, as applicable) determines is not request for review of the grantee's decision
displaced as a direct result of the to the HUD Field Office. For purposes of the
acquisition, rehabilitation, or demolition State CDBG program, a low- or moderate-
for an assisted activity. To exclude a income household may file a written request
person on this basis, HUD must concur in for review of the state recipient's decision
that determination. with the State.
(iii) A grantee (or State or state (g) Responsibility of grantee or State.
recipient, as applicable) may, at any time, (1) The grantee (or State, if applicable) is
request HUD to determine whether a person is responsible for ensuring compliance with the
a displaced person under this section. (3) requirements of this section,
Initiation of negotiations. For purposes of notwithstanding any third party's
determining the type of replacement housing contractual obligation to the grantee to
assistance to be provided under paragraph comply with the provisions of this section.
(b) of this section, if the displacement is For purposes of the State CDBG program, the
the direct result of privately undertaken State shall require state recipients to
rehabilitation, demolition, or acquisition certify that they will comply with the
of real property, the term ' 'initiation of requirements of this section.
negotiations' ' means the execution of the (2) The cost of assistance required
grant or loan agreement between the grantee under this .section may be paid from local
(or State or state recipient, as public funds, funds provided under this
(applicable) and the person owning or part, or funds available from other sources.
controlling the real property. (31 The grantee (or State and state
(c) Residential antidisplacement and recipient, as applicable) must maintain
relocation assistance plan. The grantee records in sufficient detail to demonstrate
shall comply with the requirements of 2.4 CFR compliance with the provisions of this
part 42, subpart B. section.
(d) Optional relocation assistance. Under
section 105(a) (11) of the Act, the grantee (Approved by the Office of Management and
may provide (or the State may permit the Budget under OMB control number 2506-0102)
state recipient to provide, as applicable) [61 FR 11477, Mar. 20, 1996, as amended at
relocation payments and other relocation 61 FR 51760, Oct. 3, 1996]
assistance to persons displaced by
activities that are not subject to paragraph Sec. 570.607 Employment and contracting
(b) or (c) of this section. The grantee may opportunities.
also provide (or the State may also permit
the state recipient to provide, as To the extent that they are otherwise
applicable) relocation assistance to persons applicable, grantees shall comply with:
receiving assistance under paragraphs (b) or (a) Executive Order 11246, as amended by
(c) of this section at levels in excess of Executive Orders 11375, 11478, 12086, and
those required by these paragraphs. Unless 12107 (3 CFR 1964-1965 Comp. p. 339; 3 CFR,
such assistance is provided [[Page 149]] 1966-1970 Comp., p. 684; 3 CFR, 1966-1970.,
under State or local law, the grantee (or p. 803; 3 CFR, 1978 Comp., p. 230; 3 CFR,
state recipient, as applicable) shall 1978 Comp., p. 264 (Equal Employment
provide such assistance only upon the basis Opportunity), and Executive Order 13279
of a written determination that the (Equal Protection of the Laws for Faith-
assistance is appropriate (see, e.g., 24 CFR Based and Community Organizations), 67 FR
570.201(i), as applicable) . The grantee (or 77141, 3 CFR, 2002 Comp., p. 258; and the
state recipient, as applicable) must adopt a implementing regulations at 41 CFR chapter
written policy available to the public that 60; and (b) Section 3 of the Housing and
describes the relocation assistance that the Urban Development Act of 1968 (12 U.S.C.
grantee (or state recipient, as applicable) 1701u) and implementing regulations at 24
has elected to provide and that provides for CFR part 135.
119
[68 FR 56405, Sept. 30, 20031 participate in a decision making process or
gain inside information with regard to such
Sec. 570.608 Lead-based paint. activities, may obtain a financial interest
or benefit from a CDBG-assisted activity, or
The Lead-Based Paint Poisoning Prevention have a financial interest in any contract,
Act (42 U.S.C. 4821-4846), the Residential subcontract, or agreement with respect to a
Lead-Based Paint Hazard Reduction Act of CDBG-assisted activity, or with respect to
1992 (42 U.S.C. 4851-4856), and implementing the proceeds of the CDBG-assisted activity,
regulations at part 35, subparts A, B, J, K, either for themselves or those with whom
and R of this part apply to activities under they have business or immediate family ties,
this program. during their tenure or for one year
thereafter. For the UDAG program, the above
[64 FR 50226, Sept. 15, 19991 restrictions shall apply to all activities
that are a part of the UDAG project, and
Sec. 570.609 Use of debarred, suspended or shall cover any such financial interest or
ineligible contractors or subrecipients. benefit during, or at any time after, such
person's tenure.
The requirements set forth in 24 CFR part 5 (c) Persons covered. The conflict of
apply to this program. interest provisions of paragraph (b) of this
(61. FR 5209, Feb. 9, 19961 section apply to any person who is an
employee, agent, consultant, officer, or
Sec. 570.610 Uniform administrative elected official or appointed official of
requirements and cost principles. the recipient, or of any designated public
agencies, or of subrecipients that are
The recipient, its agencies or receiving funds under this part. (d)
instrumentalities, and subrecipients shall Exceptions. Upon the written request of the
comply with the policies, guidelines, and • recipient, HUD may grant an exception to the
requirements of 24 CFR part 85 and OMB provisions of paragraph (b) of this section
Circulars A-87, A-110 (implemented at 24 CFR on a case-by-case basis when it has
part 84) , A-122, A-133 (implemented at 24 satisfactorily met the threshold
CFR part 45), and [[Page 150] ] A-128 2 requirements of (d) (1) of this section,
(implemented at 24 CFR part 44), as taking into account the cumulative effects
applicable, as they relate to the acceptance of paragraph (d) (2) of this section.
and use of Federal funds under this part. (1) Threshold requirements. HUD will
The applicable sections of 24 CFR parts 84 consider an exception only after the
and 85 are set forth at Sec. 570.502. \2\ recipient has provided the following
See footnote 1 at Sec. 570.200(a) (5) . documentation:
(i) A disclosure of the nature of the
[60 FR 56916, Nov. 9, 1995] conflict, accompanied by an assurance that
there has been public disclosure of the
Sec. 570.611 Conflict of interest. conflict and a description of how the public
disclosure was made; and
(a) Applicability. (ii) An opinion of the recipient's
(1) In the procurement of supplies, attorney that the interest for which the
equipment, construction, and services by exception is sought would not violate State
recipients and by subrecipients, the or local law.
