A -- General Rules]
Part 1207 -- Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and
Part 1207 was last amended on 4/19/95.
A -- General
||Purpose and scope of this part.|
||Scope of subpart.|
||Effect on other issuances.|
||Additions and exceptions.|
B -- Pre-Award Requirements
||Forms for applying for grants.|
||Special grant or subgrant conditions for "high-risk"
C -- Post-Award Requirements
||Standards for financial management systems.|
||Period of availability of funds.|
||Matching or cost sharing.|
Changes, Property, and Subawards
||Subawards to debarred and suspended parties.|
Reports, Records, Retention, and Enforcement
||Monitoring and reporting program performance.|
||Retention and access requirements for records.|
||Termination for convenience.|
D -- After-the-Grant Requirements
||Later disallowances and adjustments.|
||Collection of amounts due.|
E -- Entitlement [Reserved]
Authority: 44 U.S.C. 2104.
Subpart A -- General
§1207.1 Purpose and scope of this part.
This part establishes uniform administrative rules for Federal
grants and cooperative agreements and subawards to State, local and
Indian tribal governments.
§1207.2 Scope of subpart.
This subpart contains general rules pertaining to this part and
procedures for control of exceptions from this part.
As used in this part:
Accrued expenditures mean the charges incurred by the
grantee during a given period requiring the provision of funds for:
(1) Goods and other tangible property received; (2) services
performed by employees, contractors, subgrantees, subcontractors,
and other payees; and (3) other amounts becoming owed under programs
for which no current services or performance is required, such as
annuities, insurance claims, and other benefit payments.
Accrued income means the sum of: (1) Earnings during a
given period from services performed by the grantee and goods and
other tangible property delivered to purchasers, and (2) amounts
becoming owed to the grantee for which no current services or
performance is required by the grantee
Acquisition cost of an item of purchased equipment means
the net invoice unit price of the property including the cost of
modifications, attachments, accessories, or auxiliary apparatus
necessary to make the property usable for the purpose for which it
was acquired. Other charges such as the cost of installation,
transportation, taxes, duty or protective in-transit insurance,
shall be included or excluded from the unit acquisition cost in
accordance with the grantee's regular accounting practices.
Administrative requirements mean those matters common to
grants in general, such as financial management, kinds and frequency
of reports, and retention of records. These are distinguished from
programmatic requirements, which concern matters that can be
treated only on a program-by-program or grant-by-grant basis, such
as kinds of activities that can be supported by grants under a
Awarding agency means (1) with respect to a grant, the
Federal agency, and (2) with respect to a subgrant, the party that
awarded the subgrant.
Cash contributions means the grantee's cash outlay,
including the outlay of money contributed to the grantee or
subgrantee by other public agencies and institutions, and private
organizations and individuals. When authorized by Federal
legislation, Federal funds received from other assistance agreements
may be considered as grantee or subgrantee cash contributions.
Contract means (except as used in the definitions for
grant and subgrant in this section and except where qualified by
Federal) a procurement contract under a grant or subgrant, and means
a procurement subcontract under a contract.
Cost sharing or matching means the value of the
third party in-kind contributions and the portion of the costs of a
federally assisted project or program not borne by the Federal
Cost-type contract means a contract or subcontract under a
grant in which the contractor or subcontractor is paid on the basis
of the costs it incurs, with or without a fee.
Equipment means tangible, nonexpendable, personal property
having a useful life of more than one year and an acquisition cost
of $5,000 or more per unit. A grantee may use its own definition of
equipment provided that such definition would at least include all
equipment defined above.
Expenditure report means: (1) For nonconstruction grants,
the SF - 269 "Financial Status Report" (or other equivalent report);
(2) for construction grants, the SF - 271 "Outlay Report and Request
for Reimbursement" (or other equivalent report).
Federally recognized Indian tribal government means the
governing body or a governmental agency of any Indian tribe, band,
nation, or other organized group or community (including any Native
village as defined in section 3 of the Alaska Native Claims
Settlement Act, 85 Stat 688) certified by the Secretary of the
Interior as eligible for the special programs and services provided
by him through the Bureau of Indian Affairs.
Government means a State or local government or a
federally recognized Indian tribal government.
Grant means an award of financial assistance, including
cooperative agreements, in the form of money, or property in lieu of
money, by the Federal Government to an eligible grantee. The term
does not include technical assistance which provides services
instead of money, or other assistance in the form of revenue
sharing, loans, loan guarantees, interest subsidies, insurance, or
direct appropriations. Also, the term does not include assistance,
such as a fellowship or other lump sum award, which the grantee is
not required to account for.
Grantee means the government to which a grant is awarded
and which is accountable for the use of the funds provided. The
grantee is the entire legal entity even if only a particular
component of the entity is designated in the grant award
Local government means a county, municipality, city, town,
township, local public authority (including any public and Indian
housing agency under the United States Housing Act of 1937) school
district, special district, intrastate district, council of
governments (whether or not incorporated as a nonprofit corporation
under state law), any other regional or interstate government
entity, or any agency or instrumentality of a local government.
Obligations means the amounts of orders placed, contracts
and subgrants awarded, goods and services received, and similar
transactions during a given period that will require payment by the
grantee during the same or a future period.
OMB means the United States Office of Management and
Outlays (expenditures) mean charges made to the project or
program. They may be reported on a cash or accrual basis. For
reports prepared on a cash basis, outlays are the sum of actual cash
disbursement for direct charges for goods and services, the amount
of indirect expense incurred, the value of in-kind contributions
applied, and the amount of cash advances and payments made to
contractors and subgrantees. For reports prepared on an accrued
expenditure basis, outlays are the sum of actual cash disbursements,
the amount of indirect expense incurred, the value of in kind
contributions applied, and the new increase (or decrease) in the
amounts owed by the grantee for goods and other property received,
for services performed by employees, contractors, subgrantees,
subcontractors, and other payees, and other amounts becoming owed
under programs for which no current services or performance are
required, such as annuities, insurance claims, and other benefit
Percentage of completion method refers to a system under
which payments are made for construction work according to the
percentage of completion of the work, rather than to the grantee's
Prior approval means documentation evidencing consent
prior to incurring specific cost.
Real property means land, including land improvements,
structures and appurtenances thereto, excluding movable machinery
Share, when referring to the awarding agency's portion of
real property, equipment or supplies, means the same percentage as
the awarding agency's portion of the acquiring party's total costs
under the grant to which the acquisition costs under the grant to
which the acquisition cost of the property was charged. Only costs
are to be counted -- not the value of third-party in-kind
State means any of the several States of the United
States, the District of Columbia, the Commonwealth of Puerto Rico,
any territory or possession of the United States, or any agency or
instrumentality of a State exclusive of local governments. The term
does not include any public and Indian housing agency under United
States Housing Act of 1937.
Subgrant means an award of financial assistance in the
form of money, or property in lieu of money, made under a grant by a
grantee to an eligible subgrantee. The term includes financial
assistance when provided by contractual legal agreement, but does
not include procurement purchases, nor does it include any form of
assistance which is excluded from the definition of grant in this
Subgrantee means the government or other legal entity to
which a subgrant is awarded and which is accountable to the grantee
for the use of the funds provided.
Supplies means all tangible personal property other than
equipment as defined in this part.
Suspension means depending on the context, either (1)
temporary withdrawal of the authority to obligate grant funds
pending corrective action by the grantee or subgrantee or a decision
to terminate the grant, or (2) an action taken by a suspending
official in accordance with agency regulations implementing E.O.
12549 to immediately exclude a person from participating in grant
transactions for a period, pending completion of an investigation
and such legal or debarment proceedings as may ensue.
Termination means permanent withdrawal of the authority to
obligate previously-awarded grant funds before that authority would
otherwise expire. It also means the voluntary relinquishment of that
authority by the grantee or subgrantee. Termination does not
include: (1) Withdrawal of funds awarded on the basis of the
grantee's underestimate of the unobligated balance in a prior
period; (2) withdrawal of the unobligated balance as of the
expiration of a grant; (3) refusal to extend a grant or award
additional funds, to make a competing or noncompeting continuation,
renewal, extension, or supplemental award; or (4) voiding of a grant
upon determination that the award was obtained fraudulently, or was
otherwise illegal or invalid from inception.
Terms of a grant or subgrant mean all requirements
of the grant or subgrant, whether in statute, regulations, or the
Third party in-kind contributions mean property or
services which benefit a federally assisted project or program and
which are contributed by non-Federal third parties without charge to
the grantee, or a cost-type contractor under the grant
Unliquidated obligations for reports prepared on a cash
basis mean the amount of obligations incurred by the grantee that
has not been paid. For reports prepared on an accrued expenditure
basis, they represent the amount of obligations incurred by the
grantee for which an outlay has not been recorded.
Unobligated balance means the portion of the funds
authorized by the Federal agency that has not been obligated by the
grantee and is determined by deducting the cumulative obligations
from the cumulative funds authorized.
(a) General. Subparts A through D of this part apply to
all grants and subgrants to governments, except where inconsistent
with Federal statutes or with regulations authorized in accordance
with the exception provision of §1207.6, or:
(1) Grants and subgrants to State and local institutions of
higher education or State and local hospitals.
(2) The block grants authorized by the Omnibus Budget
Reconciliation Act of 1981 (Community Services; Preventive Health
and Health Services; Alcohol, Drug Abuse, and Mental Health
Services; Maternal and Child Health Services; Social Services;
Low-Income Home Energy Assistance; States' Program of Community
Development Block Grants for Small Cities; and Elementary and
Secondary Education other than programs administered by the
Secretary of Education under title V, subtitle D, chapter 2, section
583 -- the Secretary's discretionary grant program) and titles I -
III of the Job Training Partnership Act of 1982 and under the Public
Health Services Act (section 1921), Alcohol and Drug Abuse Treatment
and Rehabilitation Block Grant and part C of title V, Mental Health
Service for the Homeless Block Grant).
