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and the time allowed for completing the corrective actions and
(4) The method of requesting reconsideration of the conditions/restrictions imposed. (53 FR 8045, 8087, Mar. 11, 1988, as amended at 59 FR 53265, Oct. 21, 1994)
Financial Administration $ 600.220 Standards for financial man
agement systems. (a) A State must expend 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 statutes.
(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 income.
(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 letterof-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 grantees.
(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. (53 FR 8045, 8087, Mar. 11, 1988, as amended at 57 FR 5, Jan. 2, 1992)
$ 600.221 Payment.
(aScope. This section prescribes the basic standard and the methods under
which a Federal agency will make pay- subgrantee's actual cash disbursements to grantees, and grantees will ments. make payments to subgrantees and (f) Effect of program income, refunds, contractors.
and audit recoveries on payment. (1) (b) Basic standard. Methods and pro Grantees and subgrantees shall discedures for payment shall minimize burse repayments to and interest the time elapsing between the transfer earned on a revolving fund before reof funds and disbursement by the
questing additional cash payments for grantee or subgrantee, in accordance the same activity. with Treasury regulations at 31 CFR
(2) Except as provided in paragraph part 205.
(f)(1) of this section, grantees and sub(c) Advances. Grantees and sub
grantees shall disburse program ingrantees shall be paid in advance, pro
come, rebates, refunds, contract settle
ments, audit recoveries and interest vided they maintain or demonstrate the willingness and ability to maintain
earned on such funds before requesting procedures to minimize the time elaps
additional cash payments.
(g) Withholding payments. (1) Unless ing between the transfer of the funds and their disbursement by the grantee
otherwise required by Federal statute,
awarding agencies shall not withhold or subgrantee. (d) Reimbursement. Reimbursement
payments for proper charges incurred
by grantees or subgrantees unlessshall be the preferred method when the
(i) The grantee or subgrantee has requirements in paragraph (c) of this
failed to comply with grant award consection are not met. Grantees and sub
ditions or grantees may also be paid by reim
(ii) The grantee or subgrantee is inbursement for any construction grant.
debted to the United States. Except as otherwise specified in regula
(2) Cash withheld for failure to comtion, Federal agencies shall not use the
ply with grant award condition, but percentage of completion method to
without suspension of the grant, shall pay construction grants. The grantee
be released to the grantee upon subseor subgrantee may use that method to
quent compliance. When a grant is suspay its construction contractor, and if
pended, payment adjustments will be it does, the awarding agency's pay
made in accordance with $ 600.243(c). ments to the grantee or subgrantee
(3) A Federal agency shall not make will be based on the grantee's or sub
payment to grantees for amounts that grantee's actual rate of disbursement.
are withheld by grantees or sub(e) Working capital advances. If a
grantees from payment to contractors grantee cannot meet the criteria for
to assure satisfactory completion of advance payments described in para work. Payments shall be made by the graph (c) of this section, and the Fed
Federal agency when the grantees or eral agency has determined that reim
subgrantees actually disburse the withbursement is not feasible because the held funds to the contractors or to esgrantee lacks sufficient working cap crow accounts established to assure ital, the awarding agency may provide satisfactory completion of work. cash or a working capital advance (h) Cash depositories. (1) Consistent basis. Under this procedure the award with the national goal of expanding the ing agency shall advance cash to the opportunities for minority business engrantee to cover its estimated dis terprises, grantees and subgrantees are bursement needs for an initial period encouraged to use minority banks (a generally geared to the grantee's dis bank which is owned at least 50 percent bursing cycle. Thereafter, the awarding by minority group members). A list of agency shall reimburse the grantee for minority owned banks can be obtained its actual cash disbursements. The from the Minority Business Developworking capital advance method of ment Agency, Department of Compayment shall not be used by grantees merce, Washington, DC 20230. or subgrantees if the reason for using (2) A grantee or subgrantee shall such method is the unwillingness or in- maintain a separate bank account only ability of the grantee to provide timely when required by Federal-State agreeadvances to the subgrantee to meet the ment.
$600.223 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 funding period.
(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.
$600.222 Allowable costs.
(a) Limitation on use of funds. Grant funds may be used only for:
(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 costtype 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.