conflict of interest provisions in 24 CFR (2) Factors to be considered for
85.36 and 24 CFR 84.42, respectively, shall exceptions. In determining whether to grant
apply. a requested exception after the recipient
(2) In all cases not governed by 24 CFR has satisfactorily met the requirements of
85.36 and 84.42, the provisions of this paragraph (d) (1) of this section, HUD shall
section shall apply. Such cases include the conclude that such an exception will serve
acquisition and disposition of real property to further the purposes of the Act and the
and the provision of assistance by the effective and efficient administration of
recipient or by its subrecipients to the recipient's program or project, taking
individuals, businesses, and other private into account the cumulative effect of the
entities under eligible activities that following factors, as applicable:
authorize such assistance (e.g., (i) Whether the exception would
rehabilitation, preservation, and other provide a significant cost benefit or an
improvements of private properties or essential degree of expertise to the program
facilities pursuant to Sec. 570.202; or or project that would otherwise not be
grants, loans, and other assistance to available;
businesses, individuals, and other private (ii) Whether an opportunity was
entities pursuant to Sec. 570.203, 570.204, provided for open competitive bidding or
570.455, or 570.703(i)) . negotiation;
(b) Conflicts prohibited. The general rule (iii) Whether the person affected is a
is that no persons described in paragraph member of a group or class of low- or
(c) of this section who exercise or have moderate-income persons intended to be the
exercised any functions or responsibilities beneficiaries of the assisted activity, and
with respect to CDBG activities assisted the exception will permit such person to
under this part, or who are in a position to
120
receive generally the same interests or activities meeting the requirements of Sec.
benefits as are being [[Page 151]] 570.208(a) that either:
made available or provided to the group or (1) Have income eligibility requirements
class; limiting the benefits exclusively to low and
(iv) Whether the affected person has moderate income persons; or
withdrawn from his or her functions or (2) Are targeted geographically or
responsibilities, or the decision making otherwise to primarily benefit low and
process with respect to the specific moderate income persons (excluding
assisted activity in question; activities serving the public at large, such
(v) Whether the interest or benefit as sewers, roads, sidewalks, and parks), and
was present before the affected person was that provide benefits to persons on the
in a position as described in paragraph (b) basis of an application.
of this section; (c) Limitation on coverage. The
Zvi) Whether undue hardship will restrictions under this section apply only
result either to the recipient or the person to applicants for new benefits not being
affected when weighed against the public received by covered resident aliens as of
interest served by avoiding the prohibited the effective date of this section.
conflict; and (d) Compliance. Compliance can be
(vii) Any other relevant accomplished by obtaining certification as
considerations. provided in 24 CFR 49.20.
(e) Programs affected.
[60 FR 56916, Nov. 9, 1995] (1) The Community Development Block Grant
program for small cities, administered under
Sec. 570.612 Executive Order 12372. subpart F of part 570 of this title until
closeout of the recipient's grant.
(a) Generai. Executive Order 12372, (2) The Community Development Block Grant
Intergovernmental Review of Federal program for entitlement grants, administered
Programs, and the Department's implementing under subpart D of part 570 of this title.
regulations at 24 CFR part 52, allow each (3) The Community Development Block Grant
State to establish its own process for program for States, administered under
review and comment on proposed Federal subpart I of part 570 of this title until
financial assistance programs. closeout of the unit of general local
(b) Applicability. Executive Order 12372 government's grant by the State.
applies to the CDBG Entitlement program and (4) The Urban Development Action Grants
the UDAG program. The Executive Order program, administered under subpart G of
applies to all activities proposed to be part 570 of this title until closeout of the
assisted under UDAG, but it applies to the recipient's grant.
Entitlement program only where a grantee
proposes to use funds for the planning or [55 FR 18494, May 2, 19901
construction (reconstruction or
installation) of water or sewer facilities. Sec. 570.614 Architectural Barriers Act and
Such facilities include storm sewers as well the Americans with Disabilities Act.
as all sanitary sewers, but do not include
water and sewer lines connecting a structure (a) The Architectural Barriers Act of 1968
to the lines in the public right-of-way or (42 U.S.C. 4151-4157) requires certain
easement. It is the responsibility of the Federal and Federally funded[[Page 152]]
grantee to initiate the Executive Order buildings and other facilities to be
review process if it proposes to use its designed, constructed, or altered in
CDBG or UDAG funds for activities subject to accordance with standards that insure
review. accessibility to, and use by, physically
handicapped people. A building or facility
Sec. 570.613 Eligibility restrictions for designed, constructed, or altered with funds
certain resident aliens. allocated or reallocated under this part
after December 11, 1995, and that meets the
(a) Restriction. Certain newly legalized definition of ' 'residential structure' ' as
aliens, as described in 24 CFR part 49, are defined in 24 CER 40.2 or the definition of
not eligible to apply for benefits under 'building' ' as defined in 41 CFR 101-
covered activities funded by the programs 19.602(a) is subject to the requirements of
listed in paragraph (e) of this section. the Architectural Barriers Act of 1968 (42
' 'Benefits' ' under this section means U.S.C. 4151-4157) and shall comply with the
financial assistance, public services, jobs Uniform Federal Accessibility Standards
and access to new or rehabilitated housing (appendix A to 24 CFR part 40 for
and other facilities made available under residential structures, and appendix A to 41
covered activities funded by programs listed CFR part 101-19, subpart 101-19.6, for
in paragraph (e) of this section. general type buildings) .
''Benefits' ' do not include relocation (b) The Americans with Disabilities Act (42
services and payments to which displacees U.S.C. 12131; 47 U.S.C. 155, 201, 218 and
are entitled by law. 225) (ADA) provides comprehensive civil
(b) Covered activities. ' 'Covered rights to individuals with disabilities in
activities' ' under this section means the areas of employment, public
accommodations, State and local government
121
DATE: April 3, 2008
SUBJECT: City Council Meeting - April 10, 2008
ITEM: 11G2. Consider a resolution authorizing the Mayor to execute a Community
Development Block Grant funding agreement in the amount of
$106,921.00 with Habitat for Humanity for land acquisition.
Department: Planning and Community Development
Staff Person: Mona Ryan, Community Development Coordinator
Justification:
Habitat builds affordable housing stock for very low income families in Round Rock.