(3) Entitlement grants to carry out the following programs of the
Social Security Act:
(i) Aid to Needy Families with Dependent Children (title IV - A
of the Act, not including the Work Incentive Program (WIN)
authorized by section 402(a)19(G); HHS grants for WIN are subject to
(ii) Child Support Enforcement and Establishment of Paternity
(title IV - D of the Act);
(iii) Foster Care and Adoption Assistance (title IV - E of the
(iv) Aid to the Aged, Blind, and Disabled (titles I, X, XIV, and
XVI - AABD of the Act); and
(v) Medical Assistance (Medicaid) (title XIX of the Act) not
including the State Medicaid Fraud Control program authorized by
(4) Entitlement grants under the following programs of The
National School Lunch Act:
(i) School Lunch (section 4 of the Act),
(ii) Commodity Assistance (section 6 of the Act),
(iii) Special Meal Assistance (section 11 of the Act),
(iv) Summer Food Service for Children (section 13 of the Act),
(v) Child Care Food Program (section 17 of the Act).
(5) Entitlement grants under the following programs of
The Child Nutrition Act of 1966:
(i) Special Milk (section 3 of the Act), and
(ii) School Breakfast (section 4 of the Act).
(6) Entitlement grants for State Administrative expenses under
The Food Stamp Act of 1977 (section 16 of the Act).
(7) A grant for an experimental, pilot, or demonstration project
that is also supported by a grant listed in paragraph (a)(3) of this
(8) Grant funds awarded under subsection 412(e) of the
Immigration and Nationality Act (8 U.S.C. 1522(e)) and subsection
501(a) of the Refugee Education Assistance Act of 1980 (Pub. L. 96 -
422, 94 Stat. 1809), for cash assistance, medical assistance, and
supplemental security income benefits to refugees and entrants and
the administrative costs of providing the assistance and
(9) Grants to local education agencies under 20 U.S.C. 236
through 241 - 1(a), and 242 through 244 (portions of the Impact Aid
program), except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement
Increase for Handicapped Children); and
(10) Payments under the Veterans Administration's State Home Per
Diem Program (38 U.S.C. 641(a)).
(b) Entitlement programs. Entitlement programs enumerated
above in §1207.4(a) (3) through (8) are subject to subpart E.
§1207.5 Effect on other issuances.
All other grants administration provisions of codified program
regulations, program manuals, handbooks and other nonregulatory
materials which are inconsistent with this part are superseded,
except to the extent they are required by statute, or authorized in
accordance with the exception provision in §1207.6.
§1207.6 Additions and exceptions
(a) For classes of grants and grantees subject to this part,
Federal agencies may not impose additional administrative
requirements except in codified regulations published in the Federal
(b) Exceptions for classes of grants or grantees may be
authorized only by OMB.
(c) Exceptions on a case-by-case basis and for subgrantees may be
authorized by the affected Federal agencies.
Subpart B -- Pre-Award Requirements
§1207.10 Forms for applying for grants.
(a) Scope. (1) This section prescribes forms and
instructions to be used by governmental organizations (except
hospitals and institutions of higher education operated by a
government) in applying for grants. This section is not applicable,
however, to formula grant programs which do not require applicants
to apply for funds on a project basis.
(2) This section applies only to applications to Federal agencies
for grants, and is not required to be applied by grantees in dealing
with applicants for subgrants. However, grantees are encouraged to
avoid more detailed or burdensome application requirements for
(b) Authorized forms and instructions for governmental
organizations. (1) In applying for grants, applicants shall only
use standard application forms or those prescribed by the granting
agency with the approval of OMB under the Paperwork Reduction Act of
(2) Applicants are not required to submit more than the original
and two copies of preapplications or applications.
(3) Applicants must follow all applicable instructions that bear
OMB clearance numbers. Federal agencies may specify and describe the
programs, functions, or activities that will be used to plan,
budget, and evaluate the work under a grant. Other supplementary
instructions may be issued only with the approval of OMB to the
extent required under the Paperwork Reduction Act of 1980. For any
standard form, except the SF - 424 facesheet, Federal agencies may
shade out or instruct the applicant to disregard any line item that
is not needed.
(4) When a grantee applies for additional funding (such as a
continuation or supplemental award) or amends a previously submitted
application, only the affected pages need be submitted. Previously
submitted pages with information that is still current need not be
§1207.11 State plans.
(a) Scope. The statutes for some programs require States
to submit plans before receiving grants. Under regulations
implementing Executive Order 12372, "Intergovernmental Review of
Federal Programs," States are allowed to simplify, consolidate and
substitute plans. This section contains additional provisions for
plans that are subject to regulations implementing the Executive
(b) Requirements. A State need meet only Federal
administrative or programmatic requirements for a plan that are in
statutes or codified regulations.
(c) Assurances. In each plan the State will include an
assurance that the State shall comply with all applicable Federal
statutes and regulations in effect with respect to the periods for
which it receives grant funding. For this assurance and other
assurances required in the plan, the State may:
(1) Cite by number the statutory or regulatory provisions
requiring the assurances and affirm that it gives the assurances
required by those provisions,
(2) Repeat the assurance language in the statutes or regulations,
(3) Develop its own language to the extent permitted by law.
(d) Amendments. A State will amend a plan whenever
necessary to reflect: (1) New or revised Federal statutes or
regulations or (2) a material change in any State law, organization,
policy, or State agency operation. The State will obtain approval
for the amendment and its effective date but need submit for
approval only the amended portions of the plan.
§1207.12 Special grant or subgrant conditions for "high-risk"
(a) A grantee or subgrantee may be considered "high risk" if an
awarding agency determines that a grantee or subgrantee:
(1) Has a history of unsatisfactory performance, or
(2) Is not financially stable, or
(3) Has a management system which does not meet the management
standards set forth in this part, or
(4) Has not conformed to terms and conditions of previous awards,
(5) Is otherwise not responsible; and if the awarding agency
determines that an award will be made, special conditions and/or
restrictions shall correspond to the high risk condition and shall
be included in the award.
(b) Special conditions or restrictions may include:
(1) Payment on a reimbursement basis;
(2) Withholding authority to proceed to the next phase until
receipt of evidence of acceptable performance within a given funding
(3) Requiring additional, more detailed financial reports;
(4) Additional project monitoring;
(5) Requiring the grantee or subgrantee to obtain technical or
management assistance; or
(6) Establishing additional prior approvals.
(c) If an awarding agency decides to impose such conditions, the
awarding official will notify the grantee or subgrantee as early as
possible, in writing, of:
(1) The nature of the special conditions/restrictions;
(2) The reason(s) for imposing them;
(3) The corrective actions which must be taken before they will
be removed and the time allowed for completing the corrective
(4) The method of requesting reconsideration of the
Subpart C -- Post-Award Requirements
§1207.20 Standards for financial management systems.
(a) A State must expand and account for grant funds in accordance
with State laws and procedures for expending and accounting for its
own funds. Fiscal control and accounting procedures of the State, as
well as its subgrantees and cost-type contractors, must be
sufficient to --
(1) Permit preparation of reports required by this part and the
statutes authorizing the grant, and
(2) Permit the tracing of funds to a level of expenditures
adequate to establish that such funds have not been used in
violation of the restrictions and prohibitions of applicable
(b) The financial management systems of other grantees and
subgrantees must meet the following standards:
(1) Financial reporting. Accurate, current, and complete
disclosure of the financial results of financially assisted
activities must be made in accordance with the financial reporting
requirements of the grant or subgrant.
(2) Accounting records. Grantees and subgrantees must
maintain records which adequately identify the source and
application of funds provided for financially-assisted activities.
These records must contain information pertaining to grant or
subgrant awards and authorizations, obligations, unobligated
balances, assets, liabilities, outlays or expenditures, and
(3) Internal control. Effective control and accountability
must be maintained for all grant and subgrant cash, real and
personal property, and other assets. Grantees and subgrantees must
adequately safeguard all such property and must assure that it is
used solely for authorized purposes.
(4) Budget control. Actual expenditures or outlays must be
compared with budgeted amounts for each grant or subgrant. Financial
information must be related to performance or productivity data,
including the development of unit cost information whenever
appropriate or specifically required in the grant or subgrant
agreement. If unit cost data are required, estimates based on
available documentation will be accepted whenever possible.
(5) Allowable cost. Applicable OMB cost principles, agency
program regulations, and the terms of grant and subgrant agreements
will be followed in determining the reasonableness, allowability,
and allocability of costs.
(6) Source documentation. Accounting records must be
supported by such source documentation as cancelled checks, paid
bills, payrolls, time and attendance records, contract and subgrant
award documents, etc.
(7) Cash management. Procedures for minimizing the time
elapsing between the transfer of funds from the U.S. Treasury and
disbursement by grantees and subgrantees must be followed whenever
advance payment procedures are used. Grantees must establish
reasonable procedures to ensure the receipt of reports on
subgrantees' cash balances and cash disbursements in sufficient time
to enable them to prepare complete and accurate cash transactions
reports to the awarding agency. When advances are made by
letter-of-credit or electronic transfer of funds methods, the
grantee must make drawdowns as close as possible to the time of
making disbursements. Grantees must monitor cash drawdowns by their
subgrantees to assure that they conform substantially to the same
standards of timing and amount as apply to advances to the
(c) An awarding agency may review the adequacy of the financial
management system of any applicant for financial assistance as part
of a preaward review or at any time subsequent to award.
(a) Scope. This section prescribes the basic standard and
the methods under which a Federal agency will make payments to
grantees, and grantees will make payments to subgrantees and
(b) Basic standard. Methods and procedures for payment
shall minimize the time elapsing between the transfer of funds and
disbursement by the grantee or subgrantee, in accordance with
Treasury regulations at 31 CFR part 205.
(c) Advances. Grantees and subgrantees shall be paid in
advance, provided they maintain or demonstrate the willingness and
ability to maintain procedures to minimize the time elapsing between
the transfer of the funds and their disbursement by the grantee or
(d) Reimbursement. Reimbursement shall be the preferred
method when the requirements in paragraph (c) of this section are
not met. Grantees and subgrantees may also be paid by reimbursement
for any construction grant. Except as otherwise specified in
regulation, Federal agencies shall not use the percentage of
completion method to pay construction grants. The grantee or
subgrantee may use that method to pay its construction contractor,
and if it does, the awarding agency's payments to the grantee or
subgrantee will be based on the grantee's or subgrantee's actual
rate of disbursement.
(e) Working capital advances. If a grantee cannot meet the
criteria for advance payments described in paragraph (c) of this
section, and the Federal agency has determined that reimbursement is
not feasible because the grantee lacks sufficient working capital,
the awarding agency may provide cash or a working capital advance
basis. Under this procedure the awarding agency shall advance cash
to the grantee to cover its estimated disbursement needs for an
initial period generally geared to the grantee's disbursing cycle.