State, local or Indian tribal OMB Circular A-87.
government Private nonprofit organization OMB Circular A-122.
other than an (1) institution of higher education, (2) hospital, or (3) organization named in OMB Circular A122 as not subject to that circular, Educational institutions. ....... OMB Circular A-21. For-profit organization other 48 CFR part 31. Contract
than a hospital and an or Cost Principles and Proceganization named in OBM dures, or uniform cost acCircular A-122 as not sub counting standards that ject to that circular.
comply with cost principles acceptable to the Federal
agency. For-profit organization other 48 CFR 931.2 than a hospital and an organization named in OMB Circular A-122 as not subject to that circular.. Hospitals
..... 45 CFR part 74, Appendix E
$ 600.224 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 applies.
(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
(53 FR 8087, Mar. 11, 1988 as amended at 53 FR 8047, Mar. 11, 1988)
count towards satisfying a cost sharing grantee, subgrantee, or contractor has or matching requirement of a grant established, along with its regular indiagreement if they have been or will be rect cost rate, a special rate for allocounted towards satisfying a cost shar cating to individual projects or proing or matching requirement of an grams the value of the contributions. other Federal grant agreement, a Fed (iii) A third party in-kind contribueral procurement contract, or any tion to a fixed-price contract may other award of Federal funds.
count towards satisfying a cost sharing (4) Costs financed by program income. or matching requirement only if it reCosts financed by program income, as sults in: defined in $ 600.425, shall not count to (A) An increase in the services or wards satisfying a cost sharing or property provided under the contract matching requirement unless they are (without additional cost to the grantee expressly permitted in the terms of the or subgrantee) or assistance agreement. (This use of gen (B) A cost savings to the grantee or eral program income is described in subgrantee. $ 600.225(g).)
(iv) The values placed on third party (5) Services or property financed by in- in-kind contributions for cost sharing come earned by contractors. Contractors or matching purposes will conform to under a grant may earn income from the rules in the succeeding sections of the activities carried out under the this subpart. If a third party in-kind contract in addition to the amounts contribution is a type not treated in earned from the party awarding the those sections, the value placed upon it contract. No costs of services or prop shall be fair and reasonable. erty supported by this income may (c) Valuation of donated services-(1) count toward satisfying a cost sharing Volunteer services. Unpaid services proor matching requirement unless other vided to a grantee or subgrantee by inprovisions of the grant agreement ex- dividuals will be valued at rates conpressly permit this kind of income to sistent with those ordinarily paid for be used to meet the requirement.
similar work in the grantee's or sub(6) Records. Costs and third party in grantee's organization. If the grantee kind contributions counting towards or subgrantee does not have employees satisfying a cost sharing or matching performing similar work, the rates will requirement must be verifiable from be consistent with those ordinarily the records of grantees and subgrantee paid by other employers for similar or cost-type contractors. These records work in the same labor market. In eimust show how the value placed on ther case, a reasonable amount for third party in-kind contributions was fringe benefits may be included in the derived. To the extent feasible, volun valuation. teer services will be supported by the (2) Employees of other organizations. same methods that the organization When an employer other than a grantuses to support the allocability of reg ee, subgrantee, or cost-type contractor ular personnel costs.
furnishes free of charge the services of (7) Special standards for third party in an employee in the employee's normal kind contributions. (i) Third party in- line of work, the services will be valued kind contributions count towards sat at the employee's regular rate of pay isfying a cost sharing or matching re- exclusive of the employee's fringe benquirement only where, if the party re efits and overhead costs. If the services ceiving the contributions were to pay are in a different line of work, parafor them, the payments would be allow- graph (c)(1) of this section applies. able costs.
(d) Valuation of third party donated (ii) Some third party in-kind con supplies and loaned equipment or space. tributions are goods and services that, (1) If a third party donates supplies, if the grantee, subgrantee, or con- the contribution will be valued at the tractor receiving the contribution had market value of the supplies at the to pay for them, the payments would time of donation. have been an indirect costs. Cost shar- (2) If a third party donates the use of ing or matching credit for such con equipment or space in a building but tributions shall be given only if the retains title, the contribution will be
ings 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 subgrantees. (53 FR 8045, 8087, Mar. 11, 1988, as amended at 57 FR 5, Jan. 2, 1992; 61 FR 7165, Feb. 26, 1996)
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 matching,
(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 al lowances 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 $600.222, 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 build.
$600.225 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 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 report.
(c) Cost of generating program income. If authorized by Federal regulations or