Funding•
Cost: $106,921.00
Source of Funds: Community Development Block Grant HUD Entitlement Fund
Outside resources:
Habitat for Humanity
Background Information•
Habitat for Humanity of Williamson County has been actively constructing affordable houses
in Round Rock and placing low income families into home ownership for several years. The
cost of land is a major roadblock in their efforts to provide housing. These funds will be
used to purchase land within the City of Round Rock.
Public Comment:
All requirements for public notification have been met through the development of the
Community Development Action Plans.
EXECUTED
DOCUMENT
FOLLOWS
THE STATE OF TEXAS
COUNTY OF WILLIAMSON
COMMUNITY DEVELOPMENT BLOCK GRANT AGREEMENT
(B-07-MC-48-0514)
THIS AGREEMENT, entered into this10day of'-T"I , 2008 by and between the
City of Round Rock, a Texas home-rule municipality (herein called the "CITY") and HABITAT
FOR HUMANITY OF WILLIAMSON COUNTY, a Texas non-profit corporation (herein called
"HABITAT").
WHEREAS, the CITY has applied for and received funds from the United States
Government under Title I of the Housing and Community Development Act of 1974, Public Law
93-383; and
WHEREAS, the CITY wishes to engage HABITAT to assist the CITY in utilizing such
funds;
NOW, THEREFORE, In consideration of the mutual covenants and agreements contained herein
the parties agree as follows:
SECTION I:
SCOPE OF SERVICES
1.1. Activities
HABITAT will be responsible for administering a Community Development Block
Grant ("CDBG") Year 2008 program known as the Lewis Street program in a manner
satisfactory to the CITY and consistent with any standards required as a condition of providing
these funds. Such program will include the following activities eligible under the CDBG
Program:
Program Delivery
Activity 1: Acquisition of real property for the construction of affordable
housing for low to moderate income families.
Activity 2: Improvement of real property with drive-ways and upgrade to water
lines.
General Administration
The project will be administered by the Executive Director.
1354102008 CDBG Agreement Habitat for Humanity-Final(00135724)(2).DOC
1
1.2 National Objectives
HABITAT certifies that the activities carried out under this Agreement shall meet the
national objective to benefit low and moderate income persons by acquiring real property for the
purpose of developing affordable housing for low and moderate income families.
1.3. Levels of Accomplishment–Goals and Performance Measures
In addition to normal administrative services required as part of this Agreement,
HABITAT agrees to provide the following program services:
Activity Units of Service Per Month Total Units per Year
Activity 1: Acquisition of I
Property 12
Activity 2: Improvement of 1
Property 12
Units of Service shall be defined for Activity 1 as administrative, professional and other
services necessary to acquire real property; for Activity 2 as one month of work to improve
driveways,water lines and other improvements.
1.4. Staffing
To undertake the activities described above and accomplish the levels of service
described above, HABITAT will allocate staff time in support of the program funded under this
Agreement as follows:
Title Hrs. per Week #of Weeks, —Hours
Executive Director 1 40 100 = 4000
Timeframe: April 25, 2008-through April 25, 2010
Title Hrs. per Week #of Weeks = Estimated Hours
Construction Coordinator 1 40 1 100 = 4000
Timeframe: Timeframe: April 25, 2008-through April 25, 2010
Title Hrs. per Week #of Weeks = Estimated Hours
Community Involvement 20 100
Director = 4000
Timeframe: Timeframe: April 25, 2008-through April 25, 2010
Any changes in the key personnel assigned or their general responsibilities under this program
are subject to the prior approval of the CITY.
2
1.5. Performance Monitoring
The CITY will monitor the performance of HABITAT against the goals and performance
standards required herein. Substandard performance as determined by the CITY will constitute
noncompliance with this Agreement. If action to correct such substandard performance is not
taken by HABITAT within thirty (30) days after being notified by the CITY, contract suspension
or termination procedures will be initiated in accordance with Section V II of this Agreement.
SECTION II:
TIME OF PERFORMANCE
Services of HABITAT shall start on the 25th Day of April 2008 and end on the 25th
Day of April 2010. The term of this Agreement and the provisions herein shall be extended to
cover any additional time period during which HABITAT remains in control of CDBG funds or
other assets including program income.
SECTION III:
BUDGET
Line Item Amount
Acquisition of real property $93,000
Construction of driveways, water lines and other $13,921
improvements
Project Costs $106,921
Any indirect costs charged must be consistent with the conditions of Paragraph 8.2 (C) of
this Agreement. In addition, CITY may require a more detailed budget breakdown than the one
contained herein, and HABITAT shall provide such supplementary budget information in a
timely fashion in the form and content prescribed by CITY.
SECTION IV:
PAYMENT
It is expressly agreed the total amount to be paid by the CITY under this Agreement shall
not exceed$106,921. Drawdowns for the payment of eligible expenses shall be made against the
line item budgets provided above and incorporated herein and in accordance with performance.
Expenses for general administration shall also be paid against the line item budgets provided
above and in accordance with performance.
Payments will be contingent upon certification of HABITAT's financial management
system in accordance with the standards specified in Appendix A to this Agreement.
3
SECTION V:
NOTICES
Notices required by this Agreement shall be in writing and delivered via mail (postage
prepaid), commercial courier, or personal delivery or sent by facsimile or other electronic means.
Any notice delivered or sent as aforesaid shall be effective on the date of delivery or sending.
All notices and other written communications under this Agreement shall be addressed to the
individuals in the capacities indicated below, unless otherwise modified by subsequent written
notice.
Notices made pursuant to this Agreement shall be directed to the following
representatives:
CITY: HABITAT:
Mona Ryan, Debbie Hoffman
Community Development Coordinator Executive Director
City of Round Rock Habitat for Humanity of Williamson
County
301 West Bagdad, Suite 140 P.O. Box 737
Round Rock,Texas 78664 Georgetown TX 78627
Telephone: 512-218-5416 Telephone: 512-863-4344
Fax: 512-341-3152 Fax: 512-864-3147
e-mail: mona round-rock.tx.us e-mail: debbieh .williamsonhabitat.or
SECTION VI:
SPECIAL CONDITIONS
HABITAT shall agree to comply with the requirements of Title 24 Code of Federal
Regulations, Part 570 of the Housing and Urban Development (HUD) regulations concerning
Community Development Block Grants (CDBG) and all federal regulations and policies issued
pursuant to these regulations. HABITAT further agrees to utilize funds available under this
Agreement to supplement rather than supplant funds otherwise available.