Thereafter, the awarding agency shall reimburse the grantee for its
actual cash disbursements. The working capital advance method of
payment shall not be used by grantees or subgrantees if the reason
for using such method is the unwillingness or inability of the
grantee to provide timely advances to the subgrantee to meet the
subgrantee's actual cash disbursements.
(f) Effect of program income, refunds, and audit recoveries on
payment. (1) Grantees and subgrantees shall disburse repayments
to and interest earned on a revolving fund before requesting
additional cash payments for the same activity.
(2) Except as provided in paragraph (f)(1) of this section,
grantees and subgrantees shall disburse program income, rebates,
refunds, contract settlements, audit recoveries and interest earned
on such funds before requesting additional cash payments.
(g) Withholding payments. (1) Unless otherwise required by
Federal statute, awarding agencies shall not withhold payments for
proper charges incurred by grantees or subgrantees unless --
(i) The grantee or subgrantee has failed to comply with grant
award conditions or
(ii) The grantee or subgrantee is indebted to the United
(2) Cash withheld for failure to comply with grant award
condition, but without suspension of the grant, shall be released to
the grantee upon subsequent compliance. When a grant is suspended,
payment adjustments will be made in accordance with §1207.43(c).
(3) A Federal agency shall not make payment to grantees for
amounts that are withheld by grantees or subgrantees from payment to
contractors to assure satisfactory completion of work. Payments
shall be made by the Federal agency when the grantees or subgrantees
actually disburse the withheld funds to the contractors or to escrow
accounts established to assure satisfactory completion of work.
(h) Cash depositories.
(1) Consistent with the national goal of expanding the
opportunities for minority business enterprises, grantees and
subgrantees are encouraged to use minority banks (a bank which is
owned at least 50 percent by minority group members). A list of
minority owned banks can be obtained from the Minority Business
Development Agency, Department of Commerce, Washington, DC
(2) A grantee or subgrantee shall maintain a separate bank
account only when required by Federal-State agreement.
(i) Interest earned on advances. Except for interest
earned on advances of funds exempt under the Intergovernmental
Cooperation Act (31 U.S.C. 6501 et seq.) and the Indian
Self-Determination Act (23 U.S.C. 450), grantees and subgrantees
shall promptly, but at least quarterly, remit interest earned on
advances to the Federal agency. The grantee or subgrantee may keep
interest amounts up to $100 per year for administrative
§1207.22 Allowable costs.
(a) Limitation on use of funds. Grant funds may be used
(1) The allowable costs of the grantees, subgrantees and
cost-type contractors, including allowable costs in the form of
payments to fixed-price contractors; and
(2) Reasonable fees or profit to cost-type contractors but not
any fee or profit (or other increment above allowable costs) to the
grantee or subgrantee.
(b) Applicable cost principles. For each kind of
organization, there is a set of Federal principles for determining
allowable costs. Allowable costs will be determined in accordance
with the cost principles applicable to the organization incurring
the costs. The following chart lists the kinds of organizations and
the applicable cost principles.
|For the costs of a --
||Use the principles in --|
|State, local or Indian tribal government.
||OMB Circular A-87.|
|Private nonprofit organization other than an (1)
institution of higher education, (2) hospital, or (3)
organization named in OMB Circular A-122 as not subject to
||OMB Circular A-122.|
||OMB Circular A-21.|
|For-profit organization other than a hospital and an
organization named in OMB Circular A-122 as not subject to
||48 CFR part 31, Contract Cost Principles and Procedures,
or uniform cost accounting standards that comply with cost
principles acceptable to the Federal
§1207.23 Period of availability of funds.
(a) General. Where a funding period is specified, a
grantee may charge to the award only costs resulting from
obligations of the funding period unless carryover of unobligated
balances is permitted, in which case the carryover balances may be
charged for costs resulting from obligations of the subsequent
(b) Liquidation of obligations. A grantee must liquidate
all obligations incurred under the award not later than 90 days
after the end of the funding period (or as specified in a program
regulation) to coincide with the submission of the annual Financial
Status Report (SF - 269). The Federal agency may extend this
deadline at the request of the grantee
§1207.24 Matching or cost sharing.
(a) Basic rule: Costs and contributions acceptable. With
the qualifications and exceptions listed in paragraph (b) of this
section, a matching or cost sharing requirement may be satisfied by
either or both of the following:
(1) Allowable costs incurred by the grantee, subgrantee or a
cost-type contractor under the assistance agreement. This includes
allowable costs borne by non-Federal grants or by others cash
donations from non-Federal third parties.
(2) The value of third party in-kind contributions applicable to
the period to which the cost sharing or matching requirements
(b) Qualifications and exceptions -- (1) Costs borne by
other Federal grant agreements. Except as provided by Federal
statute, a cost sharing or matching requirement may not be met by
costs borne by another Federal grant. This prohibition does not
apply to income earned by a grantee or subgrantee from a contract
awarded under another Federal grant.
(2) General revenue sharing. For the purpose of this
section, general revenue sharing funds distributed under 31 U.S.C.
6702 are not considered Federal grant funds.
(3) Cost or contributions counted towards other Federal
costs-sharing requirements. Neither costs nor the values of
third party in-kind contributions may count towards satisfying a
cost sharing or matching requirement of a grant agreement if they
have been or will be counted towards satisfying a cost sharing or
matching requirement of another Federal grant agreement, a Federal
procurement contract, or any other award of Federal funds.
(4) Costs financed by program income. Costs financed by
program income, as defined in §1207.25, shall not count towards
satisfying a cost sharing or matching requirement unless they are
expressly permitted in the terms of the assistance agreement. (This
use of general program income is described in §1207.25(g).)
(5) Services or property financed by income earned by
contractors. Contractors under a grant may earn income from the
activities carried out under the contract in addition to the amounts
earned from the party awarding the contract. No costs of services or
property supported by this income may count toward satisfying a cost
sharing or matching requirement unless other provisions of the grant
agreement expressly permit this kind of income to be used to meet
(6) Records. Costs and third party in-kind contributions
counting towards satisfying a cost sharing or matching requirement
must be verifiable from the records of grantees and subgrantee or
cost-type contractors. These records must show how the value placed
on third party in-kind contributions was derived. To the extent
feasible, volunteer services will be supported by the same methods
that the organization uses to support the allocability of regular
(7) Special standards for third party in-kind
contributions. (i) Third party in-kind contributions count
towards satisfying a cost sharing or matching requirement only
where, if the party receiving the contributions were to pay for
them, the payments would be allowable costs.
(ii) Some third party in-kind contributions are goods and
services that, if the grantee, subgrantee, or contractor receiving
the contribution had to pay for them, the payments would have been
an indirect costs. Costs sharing or matching credit for such
contributions shall be given only if the grantee, subgrantee, or
contractor has established, along with its regular indirect cost
rate, a special rate for allocating to individual projects or
programs the value of the contributions.
(iii) A third party in-kind contribution to a fixed-price
contract may count towards satisfying a cost sharing or matching
requirement only if it results in:
(A) An increase in the services or property provided under the
contract (without additional cost to the grantee or subgrantee)
(B) A cost savings to the grantee or subgrantee.
(iv) The values placed on third party in-kind contributions for
cost sharing or matching purposes will conform to the rules in the
succeeding sections of this part. If a third party in-kind
contribution is a type not treated in those sections, the value
placed upon it shall be fair and reasonable.
(c) Valuation of donated services -- (1) Volunteer
services. Unpaid services provided to a grantee or subgrantee by
individuals will be valued at rates consistent with those ordinarily
paid for similar work in the grantee's or subgrantee's organization.
If the grantee or subgrantee does not have employees performing
similar work, the rates will be consistent with those ordinarily
paid by other employers for similar work in the same labor market.
In either case, a reasonable amount for fringe benefits may be
included in the valuation.
(2) Employees of other organizations. When an employer
other than a grantee, subgrantee, or cost-type contractor furnishes
free of charge the services of an employee in the employee's normal
line of work, the services will be valued at the employee's regular
rate of pay exclusive of the employee's fringe benefits and overhead
costs. If the services are in a different line of work, paragraph
(c)(1) of this section applies.
(d) Valuation of third party donated supplies and loaned
equipment or space. (1) If a third party donates supplies, the
contribution will be valued at the market value of the supplies at
the time of donation.
(2) If a third party donates the use of equipment or space in a
building but retains title, the contribution will be valued at the
fair rental rate of the equipment or space.
(e) Valuation of third party donated equipment, buildings, and
land. If a third party donates equipment, buildings, or land,
and title passes to a grantee or subgrantee, the treatment of the
donated property will depend upon the purpose of the grant or
subgrant, as follows:
(1) Awards for capital expenditures. If the purpose of the
grant or subgrant is to assist the grantee or subgrantee in the
acquisition of property, the market value of that property at the
time of donation may be counted as cost sharing or matching,
(2) Other awards. If assisting in the acquisition of
property is not the purpose of the grant or subgrant, paragraphs
(e)(2)(i) and (ii) of this section apply:
(i) If approval is obtained from the awarding agency, the market
value at the time of donation of the donated equipment or buildings
and the fair rental rate of the donated land may be counted as cost
sharing or matching. In the case of a subgrant, the terms of the
grant agreement may require that the approval be obtained from the
Federal agency as well as the grantee In all cases, the approval may
be given only if a purchase of the equipment or rental of the land
would be approved as an allowable direct cost. If any part of the
donated property was acquired with Federal funds, only the
non-federal share of the property may be counted as cost-sharing or
(ii) If approval is not obtained under paragraph (e)(2)(i) of
this section, no amount may be counted for donated land, and only
depreciation or use allowances may be counted for donated equipment
and buildings. The depreciation or use allowances for this property
are not treated as third party in-kind contributions. Instead, they
are treated as costs incurred by the grantee or subgrantee. They are
computed and allocated (usually as indirect costs) in accordance
with the cost principles specified in §1207.22, in the same way as
depreciation or use allowances for purchased equipment and
buildings. The amount of depreciation or use allowances for donated
equipment and buildings is based on the property's market value at
the time it was donated.
(f) Valuation of grantee or subgrantee donated real property
for construction/acquisition. If a grantee or subgrantee donates
real property for a construction or facilities acquisition project,
the current market value of that property may be counted as cost
sharing or matching. If any part of the donated property was
acquired with Federal funds, only the non-federal share of the
property may be counted as cost sharing or matching.
