of the issue or issues which the grantee wishes to have considered in the appeal. The grantee may include with the appeal statements any supporting facts or arguments which the grantee feels should be considered. Appeals from determinations made by Headquarters officials should be addressed to the Deputy Director, Community Services Administration, Washington, D.C. 20506.

(1)

Appeals from determinations made concerning regionally funded grants will be addressed to the Regional Director or the Regional Director's designee. Copies of all responses previously submitted by the grantee to the responsible CSA official and other pertinent information must accompany the appeal.

(2) The official reviewing the appeal, or the official's designee, shall consider the appeal, together with any comments submitted by cognizant offices of CSA (a copy of which shall be simultaneously sent to the grantee). In his/her discretion, the reviewing official may offer the grantee an informal hearing at which relevant CSA officials may also be heard. The decision on the appeal shall be final.

(e) Satisfaction of final audit disallowances. Unless the grantee receives written notice from CSA granting an extension, all final disallowances shall be satisfied within ninety (90) days of the date on which the disallowance becomes final. Grantees shall satisfy final disallowance through cash payments to CSA unless they have received written notice allowing an alternative means of satisfaction. In some instances, grantees under Title II of the EOA may be permitted to satisfy disallowances through increases in the required non-Federal share in subsequent grants or contracts.

(1) Failure by the grantee to satisfy a final disallowance or take corrective action to remedy deficiencies in its accounting system and internal controls determined by CSA after audit may result in suspension, termination, or other remedial action. The United States reserves the right to bring suit or take other appropriate legal action to recover the amounts in question.

[44 FR 56568, Oct. 1, 1979, as amended at 47 FR 22535, May 25, 1982]

§ 1068.42-9 Federal, State and local audits.

(a) General. Audits and examinations of grantee's operations may be conducted by CSA auditors, auditors from the staffs of other Federal agencies, State and local auditors, and the U.S. General Accounting Office. Grantees and delegate agencies must cooperate fully with General Accounting Office (GAO) and CSA auditors when they conduct audits and examinations of grant programs.

(b) Audits and surveys by CSA. CSA audits and surveys are designed to provide CSA management with information as to the effectiveness of administrative procedures and controls and to assist the grantee in improving program operations. As such, CSA audits usually supplement, but do not substitute for or duplicate, the work of the grantee's independent auditor.

(c) Audits and surveys by other Federal agencies. Grantees that have grants from or contracts with other Federal agencies such as the Department of Defense or Department of Health, Education, and Welfare may be subject to surveys and audits by those agencies. In these instances, the CSA Audit Division, if informed in advance, will try to arrange with the cognizant audit agency to have them audit CSA programs concurrently with their audits of the grantees' other programs. Where such audits meet the requirement of this subpart and are performed in accordance with the Audit Guide, CSA will approve them as acceptable in lieu of an audit by the grantee's auditor.

(d) Audits and surveys by state and local auditors. Public grantees may be audited by State and local auditors. Audits performed by these auditors will be acceptable to CSA provided that the auditor has been approved by CSA pursuant to § 1068.42-6: Provided, That the auditor maintains the same standards, utilizes similar auditing procedures and qualified personnel, and renders a similar opinion and report as provided for in the Audit Guide. If for any reason the public agency is unable to apply auditing standards equal to those set out in the Audit Guide, an audit by an independ

ent certified public accountant or an independent licensed public accountant will be required.

§ 1068.42-10 Maintenance of records.

Grantees and delegate agencies must maintain appropriate records and accounts to assure a proper accounting for all project funds, both Federal and non-Federal. All financial records, including books of original entry, source documents supporting accounting transactions, the general ledger, subsidiary ledgers, personnel and payroll records, cancelled checks, and other related documents must be retained for the time period and in the manner prescribed by CSA's policy retention and custodial requirements records.

for

APPENDIX A ΤΟ SUBPART 1068.42GRANTEE FISCAL RESPONSIBILITY AND AUDITING

Section 243 of the Economic Opportunity Act (EOA) of 1964, as amended, states that:

Section 243. "(a) No funds shall be released to any agency receiving financial assistance under this title until it has submitted to the Director a statement certifying that the assisted agency and its delegate agencies (or subcontractors for performance of any major portion of the assisted program) have established an accounting system with internal controls adequate to safeguard their assets, check the accuracy and reliability of the accounting data, promote operating efficiency and encourage compliance with prescribed management policies and such additional fiscal responsibility and accounting requirements as the Director may establish. The statement may be furnished by a certified public accountant, a duly licensed public accountant or, in the case of a public agency, the appropriate public financial officer who accepts responsibility for providing required financial services to that agency."

Section 243 "(b) Within three months after the effective date of a grant to or contract of assistance with an organization or agency, the Director shall make or cause to be made a preliminary audit survey to review and evaluate the adequacy of the accounting system and internal controls established thereunder to meet the standards set forth in the statement referred to in subsection (a). Promptly after the completion of the survey, the Director shall determine on the basis of findings and conclusions result

ing from the survey whether the accounting system and internal controls meet those standards and, if not, whether to suspend the grant or contract. In the event of suspension, the assisted agency shall be given not more than six months within which to establish the necessary systems and controls, and, in the event of failure to do so within such time period, the assistance shall be terminated by the Director."