SECTION VII:
GENERAL CONDITIONS
7.1. General Compliance
HABITAT agrees to comply with all applicable federal, state and local laws, regulations
and policies governing the funds provided under this Agreement.
4
7.2. Independent Contractor
It is understood and agreed that HABITAT is an independent contractor and shall not be
considered an employee of the CITY. HABITAT shall at all times remain an independent
contractor with respect to the services to be performed under this Agreement. The CITY shall be
exempt from payment of all unemployment compensation, FICA and retirement benefits, as
HABITAT is an independent contractor. HABITAT shall not be within protection or coverage
of the CITY'S Workers' Compensation insurance, Health Insurance, Liability Insurance or any
other Insurance that the CITY from time to time may have in force and effect.
7.3. Hold Harmless
HABITAT shall indemnify, save harmless and exempt the CITY, its officers, agents,
servants, and employees from and against any and all suits, actions, legal proceedings, claims,
demands,damages,costs,expenses,attorney fees and any and all other costs or fees incident to any
work done as result of this Agreement and arising out of a willful or negligent act or omission of
HABITAT, its officers, agents, servants,and employees; provided, however, that HABITAT shall
not be liable for any suits, actions, legal proceedings, claims, demands, damages, costs, expenses
and attorneys' fees arising out of a willful or negligent act or omission of the CITY, its officers,
agents, servants and employees,or third parties.
7.4. Worker's Compensation
HABITAT shall provide Workers' Compensation Insurance coverage for all of its
employees involved in the performance of this Agreement.
7.5. Insurance and Bonding
HABITAT shall cant' sufficient insurance coverage to protect contract assets from loss due
to theft, fraud and/or undue physical damage, and as a minimum shall purchase a blanket fidelity
bond covering all employees in an amount equal to cash advances from the CITY.
7.6. Amendments
The terms and conditions of this Agreement, including the attachments listed below,
constitute the entire agreement between the parties and supersedes all previous communications,
representations, or agreements, either written or oral, with respect to the subject matter hereof.
No modification or amendment to this Agreement will be binding on either party unless
acknowledged in writing by their duly authorized representatives.
Attachments:
a. Exhibit A—Self Certification Form
b. Exhibit B—Client Data/Beneficiary Report Form
C. Appendix A—OMB Circular A-122, Cost Principles for Non-Profit Organizations
d. Appendix B — OMB Circular A-133, Audits of States, Local Governments, and
Non-Profit Organizations
5
e. Appendix C—24 CFR 570 CDBG Regulations Subpart C, Eligible Activities
f. Appendix D—24 CFR 570 CDBG Regulations Subpart J, Grant Administration
g. Appendix E—24 CFR 570 CDBG Regulations Subpart K, Other Requirements
7.7. Suspension or Termination
Either party may terminate this Agreement at any time by giving written notice to the
other party of such termination and specifying the effective date thereof at least thirty (30) days
before the effective date of such termination. Partial terminations of the Scope of Service in
Paragraph 1.1. above may only be undertaken with the prior approval of the CITY. In the event
of any termination for convenience, all finished or unfinished documents, data, reports or other
materials prepared by HABITAT under this Agreement shall, at the option of the CITY, become
property of the CITY.
The CITY may also suspend or terminate this Agreement, in whole or in part, if
HABITAT materially fails to comply with any term of this Agreement, which include, but are
not limited to the following:
A. Failure to comply with any of the rules, regulations or provisions referred to
herein, or such statutes, regulations, executive orders, and HUD guidelines,
policies or directives as may become applicable at any time;
B. Failure, for any reason, of HABITAT to fulfill in a timely and proper manner its
obligations under this Agreement;
C. Ineffective or improper use of funds provided under this Agreement; or
D. Submission by HABITAT to the CITY reports that are incorrect or incomplete in
any material respect.
The CITY may declare HABITAT ineligible for any further participation in CITY
contracts, in addition to other remedies as provided by law. Should HABITAT fail to cure or
correct such defects or failures identified by the CITY within the fifteen (15) days after
notification of deficiencies, and such breach of contract relate to a violation of federal law or
regulations which results in a demand for reimbursement from the Department of Housing and
Urban Development (HUD) or its successor, the CITY may seek reimbursement of all funds
from the CITY to HABITAT under this Agreement.
HABITAT shall not be relieved of the liability to the CITY for damages sustained by the
CITY by virtue of any breach of this Agreement by HABITAT and the CITY may withhold any
payments to HABITAT for the purpose as set out and until such time as the exact amount of
damages due the CITY from the HABITAT is determined. Should the CITY become aware of
any activity by HABITAT which would jeopardize the CITY's position with HUD which would
cause a payback of CDBG funds or other CITY federal funds then the CITY may take
appropriate action including injunctive relief against HABITAT to prevent the transaction as
6
aforesaid. The failure of the CITY to exercise this right shall in no way constitute a waiver by
the CITY to demand payment or seek any other relief in law or in equity to which it may be
justly entitled.
7.8. Pendina Litigation
HABITAT agrees to inform CITY about any litigation HABITAT is or becomes in
involved in.
7.9. Background Checks
HABITAT agrees to conduct a criminal background check on all employees working
directly with youth.
SECTION VIII:
ADMINISTRATIVE REQUIREMENTS
8.1. Financial Mana ement
A. Accounting Standards
HABITAT agrees to comply with 24 CFR 84.21-28 and agrees to adhere to the
accounting principles and procedures required therein, utilize adequate internal controls, and
maintain necessary source documentation for all costs incurred.
B. Cost Principles
HABITAT shall administer its program in conformance with OMB Circulars A-122,
"Cost Principles for Non-Profit Organizations," or A-21, "Cost Principles for Educational
Institutions," as applicable. These principles shall be applied for all costs incurred whether
charged on a direct or indirect basis.
8.2. Documentation and Record Keying
A. Record Keeping
HABITAT shall maintain all records required by the federal regulations specified in 24
CFR Part 570.506 and that are pertinent to the activities to be funded under this Agreement.
Such records shall include, but are not be limited to:
1. Records providing a full description of each activity undertaken;
2. Records demonstrating that each activity undertaken meets one of the
National Objectives of the CDBG program under 24 CFR Part 570.208;
7
3. Records required to determine the eligibility of activities under 24 CFR
Part 570.201 - 570.206;
4. Financial records as required by 24 CFR Part 570.502, and OMB Circular
A-110; and
5. Other records necessary to document compliance with Subpart K of 24
CFR 570.