(g) Appraisal of real property. In some cases under
paragraphs (d), (e) and (f) of this section, it will be necessary to
establish the market value of land or a building or the fair rental
rate of land or of space in a building. In these cases, the Federal
agency may require the market value or fair rental value be set by
an independent appraiser, and that the value or rate be certified by
the grantee This requirement will also be imposed by the grantee on
§1207.25 Program income.
(a) General. Grantees are encouraged to earn income to
defray program costs. Program income includes income from fees for
services performed, from the use or rental of real or personal
property acquired with grant funds, from the sale of commodities or
items fabricated under a grant agreement, and from payments of
principal and interest on loans made with grant funds. Except as
otherwise provided in regulations of the Federal agency, program
income does not include interest on grant funds, rebates, credits,
discounts, refunds, etc. and interest earned on any of them.
(b) Definition of program income. Program income means
gross income received by the grantee or subgrantee directly
generated by a grant supported activity, or earned only as a result
of the grant agreement during the grant period. ``During the grant
period'' is the time between the effective date of the award and the
ending date of the award reflected in the final financial
(c) Cost of generating program income. If authorized by
Federal regulations or the grant agreement, costs incident to the
generation of program income may be deducted from gross income to
determine program income.
(d) Governmental revenues. Taxes, special assessments,
levies, fines, and other such revenues raised by a grantee or
subgrantee are not program income unless the revenues are
specifically identified in the grant agreement or Federal agency
regulations as program income.
(e) Royalties. Income from royalties and license fees for
copyrighted material, patents, and inventions developed by a grantee
or subgrantee is program income only if the revenues are
specifically identified in the grant agreement or Federal agency
regulations as program income. (See §1207.34.)
(f) Property. Proceeds from the sale of real property or
equipment will be handled in accordance with the requirements of
§1207.31 and 1207.32.
(g) Use of program income. Program income shall be
deducted from outlays which may be both Federal and non-Federal as
described below, unless the Federal agency regulations or the grant
agreement specify another alternative (or a combination of the
alternatives). In specifying alternatives, the Federal agency may
distinguish between income earned by the grantee and income earned
by subgrantees and between the sources, kinds, or amounts of income.
When Federal agencies authorize the alternatives in paragraphs (g)
(2) and (3) of this section, program income in excess of any limits
stipulated shall also be deducted from outlays.
(1) Deduction. Ordinarily program income shall be deducted
from total allowable costs to determine the net allowable costs.
Program income shall be used for current costs unless the Federal
agency authorizes otherwise. Program income which the grantee did
not anticipate at the time of the award shall be used to reduce the
Federal agency and grantee contributions rather than to increase the
funds committed to the project.
(2) Addition. When authorized, program income may be added
to the funds committed to the grant agreement by the Federal agency
and the grantee The program income shall be used for the purposes
and under the conditions of the grant agreement.
(3) Cost sharing or matching. When authorized, program
income may be used to meet the cost sharing or matching requirement
of the grant agreement. The amount of the Federal grant award
remains the same.
(h) Income after the award period. There are no Federal
requirements governing the disposition of program income earned
after the end of the award period (i.e., until the ending date of
the final financial report, see paragraph (a) of this section),
unless the terms of the agreement or the Federal agency regulations
§1207.26 Non-Federal audit.
(a) Basic rule. Grantees and subgrantees are responsible
for obtaining audits in accordance with the Single Audit Act of 1984
(31 U.S.C. 7501 - 7507) and Federal agency implementing regulations.
The audits shall be made by an independent auditor in accordance
with generally accepted government auditing standards covering
financial and compliance audits.
(b) Subgrantees. State or local governments, as those
terms are defined for purposes of the Single Audit Act, that receive
Federal financial assistance and provide $25,000 or more of it in a
fiscal year to a subgrantee shall:
(1) Determine whether State or local subgrantees have met the
audit requirements of the Act and whether subgrantees covered by OMB
Circular A - 110, "Uniform Requirements for Grants and Other
Agreements with Institutions of Higher Education, Hospitals and
Other Nonprofit Organizations" have met the audit requirement.
Commercial contractors (private forprofit and private and
governmental organizations) providing goods and services to State
and local governments are not required to have a single audit
performed. State and local governments should use their own
procedures to ensure that the contractor has complied with laws and
regulations affecting the expenditure of Federal funds;
(2) Determine whether the subgrantee spent Federal assistance
funds provided in accordance with applicable laws and regulations.
This may be accomplished by reviewing an audit of the subgrantee
made in accordance with the Act, Circular A - 110, or through other
means (e.g., program reviews) if the subgrantee has not had such an
(3) Ensure that appropriate corrective action is taken within six
months after receipt of the audit report in instance of
noncompliance with Federal laws and regulations;
(4) Consider whether subgrantee audits necessitate adjustment of
the grantee's own records; and
(5) Require each subgrantee to permit independent auditors to
have access to the records and financial statements.
(c) Auditor selection. In arranging for audit services,
§1207.36 shall be followed. Changes, Property, and Subawards
(a) General. Grantees and subgrantees are permitted to
rebudget within the approved direct cost budget to meet
unanticipated requirements and may make limited program changes to
the approved project. However, unless waived by the awarding agency,
certain types of post-award changes in budgets and projects shall
require the prior written approval of the awarding agency.
(b) Relation to cost principles. The applicable cost
principles (see §1207.22) contain requirements for prior approval of
certain types of costs. Except where waived, those requirements
apply to all grants and subgrants even if paragraphs (c) through (f)
of this section do not.
(c) Budget changes -- (1) Nonconstruction projects.
Except as stated in other regulations or an award document, grantees
or subgrantees shall obtain the prior approval of the awarding
agency whenever any of the following changes is anticipated under a
(i) Any revision which would result in the need for additional
(ii) Unless waived by the awarding agency, cumulative transfers
among direct cost categories, or, if applicable, among separately
budgeted programs, projects, functions, or activities which exceed
or are expected to exceed ten percent of the current total approved
budget, whenever the awarding agency's share exceeds $100,000.
(iii) Transfer of funds allotted for training allowances (i.e.,
from direct payments to trainees to other expense categories).
(2) Construction projects. Grantees and subgrantees shall
obtain prior written approval for any budget revision which would
result in the need for additional funds.
(3) Combined construction and nonconstruction projects.
When a grant or subgrant provides funding for both construction and
nonconstruction activities, the grantee or subgrantee must obtain
prior written approval from the awarding agency before making any
fund or budget transfer from nonconstruction to construction or vice
(d) Programmatic changes. Grantees or subgrantees must
obtain the prior approval of the awarding agency whenever any of the
following actions is anticipated:
(1) Any revision of the scope or objectives of the project
(regardless of whether there is an associated budget revision
requiring prior approval).
(2) Need to extend the period of availability of funds.
(3) Changes in key persons in cases where specified in an
application or a grant award. In research projects, a change in the
project director or principal investigator shall always require
approval unless waived by the awarding agency.
(4) Under nonconstruction projects, contracting out, subgranting
(if authorized by law) or otherwise obtaining the services of a
third party to perform activities which are central to the purposes
of the award. This approval requirement is in addition to the
approval requirements of §1207.36 but does not apply to the
procurement of equipment, supplies, and general support
(e) Additional prior approval requirements. The awarding
agency may not require prior approval for any budget revision which
is not described in paragraph (c) of this section.
(f) Requesting prior approval. (1) A request for prior
approval of any budget revision will be in the same budget formal
the grantee used in its application and shall be accompanied by a
narrative justification for the proposed revision.
(2) A request for a prior approval under the applicable Federal
cost principles (see §1207.22) may be made by letter.
(3) A request by a subgrantee for prior approval will be
addressed in writing to the grantee The grantee will promptly review
such request and shall approve or disapprove the request in writing.
A grantee will not approve any budget or project revision which is
inconsistent with the purpose or terms and conditions of the Federal
grant to the grantee If the revision, requested by the subgrantee
would result in a change to the grantee's approved project which
requires Federal prior approval, the grantee will obtain the Federal
agency's approval before approving the subgrantee's request.
§1207.31 Real property.
(a) Title. Subject to the obligations and conditions set
forth in this section, title to real property acquired under a grant
or subgrant will vest upon acquisition in the grantee or subgrantee
(b) Use. Except as otherwise provided by Federal statutes,
real property will be used for the originally authorized purposes as
long as needed for that purposes, and the grantee or subgrantee
shall not dispose of or encumber its title or other interests.
(c) Disposition. When real property is no longer needed
for the originally authorized purpose, the grantee or subgrantee
will request disposition instructions from the awarding agency. The
instructions will provide for one of the following alternatives:
(1) Retention of title. Retain title after compensating
the awarding agency. The amount paid to the awarding agency will be
computed by applying the awarding agency's percentage of
participation in the cost of the original purchase to the fair
market value of the property. However, in those situations where a
grantee or subgrantee is disposing of real property acquired with
grant funds and acquiring replacement real property under
(2) Sale of property. Sell the property and compensate the
awarding agency. The amount due to the awarding agency will be
calculated by applying the awarding agency's percentage of
participation in the cost of the original purchase to the proceeds
of the sale after deduction of any actual and reasonable selling and
fixing-up expenses. If the grant is still active, the net proceeds
from sale may be offset against the original cost of the property.
When a grantee or subgrantee is directed to sell property, sales
procedures shall be followed that provide for competition to the
extent practicable and result in the highest possible return.
(3) Transfer of title. Transfer title to the awarding
agency or to a third-party designated/approved by the awarding
agency. The grantee or subgrantee shall be paid an amount calculated
by applying the grantee or subgrantee's percentage of participation
in the purchase of the real property to the current fair market
value of the property.
(a) Title. Subject to the obligations and conditions set
forth in this section, title to equipment acquired under a grant or
subgrant will vest upon acquisition in the grantee or subgrantee
(b) States. A State will use, manage, and dispose of
equipment acquired under a grant by the State in accordance with
State laws and procedures. Other grantees and subgrantees will
follow paragraphs (c) through (e) of this section.
(c) Use. (1) Equipment shall be used by the grantee or
subgrantee in the program or project for which it was acquired as
long as needed, whether or not the project or program continues to
be supported by Federal funds. When no longer needed for the
original program or project, the equipment may be used in other
activities currently or previously supported by a Federal
(2) The grantee or subgrantee shall also make equipment available
for use on other projects or programs currently or previously
supported by the Federal Government, providing such use will not
interfere with the work on the projects or program for which it was
originally acquired. First preference for other use shall be given
to other programs or projects supported by the awarding agency. User
fees should be considered if appropriate.