Section 243 "(c) At least once annually the Director shall make or cause to be made an audit of each grant or contract of assistance under this title. Promptly after the completion of such audit, the Director shall determine on the basis of resulting findings and conclusions whether any of the costs of expenditures incurred shall be disallowed. In the event of disallowance, the Director may seek recovery of the sums involved by appropriate means, including court action or a commensurate increase in the required non-Federal share of the cost of any grant or contract with the same agency or organization which is then in effect or which is entered into within twelve months after the date of disallowance."

Section 243 "(d) The Director shall establish such other requirements and take such actions as the Director may deem necessary and appropriate to carry out the provisions of this section and to insure fiscal responsibility and accountability, and the effective and efficient handling of funds in connection with programs assisted under this title. These requirements and actions shall include (1) necessary action to assure that the rate of expenditure of any agency receiving financial assistance does not exceed the rate contemplated under its approved program; and (2) appropriate requirements to promote the continuity and coordination of all projects or components of programs receiving financial assistance under this title, including provision for the periodic reprogramming and supplementation of assistance previously provided."

13-154 0-83--29

ices adequate to insure the establishment and maintenance of an accounting system for the (name of applicant), which is a public (or non-profit) agency charged with carrying out a CSA program in (name of community). The accounting system will have internal controls adequate to safeguard the assets of such agency(ies), check the accuracy and reliability of accounting data, promote operating efficiency, and encourage compliance with prescribed management policies of the agency(ies).

Signature of financial officer

Name of financial officer

Title

Name of public body

APPENDIX C ΤΟ SUBPART 1068.42GRANTEE FISCAL RESPONSIBILITY AND AUDITING

Statement to be submitted when applicant is a private-nonprofit agency (or a public agency) whose accounting system will not be maintained by a public agency.

Address of Regional or program office of the Community Services Administration, as appropriate)

Dear Sirs:

I am a certified or duly licensed public accountant and have been engaged to examine and report on the financial accounts of the (name of applicant), which is a private-nonprofit organization (or public agency) carrying out a CSA program in (name of community). I have reviewed the accounting system that this agency has established and, in my opinion, it includes internal controls adequate to safeguard the assets of the agency, check the accuracy and reliability of accounting data, promote operating efficiency, and encourage compliance with prescribed management policies of the agency.

Signature of accountant

Name of accountant

Name of firm

Subpart 1068.43-Grantee Fiscal Responsibility and Auditing (CSA Instruction 6801-1 Change 2)

AUTHORITY: Sec. 602, 78 Stat. 530, 42 U.S.C. 2942.

"A Program Year" means a grantee's 12-month accounting period. For community action agencies this is the funding period for the principal grant that provides funds for most of the grantee's administrative costs. For other agencies funded by CSA this is their usual 12-month accounting period which may or may not correspond with the funding period of their grant(s) from CSA. It should be noted that CSA no longer identifies grantee program years by an alphabetic designator, that is; Program Year A, Program Year B, but is instead awarding funds and identifies grantee expenditures by use of an individual grantee number.

§ 1068.43-5 Policy.

(a) The period of audit coverage will be the grantee's 12-month program year. In cases where CSA program offices award funds for periods that do not coincide with the grantee's program year, the audit will also cover the portion of these funds that were expended during the grantee's pro

gram year. Subsequent annual audits will cover the balance of these funds.

(b) An example of the funding actions to be included in the scope of a grantee's annual audit is:

(1) Grantee A had a program year that ended on December 31, 1972, and has funds from three CSA offices, as follows:

(i) Grant #50100, action 01, funded by the Regional Office for the program year January 1, 1972 to December 31, 1972.

(ii) Grant #50100, action 02, funded by the Regional Office for the period from March 1, 1972 to June 30, 1972.

(iii) Grant #50100, action 01, funded by the Office of Program Development for the grant period May 1, 1972 to October 31, 1973.

(2) Grant #50100 funded by the Regional Office for the grantee's program year is the principal grant under which the grantee operates. The program year of this grant determines the period of audit coverage for the annual audit. The grantee contracts with its Certified Public Accountants (CPA's) to perform an annual audit and provide one report covering the following funding actions:

(i) Grant #50100, action 01 (Regional) would be reported for the program year January 1, 1972 to December 31, 1972.

(ii) Grant #50100, action 01 (Regional) would cover transactions during the period March 1, 1972 to December 12, 1972.

(iii) Grant #50100, action 01 (Headquarters) would cover transactions during May 1, 1972 to December 31, 1972.

(3) The following year's annual audit would provide coverage as follows:

(i) Grant #50100, action 01 (Regional) would be reported for the program year January 1, 1973 to December 31, 1973.

(ii) Grant #50100, action 02 (Regional) would cover transactions during the period January 1, 1973 to June 30, 1973. If this program were refunded, the report would also cover transactions during the period July 1, 1973 to December 31, 1973.