B. Retention
HABITAT shall retain all financial records, supporting documents, statistical records
and all other records pertinent to this Agreement for a period of four (4) years after the
termination of all activities funded under this Agreement. Notwithstanding the above, if there is
litigation, claims, audits, negotiations or other actions that involve any of the records cited and
that have started before the expiration of the four-year period,then such records must be retained
until completion of the actions and resolution of all issues, or the expiration of the four-year
period,which ever occurs later.
C. Client Data
HABITAT shall maintain client data demonstrating client eligibility for services
provided. Such data shall include, but not be limited to, client name, address and annual
household income level as shown in Exhibit "A", attached hereto and incorporated herein. Any
other basis for determining eligibility must be approved by the CITY in advance in writing, and
description of services provided. Such information shall be made available to CITY monitors or
their designees upon request.
D. Disclosure
HABITAT understands that client information collected under this contract is private
and the use or disclosure of such information, when not directly connected with the
administration of the CITY's or HABITAT's responsibilities with respect to services provided
under this contract is prohibited by the U.S. Privacy Act of 1974 unless written consent is
obtained from such person receiving service and, in the case of a minor, that of a responsible
parent/guardian.
E. Close-Outs
HABITAT's obligation to the CITY shall not end until all closeout requirements are
completed. Activities during this close-out period shall include, but are not limited to: making
final payments, disposing of program assets (including the return of all unused materials,
equipment, unspent cash advances, program income balances, and receivable accounts to the
CITY), and determining custodianship of records. Not withstanding the foregoing, the terms of
this Agreement shall remain in effect during any period that HABITAT has control over CDBG
funds, including program income.
8
F. Audits& Inspections
All HABITAT's records with respect to any matters covered by this Agreement shall be
made available to the CITY, grantor agency, their designees or the Federal Government, at any
time during normal business hours, as often as the CITY or grantor agency deems necessary, to
audit, examine, and make excerpts or transcripts of all relevant data. Any deficiencies noted in
audit reports must be fully cleared by HABITAT within thirty (30) days after receipt by
HABITAT. Failure of HABITAT to comply with the above audit requirements will constitute a
violation of this contract and may result in the withholding of future payments. HABITAT
hereby agrees to have an annual agency audit conducted in accordance with current CITY policy
concerning HABITAT's audits and OMB Circular A-133, attached hereto as Appendix B.
8.3. Reporting and Payment Procedures
A. Program Income
HABITAT shall report quarterly all program income, as defined at 24 CFR 570.500(a),
generated by activities carried out with CDBG funds made available under this contract. The use
of program income by HABITAT shall comply with requirements set forth in 24 CFR 570.504.
By way of further limitations, HABITAT may use such income during the contract period for
activities permitted under this contract and shall reduce requests for additional funds by the
amount of any such program income balances on hand. All unused program income shall be
returned to the CITY at the end of the contract period. Any interest earned on cash advances
from the U.S. Treasury is not program income and shall be remitted promptly to the CITY.
Reporting of any such program income shall, at minimum, be included in quarterly reports under
Section VIII of this Agreement. Information on program income provided in these reports will
include, but not be limited to, summaries of program income generated; a summary of
expenditures of these funds; and a description of the use of program income sufficient for
determining eligibility of these expenses under CDBG guidelines.
B. Indirect Costs
If indirect costs are charged, HABITAT will develop an indirect cost allocation plan for
determining the appropriate HABITAT's share of administrative costs and shall submit such plan
to the CITY for approval.
C. Payment Procedures
The CITY will pay to HABITAT funds available under this Agreement based on
information submitted by HABITAT and consistent with an approved budget and CITY policies
concerning payments. With the exception of certain advances, payments will be made for
eligible expenses actually incurred by HABITAT, and not to exceed actual cash requirements.
Payments will be adjusted by the CITY in accordance with advance fund and program income
balances available under this contract for costs incurred by the CITY on the behalf of HABITAT.
9
D. Progress Reports
HABITAT shall submit regular Quarterly Progress Reports to the CITY in the form,
content, and frequency as required by the CITY. These shall include but not be limited to
summary of expenditures, list of beneficiaries and a brief narrative of accomplishments.
Beneficiary reports should be submitted on Exhibit "B", attached hereto and incorporated herein
unless an alternative report is approved by CITY in advance and in writing.
E. Budgets
The CITY and the HABITAT may agree to revise the budget, provided in Section III
above, from time to time in accordance with existing CITY policies. Any amendments to the
budget must be approved in writing by both the CITY and HABITAT.
8.4. Procurement
A. Compliance
HABITAT shall maintain real property inventory records, which clearly identifies any
properties purchased, improved or sold using funds provided under this Agreement. Property
retained shall continue to meet eligibility criteria and shall conform to the "changes in use"
restrictions specified in 24 CFR Parts 570.503(b)(8). All program assets (unexpended advanced
funds) shall revert to the CITY upon termination of this Agreement. The only authorized
expenditures of funds shall be for construction and related costs as described herein.
B. OMB Standards
HABITAT shall procure materials in accordance with the requirements of Attachment O
of OMB Circular A-110, Procurement Standards, and shall subsequently follow Attachment N,
Property Management Standards, covering utilization and disposal of property. These
requirements are referenced in 24 CFR Part 84,titled "Common Rule".
C. Travel
HABITAT shall obtain written approval from the CITY for any travel outside the
metropolitan area with funds provided under this Agreement. The CITY shall determine that
such travel is necessary and reasonable according to applicable standards outlined in OMB
Circular A87.
8.5. Use and Reversion of Assets
The use and disposition of real property and equipment under this Agreement shall be in
compliance with the requirements of 24 CFR Part 84 and 24 CFR 570.502, 570.503 and 570.504,
as applicable,which include but are not limited to the following:
10
A. HABITAT agrees that should it discontinue the services as provided for herein,
then HABITAT shall transfer to the CITY all unexpended CDBG funds on hand and any
accounts receivable attributable to the use of funds under this Agreement within ten (10) days
from the time of expiration, cancellation, or termination of services. The funds remaining will be
appropriated to eligible CDBG activities in keeping with the CITY's budgetary process.