(3) Notwithstanding the encouragement in §1207.25(a) to earn
program income, the grantee or subgrantee must not use equipment
acquired with grant funds to provide services for a fee to compete
unfairly with private companies that provide equivalent services,
unless specifically permitted or contemplated by Federal
(4) When acquiring replacement equipment, the grantee or
subgrantee may use the equipment to be replaced as a trade-in or
sell the property and use the proceeds to offset the cost of the
replacement property, subject to the approval of the awarding
(d) Management requirements. Procedures for managing
equipment (including replacement equipment), whether acquired in
whole or in part with grant funds, until disposition takes place
will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a
description of the property, a serial number or other identification
number, the source of property, who holds title, the acquisition
date, and cost of the property, percentage of Federal participation
in the cost of the property, the location, use and condition of the
property, and any ultimate disposition data including the date of
disposal and sale price of the property.
(2) A physical inventory of the property must be taken and the
results reconciled with the property records at least once every two
(3) A control system must be developed to ensure adequate
safeguards to prevent loss, damage, or theft of the property. Any
loss, damage, or theft shall be investigated.
(4) Adequate maintenance procedures must be developed to keep the
property in good condition.
(5) If the grantee or subgrantee is authorized or required to
sell the property, proper sales procedures must be established to
ensure the highest possible return.
(e) Disposition. When original or replacement equipment
acquired under a grant or subgrant is no longer needed for the
original project or program or for other activities currently or
previously supported by a Federal agency, disposition of the
equipment will be made as follows:
(1) Items of equipment with a current per-unit fair market value
of less than $5,000 may be retained, sold or otherwise disposed of
with no further obligation to the awarding agency.
(2) Items of equipment with a current per unit fair market value
in excess of $5,000 may be retained or sold and the awarding agency
shall have a right to an amount calculated by multiplying the
current market value or proceeds from sale by the awarding agency's
share of the equipment.
(3) In cases where a grantee or subgrantee fails to take
appropriate disposition actions, the awarding agency may direct the
grantee or subgrantee to take excess and disposition actions.
(f) Federal equipment. In the event a grantee or
subgrantee is provided federally-owned equipment:
(1) Title will remain vested in the Federal Government.
(2) Grantees or subgrantees will manage the equipment in
accordance with Federal agency rules and procedures, and submit an
annual inventory listing.
(3) When the equipment is no longer needed, the grantee or
subgrantee will request disposition instructions from the Federal
(g) Right to transfer title. The Federal awarding agency
may reserve the right to transfer title to the Federal Government or
a third part named by the awarding agency when such a third party is
otherwise eligible under existing statutes. Such transfers shall be
subject to the following standards:
(1) The property shall be identified in the grant or otherwise
made known to the grantee in writing.
(2) The Federal awarding agency shall issue disposition
instruction within 120 calendar days after the end of the Federal
support of the project for which it was acquired. If the Federal
awarding agency fails to issue disposition instructions within the
120 calendar-day period the grantee shall follow §1207.32(e).
(3) When title to equipment is transferred, the grantee shall be
paid an amount calculated by applying the percentage of
participation in the purchase to the current fair market value of
(a) Title. Title to supplies acquired under a grant or
subgrant will vest, upon acquisition, in the grantee or subgrantee
(b) Disposition. If there is a residual inventory of
unused supplies exceeding $5,000 in total aggregate fair market
value upon termination or completion of the award, and if the
supplies are not needed for any other federally sponsored programs
or projects, the grantee or subgrantee shall compensate the awarding
agency for its share.
The Federal awarding agency reserves a royalty-free,
nonexclusive, and irrevocable license to reproduce, publish or
otherwise use, and to authorize others to use, for Federal
(a) The copyright in any work developed under a grant, subgrant,
or contract under a grant or subgrant; and
(b) Any rights of copyright to which a grantee, subgrantee or a
contractor purchases ownership with grant support.
§1207.35 Subawards to debarred and suspended parties.
Grantees and subgrantees must not make any award or permit any
award (subgrant or contract) at any tier to any party which is
debarred or suspended or is otherwise excluded from or ineligible
for participation in Federal assistance programs under Executive
Order 12549, "Debarment and Suspension."
(a) States. When procuring property and services under a
grant, a State will follow the same policies and procedures it uses
for procurements from its non-Federal funds. The State will ensure
that every purchase order or other contract includes any clauses
required by Federal statutes and executive orders and their
implementing regulations. Other grantees and subgrantees will follow
paragraphs (b) through (i) in this section.
(b) Procurement standards. (1) Grantees and subgrantees
will use their own procurement procedures which reflect applicable
State and local laws and regulations, provided that the procurements
conform to applicable Federal law and the standards identified in
(2) Grantees and subgrantees will maintain a contract
administration system which ensures that contractors perform in
accordance with the terms, conditions, and specifications of their
contracts or purchase orders.
(3) Grantees and subgrantees will maintain a written code of
standards of conduct governing the performance of their employees
engaged in the award and administration of contracts. No employee,
officer or agent of the grantee or subgrantee shall participate in
selection, or in the award or administration of a contract supported
by Federal funds if a conflict of interest, real or apparent, would
be involved. Such a conflict would arise when:
(i) The employee, officer or agent,
(ii) Any member of his immediate family,
(iii) His or her partner, or
(iv) An organization which employs, or is about to employ, any of
the above, has a financial or other interest in the firm selected
for award. The grantee's or subgrantee's officers, employees or
agents will neither solicit nor accept gratuities, favors or
anything of monetary value from contractors, potential contractors,
or parties to subagreements. Grantee and subgrantees may set minimum
rules where the financial interest is not substantial or the gift is
an unsolicited item of nominal intrinsic value. To the extent
permitted by State or local law or regulations, such standards or
conduct will provide for penalties, sanctions, or other disciplinary
actions for violations of such standards by the grantee's and
subgrantee's officers, employees, or agents, or by contractors or
their agents. The awarding agency may in regulation provide
additional prohibitions relative to real, apparent, or potential
conflicts of interest.
(4) Grantee and subgrantee procedures will provide for a review
of proposed procurements to avoid purchase of unnecessary or
duplicative items. Consideration should be given to consolidating or
breaking out procurements to obtain a more economical purchase.
Where appropriate, an analysis will be made of lease versus purchase
alternatives, and any other appropriate analysis to determine the
most economical approach.
(5) To foster greater economy and efficiency, grantees and
subgrantees are encouraged to enter into State and local
intergovernmental agreements for procurement or use of common goods
(6) Grantees and subgrantees are encouraged to use Federal excess
and surplus property in lieu of purchasing new equipment and
property whenever such use is feasible and reduces project
(7) Grantees and subgrantees are encouraged to use value
engineering clauses in contracts for construction projects of
sufficient size to offer reasonable opportunities for cost
reductions. Value engineering is a systematic and creative analysis
of each contract item or task to ensure that its essential function
is provided at the overall lower cost.
(8) Grantees and subgrantees will make awards only to responsible
contractors possessing the ability to perform successfully under the
terms and conditions of a proposed procurement. Consideration will
be given to such matters as contractor integrity, compliance with
public policy, record of past performance, and financial and
(9) Grantees and subgrantees will maintain records sufficient to
detail the significant history of a procurement. These records will
include, but are not necessarily limited to the following: rationale
for the method of procurement, selection of contract type,
contractor selection or rejection, and the basis for the contract
(10) Grantees and subgrantees will use time and material type
contracts only --
(i) After a determination that no other contract is suitable,
(ii) If the contract includes a ceiling price that the contractor
exceeds at its own risk.
(11) Grantees and subgrantees alone will be responsible, in
accordance with good administrative practice and sound business
judgment, for the settlement of all contractual and administrative
issues arising out of procurements. These issues include, but are
not limited to source evaluation, protests, disputes, and claims.
These standards do not relieve the grantee or subgrantee of any
contractual responsibilities under its contracts. Federal agencies
will not substitute their judgment for that of the grantee or
subgrantee unless the matter is primarily a Federal concern.
Violations of law will be referred to the local, State, or Federal
authority having proper jurisdiction.
(12) Grantees and subgrantees will have protest procedures to
handle and resolve disputes relating to their procurements and shall
in all instances disclose information regarding the protest to the
awarding agency. A protestor must exhaust all administrative
remedies with the grantee and subgrantee before pursuing a protest
with the Federal agency. Reviews of protests by the Federal agency
will be limited to:
(i) Violations of Federal law or regulations and the standards of
this section (violations of State or local law will be under the
jurisdiction of State or local authorities) and
(ii) Violations of the grantee's or subgrantee's protest
procedures for failure to review a complaint or protest. Protests
received by the Federal agency other than those specified above will
be referred to the grantee or subgrantee.
(c) Competition. (1) All procurement transactions will be
conducted in a manner providing full and open competition consistent
with the standards of §1207.36. Some of the situations considered to
be restrictive of competition include but are not limited to:
(i) Placing unreasonable requirements on firms in order for them
to qualify to do business,
(ii) Requiring unnecessary experience and excessive bonding,
(iii) Noncompetitive pricing practices between firms or between
(iv) Noncompetitive awards to consultants that are on retainer
(v) Organizational conflicts of interest,
(vi) Specifying only a "brand name" product instead of allowing
"an equal" product to be offered and describing the performance of
other relevant requirements of the procurement, and
(vii) Any arbitrary action in the procurement process.
(2) Grantees and subgrantees will conduct procurements in a
manner that prohibits the use of statutorily or administratively
imposed in-State or local geographical preferences in the evaluation
of bids or proposals, except in those cases where applicable Federal
statutes expressly mandate or encourage geographic preference.
Nothing in this section preempts State licensing laws. When
contracting for architectural and engineering (A/E) services,
geographic location may be a selection criteria provided its
application leaves an appropriate number of qualified firms, given
the nature and size of the project, to compete for the contract.
(3) Grantees will have written selection procedures for
procurement transactions. These procedures will ensure that all
(i) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured.