(iii) Grant #50100, action 01 (Headquarters) would cover transactions during the period January 1, 1973 to

October 31, 1973. If this program is extended or refunded, the period of audit coverage would cover the period through December 31, 1973.

(c) CSA programs that were not included in the scope of the grantee's last audit of its principal grant before January 1, 1972 because of different funding periods should be audited at the end of the funding period even though this occurs after January 1, 1972 but on a one time basis only. Thereafter, these programs should be included in the first complete audit after January 1, 1972, based on the grantee's program year.

§ 1068.43-6 Grantees with predetermined fiscal year.

(a) Exceptions to the above criteria for determining the period of coverage of the annual audit will be made for those grantees who, prior to receiving funds from CSA, had a fiscal year or 12-month operating period which does not correspond to the program year or funding period under which CSA grants have been awarded and which elect to use such predetermined fiscal year for this purpose.

(b) Since it is CSA's intention to reduce problems associated with the scheduling of annual audits covering programs with varying refunding or termination dates, grantees who wish to exercise this exception should write or contact the CSA Regional Auditor servicing the geographic area in which they are located.

(c) The Regional Auditor will coordinate the grantee's request to change the annual audit report to the organization's fiscal year with the CSA program offices funding the grantee.

(d) Grantees may change the period of audit coverage only after they have received the written approval of the CSA Regional Auditor. The Regional Auditor will also indicate to the grantee what audit coverage is to be provided during the conversion process.

§ 1068.43-7 Changes to CSA guidance.

Amendments to CSA Manual 2410-1 (the Audit Guide) will be forthcoming to reflect the changes to financial statements to be included in annual

audit reports as a result of this subpart.

Subpart 1068.50-Cost Principles

AUTHORITY: Sec. 602, 78 Stat. 530, (42 U.S.C. 2942).

SOURCE: 45 FR 64940, Oct. 1, 1980, unless otherwise noted.

§ 1068.50-1 Applicability.

The provisions of OMB Circular A21, Cost Principles for Educational Institutions, OMB Circular A-122, Cost Principles for Nonprofit Organizations and Circular 74-4, Cost Principles applicable to Grants and Contracts with State and Local Governments, are applicable to all grants and agreements made under the Economic Opportunity Act of 1964, as amended, when the assistance is administered by the Community Services Administration. All subawards (delegate agency agreements, subcontracts, etc.) are subject to those cost principles applicable to the particular organization concerned, e.g. if a nonprofit grantee enters into a delegate agency agreement with a nonprofit organization Circular A-122 shall apply; however, if that same grantee contracts with a college or university, Circular A-21 shall apply.

§ 1068.50-2 Purpose.

The purpose of this subpart is to implement the cost principles pursuant to OMB Circulars A-122, A-21, and 744 by advising organizations, agencies, units of government and educational institutions funded by CSA of their applicability and to incorporate Circular A-122 into CSA's body of published regulations in order to assure that it is readily accessible to nonprofit organizations. Circulars A-21 and 74-4 may be obtained by writing to the Office of Administration, Publications Unit, Room G-236, New Executive Office Building, Washington, D.C. 20503.

§ 1068.50-3 Implementation date.

The provisions of these Circulars are effective as of October 31, 1980. However, if an organization has an existing award as of October 31, 1980 and does not wish to be governed by these cost principles while under this award, that

organization will so inform the CSA Regional or Headquarters office responsible for administering the grant. In such a situation the organization will continue to be bound for the remainder of the funding period by those regulations superseded by the cost principles. However, the cost principles will apply at the start of the next award made to that organization. § 1068.50-4 Supersession.

The cost principles published in OMB Circulars A-21, A-122, and 74-4 supersede cost principles previously issued by CSA except those cost principles which have been legislatively mandated.

APPENDIX TO SUBPART 1068.50-OMB CIRCULAR A-122, COST PRINCIPLES FOR NONPROFIT ORGANIZATIONS

[CIRCULAR No. A-122]

June 27, 1980.

To The Heads of Executive Departments and Establishments

Subject: Cost principles for nonprofit organizations.

1. Purpose. This Circular establishes principles for determining costs of grants, contracts and other agreements with nonprofit organizations. It does not apply to colleges and universities which are covered by Circular A-21; State, local, and federally recognized Indian tribal governments which are covered by Circular 74-4; or hospitals. The principles are designed to provide that the Federal Government bear its fair share of costs except where restricted or prohibited by law. The principles do not attempt to prescribe the extent of cost sharing or matching on grants, contracts, or other agreements. However, such cost sharing or matching shall not be accomplished through arbitrary limitations on individual cost elements by Federal agencies. Provision for profit or other increment above cost is outside the scope of this Circular.

2. Supersession. This Circular supersedes cost principles issued by individual agencies for nonprofit organization.

3. Applicability. a. These principles shall be used by all Federal agencies in determining the costs of work performed by nonprofit organizations under grants, cooperative agreements, cost reimbursement contracts, and other contracts in which costs are used in pricing, administration, or settlement. All of these instruments are hereafter referred to as awards. The principles do not apply to