B. Real property under HABITAT's control that was acquired or improved, in whole
or in part, with funds under this Agreement in excess of$25,000 shall be used to meet one of the
CDBG National Objectives pursuant to 24 CFR 570.208 until five (5) years after expiration of
this Agreement. If HABITAT fails to use CDBG-assisted real property in a manner that meets a
CDBG National Objective for the prescribed period of time, HABITAT shall pay the CITY an
amount equal to the current fair market value of the property less any portion of the value
attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the
property. Such payment shall constitute program income to the CITY. HABITAT may retain
real property acquired or improved under this Agreement after the expiration of the five-year
period.
C. In all cases in which equipment acquired, in whole or in part, with funds under
this Agreement is sold, the proceeds shall be program income (prorated to reflect the extent to
that funds received under this Agreement were used to acquire the equipment). Equipment not
needed by HABITAT for activities under this Agreement shall be(a)transferred to the CITY for
the CDBG program or (b) retained after compensating the CITY an amount equal to the current
fair market value of the equipment less the percentage of non-CDBG funds used to acquire the
equipment.
SECTION IX:
RELOCATION,REAL PROPERTY ACQUISITION AND ONE-FOR-ONE HOUSING
REPLACEMENT
9.1. HABITAT agrees to comply with (a) the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970, as amended (URA), and implementing regulations at
49 CFR Part 24 and 24 CFR 570.606(b): (b) the requirements of 24 CFR 570.606(c) governing
the Residential Anti-displacement and Relocation Assistance Plan under section 104(d) of the
HCD Act; and 9c) the requirements in 24 CFR 570.606(d) governing optional relocation
policies. HABITAT shall provide relocation assistance to displaced persons as defined by 24
CFR 570.606(b)(2) that are displaced as a direct result of acquisition, rehabilitation, demolition
or conversion for a CDBG-assisted project. HABITAT also agrees to comply with applicable
CITY ordinances, resolutions and policies concerning the displacement of persons from their
residences.
11
SECTION X:
PERSONNEL & PARTICIPANT CONDITIONS
10.1. Civil Rights
A. Compliance
HABITAT agrees to comply with city and state civil rights acts and ordinances, and with
Title VI of the Civil Rights Act of 1964 as amended,Title VIII of the Civil Rights Act of 1968 as
amended, Section 109 of Title I of the Housing and Community Development Act of 1974,
Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the
Age Discrimination Act of 1975, Executive Order 11063, and with Executive Order 11246 as
amended by Executive Orders 11375, 11478, 12107 and 12086.
B. Nondiscrimination
HABITAT will not cause any person to be excluded from participation in, denied the
benefits of, or subjected to discrimination under any of the program's activities receiving
assistance under this Agreement based on the grounds of race, color, religion, sex, ancestry,
national origin or handicap. In order to allow the CITY to monitor non-discrimination,
HABITAT will at minimum maintain records regarding the race of persons or households
assisted under this contract and whether households assisted have a female head of household.
HABITAT will not discriminate against any employee or applicant for employment
because of race, color, religion, sex, ancestry, national origin, or other handicap, age, marital
status, or status with regard to public assistance. HABITAT will take affirmative action to
insure all employment practices are free from such discrimination. Such employment practices
include but are not limited to the following: hiring, upgrading, demotion, transfer, recruitment or
recruitment advertising, layoff, termination, rates of pay or other forms of compensation, and
selection for training, including apprenticeship. HABITAT agrees to post in conspicuous
places, available to employees and applicants for employment, notices to be provided by the
contracting agency setting forth the provisions of this nondiscrimination clause.
C. Land Covenants
This Agreement is subject to the requirements of Title VI of the Civil Rights Act of 1964
(P.L. 88-352) and 24 CFR 570.601 and 570.602. In regard to the sale, lease, or other transfer of
land acquired, cleared or improved with assistance provided under this Agreement, HABITAT
shall cause or require a covenant running with the land to be inserted in the deed or lease for
such transfer, prohibiting discrimination as herein defined, in the sale, lease or rental, or in the
use or occupancy of such land, or in any improvements erected or to be erected thereon,
providing that the CITY and the United States are beneficiaries of and entitled to enforce such
covenants. HABITAT, in undertaking its obligation to carry out the program assisted hereunder,
agrees to take such measures as are necessary to enforce such covenant, and will not itself so
discriminate.
12
D. Compliance with Section 504
HABITAT agrees to comply with any federal regulations issued pursuant to compliance
with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 706) or applicable updates which
prohibits discrimination against the handicapped in any federally assisted program. The CITY
shall provide HABITAT with any guidelines necessary for compliance with that portion of the
regulations in force during the term of this Agreement.
10.2. Affirmative Action
A. Approved Plan
HABITAT agrees that it shall be committed to carry out pursuant to the CITY's
specifications an Affirmative Action Program in keeping with the principles as provided in
Presidents Executive Order 11246 of September 24, 1966. The CITY shall provide Affirmative
Action guidelines to HABITAT to assist in the formulation of such program. HABITAT shall
submit a plan for an Affirmative Action Program for approval prior to the award of funds.
B. Women-and Minority-Owned Businesses(W/MBE)
HABITAT will use its best efforts to afford small businesses, minority business
enterprises, and women's business enterprises the maximum practicable opportunity to
participate in the performance of this Agreement. As used in this Agreement, the terms "small
business' means a business that meets the criteria set forth in section 3(a) of the Small Business
Act, as amended (15 U.S.C. 632), and "minority and women's business enterprise" means a
business at least fifty-one (51) percent owned and controlled by minority group members or
women. For the purpose of this definition, "minority group members" are Afro-Americans,
Spanish-speaking, Spanish surnamed or Spanish-heritage Americans, Asian-Americans, and
American Indians. HABITAT may relay on written representations by businesses regarding
their status as minority and female business enterprises in lieu of an independent investigation.
C. Access to Records
HABITAT shall furnish and cause each of its own subcontractors to furnish all
information and reports required hereunder and will permit access to its books, records and
accounts by the CITY, HUD or its agent, or other authorized Federal officials for purposes of
investigation to ascertain compliance with the rules,regulations and provisions stated herein.
D. Notifications
HABITAT will send to each labor union or representative of workers with which it has a
collective bargaining agreement or other contract or understanding, a notice, to be provided by
the agency contracting officer, advising the labor union or worker's representative of
HABITAT's commitments hereunder, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
13
E. Equal Employment Opportunity and Affirmative Action(EEO/AA) Statement
HABITAT will, in all solicitations or advertisements for employees placed by or on
behalf of HABITAT, state that it is an Equal Opportunity or Affirmative Action employer.