Such description shall not, in competitive procurements, contain
features which unduly restrict competition. The description may
include a statement of the qualitative nature of the material,
product or service to be procured, and when necessary, shall set
forth those minimum essential characteristics and standards to which
it must conform if it is to satisfy its intended use. Detailed
product specifications should be avoided if at all possible. When it
is impractical or uneconomical to make a clear and accurate
description of the technical requirements, a "brand name or equal"
description may be used as a means to define the performance or
other salient requirements of a procurement. The specific features
of the named brand which must be met by offerors shall be clearly
(ii) Identify all requirements which the offerors must fulfill
and all other factors to be used in evaluating bids or
(4) Grantees and subgrantees will ensure that all prequalified
lists of persons, firms, or products which are used in acquiring
goods and services are current and include enough qualified sources
to ensure maximum open and free competition. Also, grantees and
subgrantees will not preclude potential bidders from qualifying
during the solicitation period.
(d) Methods of procurement to be followed -- (1)
Procurement by small purchase procedures. Small purchase
procedures are those relatively simple and informal procurement
methods for securing services, supplies, or other property that do
not cost more than the simplified acquisition threshold fixed at 41
U.S.C. 403(11) (currently set at $100,000). If small purchase
procedures are used, price or rate quotations shall be obtained from
an adequate number of qualified sources.
(2) Procurement by sealed bids (formal advertising). Bids
are publicly solicited and a firm-fixed-price contract (lump sum or
unit price) is awarded to the responsible bidder whose bid,
conforming with all the material terms and conditions of the
invitation for bids, is the lowest in price. The sealed bid method
is the preferred method for procuring construction, if the
conditions in §1207.36(d)(2)(i) apply.
(i) In order for sealed bidding to be feasible, the following
conditions should be present:
(A) A complete, adequate, and realistic specification or purchase
description is available;
(B) Two or more responsible bidders are willing and able to
compete effectively and for the business; and
(C) The procurement lends itself to a firm fixed price contract
and the selection of the successful bidder can be made principally
on the basis of price.
(ii) If sealed bids are used, the following requirements
(A) The invitation for bids will be publicly advertised and bids
shall be solicited from an adequate number of known suppliers,
providing them sufficient time prior to the date set for opening the
(B) The invitation for bids, which will include any
specifications and pertinent attachments, shall define the items or
services in order for the bidder to properly respond;
(C) All bids will be publicly opened at the time and place
prescribed in the invitation for bids;
(D) A firm fixed-price contract award will be made in writing to
the lowest responsive and responsible bidder. Where specified in
bidding documents, factors such as discounts, transportation cost,
and life cycle costs shall be considered in determining which bid is
lowest. Payment discounts will only be used to determine the low bid
when prior experience indicates that such discounts are usually
taken advantage of; and
(E) Any or all bids may be rejected if there is a sound
(3) Procurement by competitive proposals. The technique of
competitive proposals is normally conducted with more than one
source submitting an offer, and either a fixed-price or
cost-reimbursement type contract is awarded. It is generally used
when conditions are not appropriate for the use of sealed bids. If
this method is used, the following requirements apply:
(i) Requests for proposals will be publicized and identify all
evaluation factors and their relative importance. Any response to
publicized requests for proposals shall be honored to the maximum
(ii) Proposals will be solicited from an adequate number of
(iii) Grantees and subgrantees will have a method for conducting
technical evaluations of the proposals received and for selecting
(iv) Awards will be made to the responsible firm whose proposal
is most advantageous to the program, with price and other factors
(v) Grantees and subgrantees may use competitive proposal
procedures for qualifications-based procurement of
architectural/engineering (A/E) professional services whereby
competitors' qualifications are evaluated and the most qualified
competitor is selected, subject to negotiation of fair and
reasonable compensation. The method, where price is not used as a
selection factor, can only be used in procurement of A/E
professional services. It cannot be used to purchase other types of
services though A/E firms are a potential source to perform the
(4) Procurement by noncompetitive proposals is procurement
through solicitation of a proposal from only one source, or after
solicitation of a number of sources, competition is determined
(i) Procurement by noncompetitive proposals may be used only when
the award of a contract is infeasible under small purchase
procedures, sealed bids or competitive proposals and one of the
following circumstances applies:
(A) The item is available only from a single source;
(B) The public exigency or emergency for the requirement will not
permit a delay resulting from competitive solicitation;
(C) The awarding agency authorizes noncompetitive proposals;
(D) After solicitation of a number of sources, competition is
(ii) Cost analysis, i.e., verifying the proposed cost data, the
projections of the data, and the evaluation of the specific elements
of costs and profits, is required.
(iii) Grantees and subgrantees may be required to submit the
proposed procurement to the awarding agency for pre-award review in
accordance with paragraph (g) of this section.
(e) Contracting with small and minority firms, women's
business enterprise and labor surplus area firms. (1) The
grantee and subgrantee will take all necessary affirmative steps to
assure that minority firms, women's business enterprises, and labor
surplus area firms are used when possible.
(2) Affirmative steps shall include:
(i) Placing qualified small and minority businesses and women's
business enterprises on solicitation lists;
(ii) Assuring that small and minority businesses, and women's
business enterprises are solicited whenever they are potential
(iii) Dividing total requirements, when economically feasible,
into smaller tasks or quantities to permit maximum participation by
small and minority business, and women's business enterprises;
(iv) Establishing delivery schedules, where the requirement
permits, which encourage participation by small and minority
business, and women's business enterprises;
(v) Using the services and assistance of the Small Business
Administration, and the Minority Business Development Agency of the
Department of Commerce; and
(vi) Requiring the prime contractor, if subcontracts are to be
let, to take the affirmative steps listed in paragraphs (e)(2)(i)
through (v) of this section.
(f) Contract cost and price. (1) Grantees and subgrantees
must perform a cost or price analysis in connection with every
procurement action including contract modifications. The method and
degree of analysis is dependent on the facts surrounding the
particular procurement situation, but as a starting point, grantees
must make independent estimates before receiving bids or proposals.
A cost analysis must be performed when the offeror is required to
submit the elements of his estimated cost, e.g., under professional,
consulting, and architectural engineering services contracts. A cost
analysis will be necessary when adequate price competition is
lacking, and for sole source procurements, including contract
modifications or change orders, unless price reasonableness can be
established on the basis of a catalog or market price of a
commercial product sold in substantial quantities to the general
public or based on prices set by law or regulation. A price analysis
will be used in all other instances to determine the reasonableness
of the proposed contract price.
(2) Grantees and subgrantees will negotiate profit as a separate
element of the price for each contract in which there is no price
competition and in all cases where cost analysis is performed. To
establish a fair and reasonable profit, consideration will be given
to the complexity of the work to be performed, the risk borne by the
contractor, the contractor's investment, the amount of
subcontracting, the quality of its record of past performance, and
industry profit rates in the surrounding geographical area for
(3) Costs or prices based on estimated costs for contracts under
grants will be allowable only to the extent that costs incurred or
cost estimates included in negotiated prices are consistent with
Federal cost principles (see §1207.22). Grantees may reference their
own cost principles that comply with the applicable Federal cost
(4) The cost plus a percentage of cost and percentage of
construction cost methods of contracting shall not be used.
(g) Awarding agency review.
(1) Grantees and subgrantees must make available, upon request of
the awarding agency, technical specifications on proposed
procurements where the awarding agency believes such review is
needed to ensure that the item and/or service specified is the one
being proposed for purchase. This review generally will take place
prior to the time the specification is incorporated into a
solicitation document. However, if the grantee or subgrantee desires
to have the review accomplished after a solicitation has been
developed, the awarding agency may still review the specifications,
with such review usually limited to the technical aspects of the
(2) Grantees and subgrantees must on request make available for
awarding agency pre-award review procurement documents, such as
requests for proposals or invitations for bids, independent cost
estimates, etc. when:
(i) A grantee's or subgrantee's procurement procedures or
operation fails to comply with the procurement standards in this
(ii) The procurement is expected to exceed the simplified
acquisition threshold and is to be awarded without competition or
only one bid or offer is received in response to a solicitation;
(iii) The procurement, which is expected to exceed the simplified
acquisition threshold, specifies a "brand name" product; or
(iv) The proposed award is more than the simplified acquisition
threshold and is to be awarded to other than the apparent low bidder
under a sealed bid procurement; or
(v) A proposed contract modification changes the scope of a
contract or increases the contract amount by more than the
simplified acquisition threshold.
(3) A grantee or subgrantee will be exempt from the pre-award
review in paragraph (g)(2) of this section if the awarding agency
determines that its procurement systems comply with the standards of
(i) A grantee or subgrantee may request that its procurement
system be reviewed by the awarding agency to determine whether its
system meets these standards in order for its system to be
certified. Generally, these reviews shall occur where there is a
continuous high-dollar funding, and third-party contracts are
awarded on a regular basis.
(ii) A grantee or subgrantee may self-certify its procurement
system. Such self-certification shall not limit the awarding
agency's right to survey the system. Under a self-certification
procedure, awarding agencies may wish to rely on written assurances
from the grantee or subgrantee that it is complying with these
standards. A grantee or subgrantee will cite specific procedures,
regulations, standards, etc., as being in compliance with these
requirements and have its system available for review.
(h) Bonding requirements. For construction or facility
improvement contracts or subcontracts exceeding the simplified
acquisition threshold, the awarding agency may accept the bonding
policy and requirements of the grantee or subgrantee provided the
awarding agency has made a determination that the awarding agency's
interest is adequately protected. If such a determination has not
been made, the minimum requirements shall be as follows:
(1) A bid guarantee from each bidder equivalent to five
percent of the bid price. The "bid guarantee" shall consist of a
firm commitment such as a bid bond, certified check, or other
negotiable instrument accompanying a bid as assurance that the
bidder will, upon acceptance of his bid, execute such contractual
documents as may be required within the time specified.
(2) A performance bond on the part of the contractor for 100
percent of the contract price. A "performance bond" is one
executed in connection with a contract to secure fulfillment of all
the contractor's obligations under such contract.
(3) A payment bond on the part of the contractor for 100
percent of the contract price. A "payment bond" is one executed
in connection with a contract to assure payment as required by law
of all persons supplying labor and material in the execution of the
work provided for in the contract.
(i) Contract provisions. A grantee's and subgrantee's
contracts must contain provisions in paragraph (i) of this section.