F. Subcontract Provisions
HABITAT will include the provisions of Paragraphs X.A, Civil Rights, and B,
Affirmative Action, in every subcontract or purchase order, specifically or by reference, so that
such provisions will be binding upon each of its own subcontractors.
10.3. Employment Restrictions
A. Prohibited Activity
HABITAT is prohibited from using funds provided herein or personnel employed in the
administration of the program for: political activities; inherently religious activities; lobbying;
political patronage; and nepotism activities.
B. Labor Standards
HABITAT agrees to comply with the requirements of the Secretary of Labor in
accordance with the Davis-Bacon Act as amended, the provisions of Contract Work Hours and
Safety Standards Act as amended, the provisions of Contract Work Hours and Safety Standards
Act (40 U.S.C. 327 et seq.) and all other applicable Federal, state and local laws and regulations
pertaining to labor standards insofar as those acts apply to the performance of this Agreement.
HABITAT agrees to comply with the Copeland Anti-Kick Back Act (18 U.S.C. 874 et seq.) and
its implementing regulations of the U.S. Department of Labor at 29 CFR Part 5. HABITAT shall
maintain documentation that demonstrates compliance with hour and wage requirements of this
part. Such documentation shall be made available to the CITY for review upon request.
HABITAT agrees that, except with respect to the rehabilitation or construction of
residential property containing less than eight (8) units, all contractors engaged under contracts
in excess of$2,000.00 for construction, renovation or repair work financed in whole or in part
with assistance provided under this Agreement, shall comply with Federal requirements adopted
by the CITY pertaining to such contracts and with the applicable requirements of the regulations
of the Department of Labor, under 29 CFR Parts 1, 3, 5 and 7 governing the payment of wages
and ratio of apprentices and trainees to journey workers; provided that, if wage rates higher than
those required under the regulations are imposed by state or local law, nothing hereunder is
intended to relieve HABITAT of its obligation, if any, to require payment of the higher wage.
HABITAT shall cause or require to be inserted in full, in all such contracts subject to such
regulations,provisions meeting the requirement of this paragraph.
C. "Section 3" Clause
1. Compliance
14
Compliance with the provisions of Section 3 of the HUD Act of 1968, as
amended, and as implemented by the regulations set forth in 24 CFR 135, and all applicable rules
and orders issued hereunder prior to the execution of this Agreement, shall be a condition of the
Federal financial assistance provided under this Agreement and binding upon the CITY,
HABITAT and any of HABITAT's subcontractors. Failure to fulfill these requirements shall
subject the CITY, HABITAT and any of HABITAT's subcontractors, their successors and
assigns, to those sanctions specified by the Agreement through which Federal assistance is
provided. HABITAT certifies and agrees that no contractual or other disability exists that would
prevent compliance with these requirements.
HABITAT further agrees to comply with these "Section 3" requirements and to
include the following language in all subcontracts executed under this Agreement:
"The work to be performed under this Agreement is a project assisted under a
program providing direct Federal financial assistance from HUD and is subject to
the requirements of Section 3 of the Housing and Urban Development Act of
1968, as amended (12 U.S.C. 1701). Section 3 requires that to the greatest extent
feasible opportunities for training and employment be given to low- and very low-
income residents of the project area, and that contracts for work in connection
with the project be awarded to business concerns that provide economic
opportunities for low- and very low-income persons residing in the metropolitan
area in which the project is located."
HABITAT further agrees to ensure that opportunities for training and
employment arising in connection with a housing rehabilitation (including reduction and
abatement of lead-based paint hazards), housing construction, or other public construction
project are given to low- and very low-income persons residing within the metropolitan area in
which the CDBG-funded project is located; where feasible, priority should be given to low-and
very law-income persons within the service area of the project or the neighborhood in which the
project is located, and to low- and very low-income participants in other HUD programs; and
award contracts for work undertaken in connection with a housing rehabilitation (including
reduction and abatement of lead-based pain hazards), housing construction, or other public
construction project to business concerns that provide economic opportunities for low-and very
low-income persons residing within the metropolitan area in which the CDBG-funded project is
located; where feasible, priority should be given to business concerns that provide economic
opportunities to low-and very low-income residents within the service area or the neighborhood
in which the project is located, and to low- and very low-income participants in other HUD
programs.
HABITAT certifies and agrees that no contractual or other legal incapacity exists
that would prevent compliance with these requirements.
2. Notifications
HABITAT agrees to send to each labor organization or representative of workers
with which it has a collective bargaining agreement or other contract or understanding, if any, a
15
notice advising said labor organization or worker's representative of its commitments under this
Section 3 clause and shall post copies of the notice in conspicuous places to employees and
applicants for employment or training.
3. Subcontracts
HABITAT will include this Section 3 clause in every subcontract and will take
appropriate action pursuant to the subcontract upon a finding that the subcontractor is in
violation of regulations issued by the grantor agency. HABITAT will not subcontract with any
entity where it has notice or knowledge that the latter has been found in violation of regulations
under 24 CFR Part 135 and will not let any subcontract unless the entity has first provided it with
a preliminary statement of ability to comply with the requirements of these regulations.
10.4. Conduct
A. Assignability
HABITAT shall not assign or transfer any interest in this Agreement without the prior
written consent of the CITY.
B. Subcontracts
1. Approvals
HABITAT shall not enter into any subcontracts with any agency or individual in the
performance of this contract without written consent of the CITY prior to the execution of such
Agreement.
2. Monitoring of Subcontractors
HABITAT will monitor all subcontracted services on a regular basis to assure contract
compliance. Results of monitoring efforts shall be summarized in written reports and supported
with evidence of follow-up actions taken to correct areas of noncompliance.
3. Content
HABITAT shall cause all of the provisions of this contract in its entirety to be included
in and made a part of any subcontract executed in the performance of this Agreement.
4. Selection Process
HABITAT shall undertake to insure that all subcontracts let in the performance of this
agreement shall be awarded on a fair and open competition basis in accordance with applicable
procurement requirements. Executed copies of all subcontracts shall be forwarded to the CITY
along with documentation concerning the selection process.
16
C. Hatch Act
HABITAT agrees that no funds provided, nor personnel employed under this
Agreement, shall be in any way or to any extent engaged in the conduct of political activities in
violation of Chapter 15 of Title V United States Code.
D. Conflict of Interest
HABITAT understands and agrees to abide by the provisions of 24 CFR 84.42 and
570.611,which include, but are not limited to the following:
1. HABITAT shall maintain a written code or standards of conduct that shall
govern the performance of its officers, employees or agents engaged in the award and
administration of contracts supported by Federal funds.
2. No employee, officer or agent of HABITAT shall participate in the
selection, or in the award,or administration of,a contract supported by Federal funds if a conflict
of interest,real or apparent, would be involved.
3. No covered persons who exercise or have exercised any functions or
responsibilities with respect to CDBG-assisted activities, or who are in a position to participate
in a decision-making process or gain inside information with regard to such activities, may
obtain a financial interest in any contract, or have a financial interest in any contract, subcontract,
or agreement with respect to the CDBD-assisted activity,or with respect to the proceeds from the
CDBG-assisted activity, either for themselves or those with whom they have business or
immediate family ties, during their tenure or for a period of one(1)year thereafter.
These conflict of interest provisions apply to "covered persons" which shall include any
person who is an employee,agent,consultant,officer, or elected official of the CITY, HABITAT
or any designated public agencies which are receiving funds under the CDBG Entitlement
program.
E. Lobbying
HABITAT hereby certifies that:
1. No Federal appropriated funds have been paid or will be paid, by or on
behalf of it, to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any Federal contract, the making of any
Federal grant, the making of any Federal loan, the entering into any cooperative agreement, and
the extension, continuation, renewal, amendment, or modification of any Federal contract, grant,
loan, or cooperative agreement;
2. If any funs other than Federal appropriated funds have been paid or will be
paid to any person for influencing or attempting to influence an officer or employee of any
17
agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with this Federal contract, grant, loan or cooperative
agreement, it will complete and submit Standard Form-LLL, "Disclosure Form to Report
Lobbying," in accordance with its instructions; and
3. It will require that the language of paragraph 4. of this certification be
included in the award documents for all subawards at all tiers including subcontracts, subgrants,
and contracts under grants, loans, and cooperative agreements and that all subrecipients shall
certify and disclose accordingly:
4. Lobbying Certification
This certification is a material representation of a fact upon which reliance was
placed when this transaction was made or entered into. Submission of this certification is a
prerequisite for making or entering into this transaction imposed by section 1352,title 31, U.S.C.
Any person who fails to file the required certification shall be subject to a civil penalty of not
less than $10,000 and not more than$100,000 for each such failure.
F. Cope
If this Agreement results in any copyrightable material or inventions, the CITY and/or
grantor agency reserves the right to royalty-free, non-exclusive and irrevocable license to
reproduce, publish or otherwise use and to authorize others to use, the work or materials for
governmental purposes.
G. Religious Organization
HABITAT agrees that funds provided under this Agreement will not be utilized for
inherently religious activities, such as worship, religious instruction, or proselytization; to
promote religious interests; or for the benefit of a religious organization as specified in 24 CFR
570.2000).
SECTION XI:
ENVIRONMENTAL CONDITIONS
11.1. Air and Water
HABITAT agrees to comply with the following requirements insofar as they apply to the
performance of this Agreement:
A. Clean Air Act, 42 U.S.C., 7401,et seq.;
B. Federal Water Pollution Control Act, as amended, 33 U.S.C., 1251, et seq., as
amended, 1318 relating to inspection, monitoring, entry, reports, and information, as well as
18
other requirements specified in said Section 114 and Section 308, and all regulations and
guidelines issued thereunder; and
C. Environmental Protection Agency (EPA) regulations pursuant to 40 CFR Part 50,
as amended.
11.2. Flood Disaster Protection
In accordance with the requirements of the Flood Disaster Protection Act of 1973 (42
U.S.C. 4001), HABITAT shall assure that for activities located in an area identified by the
Federal Emergency Management Agency (FEMA) as having special flood hazards, flood
insurance under the National Flood Insurance Program is obtained and maintained as a condition
of financial assistance for acquisition or construction purposes including rehabilitation.
11.3. Lead-Based Paint
HABITAT agrees that any construction or rehabilitation of residential structures with
assistance provided under this Agreement shall be subject to HUD Lead-Based Paint Regulations
at 24 CFR 570.608, and 24 CFR Part 35, Subpart B. Such regulations pertain to all CDBG-
assisted housing and require that all owners, prospective owners, and tenants of properties
constructed prior to 1978 be properly notified that such properties may include lead-based paint.
Such notification shall point out the hazards of lead-based paint and explain the symptoms,
treatment and precautions that should be taken when dealing with lead-based paint poisoning and
the advisability and availability of blood lead level screening for children under seven. The
notice should also point out that if lead-based paint is found on the property,abatement measures
may be undertaken. The regulations further require that, depending on the amount of Federal
funds applied to a property, paint testing, risk assessment, treatment and/or abatement may be
conducted.
11.4. Historic Preservation
HABITAT agrees to comply with the Historic Preservation requirements set forth in the
National Historic Preservation Act of 1966, as amended (16 U.S.C. 470) and the procedures set
forth in 36 CFR Part 800, Advisory Council on Historic Preservation Procedures for Protection
of Historic Properties, insofar as they apply to the performance of this agreement.
In general, this requires concurrence from the State Historic Preservation Officer for all
rehabilitation and demolition of historic properties that are fifty years old or older or that are
included on a Federal, state, or local historic property list.
19
SECTION XII:
SEVARABILITY
12.1. If any provision of this Agreement is held invalid, the remainder of the Agreement shall
not be affected thereby and all other parts of this Agreement shall nevertheless be in full force
and effect.
SECTION XIII:
SECTION HEADINGS AND SUBHEADINGS
13.1. The section headings and subheadings contained in this Agreement are included for
convenience only and shall not limit or otherwise affect the terms of this Agreement.
SECTION XIV:
WAIVER
14.1. The CITY's failure to act with respect to a breach by HABITAT does not waive its right
to act with respect to subsequent or similar breaches. The failure of the CITY to exercise or
enforce any right or provision shall not constitute a waiver of such right or provision.
IN WITNESS WHEREOF,this Agreement is executed as of the date first written above.
4Approe to form:
heets, City Attorney
CITY: HABITAT:
City of Round o Habitat for Humanity of Williamson
County
N LL, Mayor Name: D bb i -9 - o,
rA
ATTEST: Title: Execuiiye. Uirec c-
- �Zk", Uk,�
SARAH WHITE
City Secretary
20