Federal agencies are permitted to require changes, remedies, changed
conditions, access and records retention, suspension of work, and
other clauses approved by the Office of Federal Procurement
(1) Administrative, contractual, or legal remedies in instances
where contractors violate or breach contract terms, and provide for
such sanctions and penalties as may be appropriate. (Contracts more
than the simplified acquisition threshold)
(2) Termination for cause and for convenience by the grantee or
subgrantee including the manner by which it will be effected and the
basis for settlement. (All contracts in excess of $10,000)
(3) Compliance with Executive Order 11246 of September 24, 1965,
entitled "Equal Employment Opportunity," as amended by Executive
Order 11375 of October 13, 1967, and as supplemented in Department
of Labor regulations (41 CFR chapter 60). (All construction
contracts awarded in excess of $10,000 by grantees and their
contractors or subgrantees)
(4) Compliance with the Copeland "Anti-Kickback" Act (18 U.S.C.
874) as supplemented in Department of Labor regulations (29 CFR Part
3). (All contracts and subgrants for construction or repair)
(5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a -
7) as supplemented by Department of Labor regulations (29 CFR Part
5). (Construction contracts in excess of $2000 awarded by grantees
and subgrantees when required by Federal grant program
(6) Compliance with Sections 103 and 107 of the Contract Work
Hours and Safety Standards Act (40 U.S.C. 327 - 330) as supplemented
by Department of Labor regulations (29 CFR Part 5). (Construction
contracts awarded by grantees and subgrantees in excess of $2000,
and in excess of $2500 for other contracts which involve the
employment of mechanics or laborers)
(7) Notice of awarding agency requirements and regulations
pertaining to reporting.
(8) Notice of awarding agency requirements and regulations
pertaining to patent rights with respect to any discovery or
invention which arises or is developed in the course of or under
(9) Awarding agency requirements and regulations pertaining to
copyrights and rights in data.
(10) Access by the grantee, the subgrantee, the Federal grantor
agency, the Comptroller General of the United States, or any of
their duly authorized representatives to any books, documents,
papers, and records of the contractor which are directly pertinent
to that specific contract for the purpose of making audit,
examination, excerpts, and transcriptions.
(11) Retention of all required records for three years after
grantees or subgrantees make final payments and all other pending
matters are closed.
(12) Compliance with all applicable standards, orders, or
requirements issued under section 306 of the Clean Air Act (42
U.S.C. 1857(h)), section 508 of the Clean Water Act (33 U.S.C.
1368), Executive Order 11738, and Environmental Protection Agency
regulations (40 CFR part 15). (Contracts, subcontracts, and
subgrants of amounts in excess of $100,000)
(13) Mandatory standards and policies relating to energy
efficiency which are contained in the state energy conservation plan
issued in compliance with the Energy Policy and Conservation Act
(Pub. L. 94 - 163, 89 Stat. 871).
(a) States. States shall follow state law and procedures
when awarding and administering subgrants (whether on a cost
reimbursement or fixed amount basis) of financial assistance to
local and Indian tribal governments. States shall:
(1) Ensure that every subgrant includes any clauses required by
Federal statute and executive orders and their implementing
(2) Ensure that subgrantees are aware of requirements imposed
upon them by Federal statute and regulation;
(3) Ensure that a provision for compliance with §1207.42 is
placed in every cost reimbursement subgrant; and
(4) Conform any advances of grant funds to subgrantees
substantially to the same standards of timing and amount that apply
to cash advances by Federal agencies.
(b) All other grantees All other grantees shall follow the
provisions of this part which are applicable to awarding agencies
when awarding and administering subgrants (whether on a cost
reimbursement or fixed amount basis) of financial assistance to
local and Indian tribal governments. Grantees shall:
(1) Ensure that every subgrant includes a provision for
compliance with this part;
(2) Ensure that every subgrant includes any clauses required by
Federal statute and executive orders and their implementing
(3) Ensure that subgrantees are aware of requirements imposed
upon them by Federal statutes and regulations.
(c) Exceptions. By their own terms, certain provisions of
this part do not apply to the award and administration of
(1) Section 1207.10;
(2) Section 1207.11;
(3) The letter-of-credit procedures specified in Treasury
Regulations at 31 CFR part 205, cited in §1207.21; and
(4) Section 1207.50. Reports, Records, Retention, and
§1207.40 Monitoring and reporting program performance.
(a) Monitoring by granteesGrantees are responsible for
managing the day-to-day operations of grant and subgrant supported
activities. Grantees must monitor grant and subgrant supported
activities to assure compliance with applicable Federal requirements
and that performance goals are being achieved. Grantee monitoring
must cover each program, function or activity.
(b) Nonconstruction performance reports. The Federal
agency may, if it decides that performance information available
from subsequent applications contains sufficient information to meet
its programmatic needs, require the grantee to submit a performance
report only upon expiration or termination of grant support. Unless
waived by the Federal agency this report will be due on the same
date as the final Financial Status Report.
(1) Grantees shall submit annual performance reports unless the
awarding agency requires quarterly or semi-annual reports. However,
performance reports will not be required more frequently than
quarterly. Annual reports shall be due 90 days after the grant year,
quarterly or semi-annual reports shall be due 30 days after the
reporting period. The final performance report will be due 90 days
after the expiration or termination of grant support. If a justified
request is submitted by a grantee, the Federal agency may extend the
due date for any performance report. Additionally, requirements for
unnecessary performance reports may be waived by the Federal
(2) Performance reports will contain, for each grant, brief
information on the following:
(i) A comparison of actual accomplishments to the objectives
established for the period. Where the output of the project can be
quantified, a computation of the cost per unit of output may be
required if that information will be useful.
(ii) The reasons for slippage if established objectives were not
(iii) Additional pertinent information including, when
appropriate, analysis and explanation of cost overruns or high unit
(3) Grantees will not be required to submit more than the
original and two copies of performance reports.
(4) Grantees will adhere to the standards in this section in
prescribing performance reporting requirements for subgrantees.
(c) Construction performance reports. For the most part,
on-site technical inspections and certified percentage-of-completion
data are relied on heavily by Federal agencies to monitor progress
under construction grants and subgrants. The Federal agency will
require additional formal performance reports only when considered
necessary, and never more frequently than quarterly.
(d) Significant developments. Events may occur between the
scheduled performance reporting dates which have significant impact
upon the grant or subgrant supported activity. In such cases, the
grantee must inform the Federal agency as soon as the following
types of conditions become known:
(1) Problems, delays, or adverse conditions which will materially
impair the ability to meet the objective of the award. This
disclosure must include a statement of the action taken, or
contemplated, and any assistance needed to resolve the
(2) Favorable developments which enable meeting time schedules
and objectives sooner or at less cost than anticipated or producing
more beneficial results than originally planned.
(e) Federal agencies may make site visits as warranted by program
(f) Waivers, extensions. (1) Federal agencies may waive
any performance report required by this part if not needed.
(2) The grantee may waive any performance report from a
subgrantee when not needed. The grantee may extend the due date for
any performance report from a subgrantee if the grantee will still
be able to meet its performance reporting obligations to the Federal
§1207.41 Financial reporting.
(1) Except as provided in paragraphs (a)(2) and (5) of this
section, grantees will use only the forms specified in paragraphs
(a) through (e) of this section, and such supplementary or other
forms as may from time to time be authorized by OMB, for:
(i) Submitting financial reports to Federal agencies, or
(ii) Requesting advances or reimbursements when letters of credit
are not used.
(2) Grantees need not apply the forms prescribed in this section
in dealing with their subgrantees. However, grantees shall not
impose more burdensome requirements on subgrantees.
(3) Grantees shall follow all applicable standard and
supplemental Federal agency instructions approved by OMB to the
extend required under the Paperwork Reduction Act of 1980 for use in
connection with forms specified in paragraphs (b) through (e) of
this section. Federal agencies may issue substantive supplementary
instructions only with the approval of OMB. Federal agencies may
shade out or instruct the grantee to disregard any line item that
the Federal agency finds unnecessary for its decisionmaking
(4) Grantees will not be required to submit more than the
original and two copies of forms required under this part.
(5) Federal agencies may provide computer outputs to grantees to
expedite or contribute to the accuracy of reporting. Federal
agencies may accept the required information from grantees in
machine usable format or computer printouts instead of prescribed
(6) Federal agencies may waive any report required by this
section if not needed.
(7) Federal agencies may extend the due date of any financial
report upon receiving a justified request from a grantee
(b) Financial Status Report -- (1) Form. Grantees
will use Standard Form 269 or 269A, Financial Status Report, to
report the status of funds for all nonconstruction grants and for
construction grants when required in accordance with
(2) Accounting basis. Each grantee will report program
outlays and program income on a cash or accrual basis as prescribed
by the awarding agency. If the Federal agency requires accrual
information and the grantee's accounting records are not normally
kept on the accrual basis, the grantee shall not be required to
convert its accounting system but shall develop such accrual
information through and analysis of the documentation on hand.
(3) Frequency. The Federal agency may prescribe the
frequency of the report for each project or program. However, the
report will not be required more frequently than quarterly. If the
Federal agency does not specify the frequency of the report, it will
be submitted annually. A final report will be required upon
expiration or termination of grant support.
(4) Due date. When reports are required on a quarterly or
semiannual basis, they will be due 30 days after the reporting
period. When required on an annual basis, they will be due 90 days
after the grant year. Final reports will be due 90 days after the
expiration or termination of grant support.
(c) Federal Cash Transactions Report -- (1) Form.
(i) For grants paid by letter or credit, Treasury check advances
or electronic transfer of funds, the grantee will submit the
Standard Form 272, Federal Cash Transactions Report, and when
necessary, its continuation sheet, Standard Form 272a, unless the
terms of the award exempt the grantee from this requirement.
(ii) These reports will be used by the Federal agency to monitor
cash advanced to grantees and to obtain disbursement or outlay
information for each grant from grantees The format of the report
may be adapted as appropriate when reporting is to be accomplished
with the assistance of automatic data processing equipment provided
that the information to be submitted is not changed in
(2) Forecasts of Federal cash requirements. Forecasts of
Federal cash requirements may be required in the "Remarks" section
of the report.
(3) Cash in hands of subgrantees. When considered
necessary and feasible by the Federal agency, grantees may be
required to report the amount of cash advances in excess of three
days' needs in the hands of their subgrantees or contractors and to
provide short narrative explanations of actions taken by the grantee
to reduce the excess balances.
(4) Frequency and due date. Grantees must submit the
report no later than 15 working days following the end of each
quarter. However, where an advance either by letter of credit or
electronic transfer of funds is authorized at an annualized rate of
one million dollars or more, the Federal agency may require the
report to be submitted within 15 working days following the end of
(d) Request for advance or reimbursement -- (1) Advance
payments. Requests for Treasury check advance payments will be
submitted on Standard Form 270, Request for Advance or
Reimbursement. (This form will not be used for drawdowns under a
letter of credit, electronic funds transfer or when Treasury check
advance payments are made to the grantee automatically on a
(2) Reimbursements. Requests for reimbursement under
nonconstruction grants will also be submitted on Standard Form 270.
(For reimbursement requests under construction grants, see paragraph
(e)(1) of this section.)
(3) The frequency for submitting payment requests is treated in
(e) Outlay report and request for reimbursement for
construction programs -- (1) Grants that support construction
activities paid by reimbursement method. (i) Requests for
reimbursement under construction grants will be submitted on
Standard Form 271, Outlay Report and Request for Reimbursement for
Construction Programs. Federal agencies may, however, prescribe the
Request for Advance or Reimbursement form, specified in §1207.41(d),
instead of this form.
(ii) The frequency for submitting reimbursement requests is
treated in §1207.41(b)(3).
(2) Grants that support construction activities paid by letter
of credit, electronic funds transfer or Treasury check advance.
(i) When a construction grant is paid by letter of credit,
electronic funds transfer or Treasury check advances, the grantee
will report its outlays to the Federal agency using Standard Form
271, Outlay Report and Request for Reimbursement for Construction
Programs. The Federal agency will provide any necessary special
instruction. However, frequency and due date shall be governed by
§1207.41(b)(3) and (4).
(ii) When a construction grant is paid by Treasury check advances
based on periodic requests from the grantee, the advances will be
requested on the form specified in §1207.41(d).
(iii) The Federal agency may substitute the Financial Status
Report specified in §1207.41(b) for the Outlay Report and Request
for Reimbursement for Construction Programs.
(3) Accounting basis. The accounting basis for the Outlay
Report and Request for Reimbursement for Construction Programs shall
be governed by §1207.41(b)(2).
§1207.42 Retention and access requirements for
(1) This section applies to all financial and programmatic
records, supporting documents, statistical records, and other
records of grantees or subgrantees which are:
(i) Required to be maintained by the terms of this part, program
regulations or the grant agreement, or
(ii) Otherwise reasonably considered as pertinent to program
regulations or the grant agreement.
(2) This section does not apply to records maintained by
contractors or subcontractors. For a requirement to place a
provision concerning records in certain kinds of contracts, see
(b) Length of retention period.
(1) Except as otherwise provided, records must be retained for
three years from the starting date specified in paragraph (c) of
(2) If any litigation, claim, negotiation, audit or other action
involving the records has been started before the expiration of the
3-year period, the records must be retained until completion of the
action and resolution of all issues which arise from it, or until
the end of the regular 3-year period, whichever is later.
(3) To avoid duplicate recordkeeping, awarding agencies may make
special arrangements with grantees and subgrantees to retain any
records which are continuously needed for joint use. The awarding
agency will request transfer of records to its custody when it
determines that the records possess long-term retention value. When
the records are transferred to or maintained by the Federal agency,
the 3-year retention requirement is not applicable to the grantee or
(c) Starting date of retention period -- (1)
General. When grant support is continued or renewed at annual or
other intervals, the retention period for the records of each
funding period starts on the day the grantee or subgrantee submits
to the awarding agency its single or last expenditure report for
that period. However, if grant support is continued or renewed
quarterly, the retention period for each year's records starts on
the day the grantee submits its expenditure report for the last
quarter of the Federal fiscal year. In all other cases, the
retention period starts on the day the grantee submits its final
expenditure report. If an expenditure report has been waived, the
retention period starts on the day the report would have been
(2) Real property and equipment records. The retention
period for real property and equipment records starts from the date
of the disposition or replacement or transfer at the direction of
the awarding agency.
(3) Records for income transactions after grant or subgrant
support. In some cases grantees must report income after the
period of grant support. Where there is such a requirement, the
retention period for the records pertaining to the earning of the
income starts from the end of the grantee's fiscal year in which the
income is earned.
(4) Indirect cost rate proposals, cost allocations plans,
etc. This paragraph applies to the following types of documents,
and their supporting records: indirect cost rate computations or
proposals, cost allocation plans, and any similar accounting
computations of the rate at which a particular group of costs is
chargeable (such as computer usage chargeback rates or composite
fringe benefit rates).
(i) If submitted for negotiation. If the proposal, plan,
or other computation is required to be submitted to the Federal
Government (or to the grantee) to form the basis for negotiation of
the rate, then the 3-year retention period for its supporting
records starts from the date of such submission.
(ii) If not submitted for negotiation. If the proposal,
plan, or other computation is not required to be submitted to the
Federal Government (or to the grantee) for negotiation purposes,
then the 3-year retention period for the proposal plan, or
computation and its supporting records starts from end of the fiscal
year (or other accounting period) covered by the proposal, plan, or
(d) Substitution of microfilm. Copies made by
microfilming, photocopying, or similar methods may be substituted
for the original records.
(e) Access to records -- (1) Records of grantees and
subgrantees. The awarding agency and the Comptroller General of
the United States, or any of their authorized representatives, shall
have the right of access to any pertinent books, documents, papers,
or other records of grantees and subgrantees which are pertinent to
the grant, in order to make audits, examinations, excerpts, and
(2) Expiration of right of access. The rights of access in
this section must not be limited to the required retention period
but shall last as long as the records are retained.
(f) Restrictions on public access. The Federal Freedom of
Information Act (5 U.S.C. 552) does not apply to records Unless
required by Federal, State, or local law, grantees and subgrantees
are not required to permit public access to their records.
(a) Remedies for noncompliance. If a grantee or subgrantee
materially fails to comply with any term of an award, whether stated
in a Federal statute or regulation, an assurance, in a State plan or
application, a notice of award, or elsewhere, the awarding agency
may take one or more of the following actions, as appropriate in the
(1) Temporarily withhold cash payments pending correction of the
deficiency by the grantee or subgrantee or more severe enforcement
action by the awarding agency,
(2) Disallow (that is, deny both use of funds and matching credit
for) all or part of the cost of the activity or action not in
(3) Wholly or partly suspend or terminate the current award for
the grantee's or subgrantee's program,
(4) Withhold further awards for the program, or
(5) Take other remedies that may be legally available.
(b) Hearings, appeals. In taking an enforcement action,
the awarding agency will provide the grantee or subgrantee an
opportunity for such hearing, appeal, or other administrative
proceeding to which the grantee or subgrantee is entitled under any
statute or regulation applicable to the action involved.
(c) Effects of suspension and termination. Costs of
grantee or subgrantee resulting from obligations incurred by the
grantee or subgrantee during a suspension or after termination of an
award are not allowable unless the awarding agency expressly
authorizes them in the notice of suspension or termination or
subsequently. Other grantee or subgrantee costs during suspension or
after termination which are necessary and not reasonably avoidable
are allowable if:
(1) The costs result from obligations which were properly
incurred by the grantee or subgrantee before the effective date of
suspension or termination, are not in anticipation of it, and, in
the case of a termination, are noncancellable, and,
(2) The costs would be allowable if the award were not suspended
or expired normally at the end of the funding period in which the
termination takes effect.
(d) Relationship to debarment and suspension. The
enforcement remedies identified in this section, including
suspension and termination, do not preclude grantee or subgrantee
from being subject to "Debarment and Suspension" under E.O. 12549
§1207.44 Termination for convenience.
Except as provided in §1207.43 awards may be terminated in whole
or in part only as follows:
(a) By the awarding agency with the consent of the grantee or
subgrantee in which case the two parties shall agree upon the
termination conditions, including the effective date and in the case
of partial termination, the portion to be terminated, or
(b) By the grantee or subgrantee upon written notification to the
awarding agency, setting forth the reasons for such termination, the
effective date, and in the case of partial termination, the portion
to be terminated. However, if, in the case of a partial termination,
the awarding agency determines that the remaining portion of the
award will not accomplish the purposes for which the award was made,
the awarding agency may terminate the award in its entirety under
either §1207.43 or paragraph (a) of this section.
Subpart D -- After-The-Grant Requirements
(a) General. The Federal agency will close out the award
when it determines that all applicable administrative actions and
all required work of the grant has been completed.
(b) Reports. Within 90 days after the expiration or
termination of the grant, the grantee must submit all financial,
performance, and other reports required as a condition of the grant.
Upon request by the grantee, Federal agencies may extend this
timeframe. These may include but are not limited to:
(1) Final performance or progress report.
(2) Financial Status Report (SF 269) or Outlay Report and Request
for Reimbursement for Construction Programs (SF - 271) (as
(3) Final request for payment (SF - 270) (if applicable).
(4) Invention disclosure (if applicable).
(5) Federally-owned property report: In accordance with
§1207.32(f), a grantee must submit an inventory of all federally
owned property (as distinct from property acquired with grant funds)
for which it is accountable and request disposition instructions
from the Federal agency of property no longer needed.
(c) Cost adjustment. The Federal agency will, within 90
days after receipt of reports in paragraph (b) of this section, make
upward or downward adjustments to the allowable costs.
(d) Cash adjustments. (1) The Federal agency will make
prompt payment to the grantee for allowable reimbursable costs.
(2) The grantee must immediately refund to the Federal agency any
balance of unobligated (unencumbered) cash advanced that is not
authorized to be retained for use on other grants.
§1207.51 Later disallowances and adjustments.
The closeout of a grant does not affect:
(a) The Federal agency's right to disallow costs and recover
funds on the basis of a later audit or other review;
(b) The grantee's obligation to return any funds due as a result
of later refunds, corrections, or other transactions;
(c) Records retention as required in §1207.42;
(d) Property management requirements in §1207.31 and 1207.32;
(e) Audit requirements in §1207.26.
§1207.52 Collection of amounts due.
(a) Any funds paid to a grantee in excess of the amount to which
the grantee is finally determined to be entitled under the terms of
the award constitute a debt to the Federal Government. If not paid
within a reasonable period after demand, the Federal agency may
reduce the debt by:
(1) Making an administrative offset against other requests for
(2) Withholding advance payments otherwise due to the grantee,
(3) Other action permitted by law.
(b) Except where otherwise provided by statutes or regulations,
the Federal agency will charge interest on an overdue debt in
accordance with the Federal Claims Collection Standards (4 CFR
chapter II). The date from which interest is computed is not
extended by litigation or the filing of any form of appeal.
Subpart E -- Entitlement [Reserved]