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 CH 2) AUTHORITY: Sec. 602, 78 Stat. 530, 42 U.S.C. 2942. SOURCE: 44 FR 56572, Oct. 1, 1979, unless otherwise noted. § 1068.43-1 Applicability. This subpart applies to all grantees financially assisted under Titles II, IV, and VII of the Economic Opportunity Act of 1964, as amended, if such assist ance is administered by the Community Services Administration. § 1068.43-2 Effective date. August 31, 1971 (CSA Instruction 6801-1, Change 2). § 1068.43-3 Purpose. CSA Instruction 6801-1, now Subpart 1068.42 of this chapter, provides that grantees must have one annual audit which must cover all CSAfunded programs. This subpart clarifies the period of time to be covered by the annual audit in those cases where grantees have received funds from more than one funding office within CSA and the authorized period for expending the funds is not consistent with the grantee's program year. § 1068.43-4 Definition. "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 program 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, DC 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 prin 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 cr 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 awards under which an organization is not required to account to the Government for actual costs incurred. b. All cost reimbursement subawards (subgrants, subcontracts, etc.) are subject to those Federal cost principles applicable to the particular organization concerned. Thus, if a subaward is to a nonprofit organization, this Circular shall apply; if a subaward is to a commercial organization, the cost principles applicable to commercial concerns shall apply; if a subaward is to a college or university, Circular A-21 shall apply; if a subaward is to a State, local, or federally recognized Indian tribal government, Circular 74-4 shall apply. 4. Definitions. a. "Nonprofit organization" means any corporation, trust, association, cooperative, or other organization which (1) is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest; (2) is not organized primarily for profit; and (3) uses its net proceeds to maintain, improve, and/or expand its operations. For this purpose, the term "nonprofit organization" excludes (i) colleges and universities; (ii) hospitals; (iii) State, local, and federally recognized Indian tribal governments; and (iv) those nonprofit organizations which are excluded from coverage of this Circular in accordance with paragraph 5 below. b. "Prior approval" means securing the awarding agency's permission in advance to incur cost for those items that are designated as requiring prior approval by the Circular. Generally this permission will be in writing. Where an item of cost requiring prior approval is specified in the budget of an award, approval of the budget constitutes approval of that cost. 5. Exclusion of some nonprofit organizations. Some nonprofit organizations, because of their size and nature of operations, can be considered to be similar to commercial concerns for purpose of applicability of cost principles. Such nonprofit organizations shall operate under Federal cost principles applicable to commercial concerns. A listing of these organizations is contained in Attachment C. Other organizations may be added from time to time. 6. Responsibilities. Agencies responsible for administering programs that involve awards to nonprofit organizations shall implement the provisions of this Circular. Upon request, implementing instruction shall be furnished to the Office of Management and Budget. Agencies shall designate a liaison official to serve as the agency representative on matters relating to the implementation of this Circular. The name and title of such representative shall be furnished to the Office of Management and Budget within 30 days of the date of this Circular. 7. Attachments. The principles and related policy guides are set forth in the following Attachments: Attachment A-General Principles Attachment B-Selected Items of Cost Attachment C-Nonprofit Organizations Not Subject to This Circular 8. Requests for exceptions. The Office of Management and Budget may grant exceptions to the requirements of this Circular when permissible under existing law. However, in the interest of achieving maximum uniformity, exceptions will be permitted only in highly unusual circumstances. 9. Effective Date. The provisions of this Circular are effective immediately. Implementation shall be phased in by incorporating the provisions into new awards made after the start of the organization's next fiscal year. For existing awards the new principles may be applied if an organization and the cognizant Federal agency agree. Earlier implementation, or a delay in implementation of individual provisions is also permitted by mutual agreement between an organization and the cognizant Federal agency. [CSA funded organizations please note implementation dates in § 1068.50-3). 10. Inquiries. Further information concerning this Circular may be obtained by contacting the Financial Management Branch, Budget Review Division, Office of Management and Budget, Washington, DC 20503, telephone (202) 395-4773. James T. McIntyre, Jr., [Circular No. A-122] ATTACHMENT A GENERAL PRINCIPLES Table of Contents A. Basic Considerations 1. Composition of total costs 2. Factors affecting allowability of costs 3. Reasonable costs 4. Allocable costs 5. Applicable credits 6. Advance understandings B. Direct Costs C. Indirect Costs D. Allocation of Indirect Costs and Determination of Indirect Cost Rates 1. General 2. Simplified allocation method 3. Multiple allocation base method 4. Direct allocation method 5. Special indirect cost rates E. Negotiation and Approval of Indirect Cost Rates 1. Definitions 2. Negotiations and approval of rates [Circular No. A-122] ATTACHMENT A [RESERVED] ATTACHMENT B SELECTED ITEMS OF COST Table of Contents 1. Advertising costs 2. Bad debts 10. Donations 11. Employee morale, health and welfare costs and credits 12. Entertainment costs 13. Equipment and other capital expenditures 14. Fines and penalties 15. Fringe benefits 16. Idle facilities and idle capacity 17. Independent research and development (reserved) 18. Insurance and indemnification 19. Interest, fund raising, and investment management cost 20. Labor relations costs 21. Losses on other awards 22. Maintenance and repair costs 23. Materials and supplies 24. Meetings, conferences 25. Memberships, subscriptions, and professional activity costs 26. Organization costs 27. Overtime, extra-pay shift, and multishift premiums 28. Page charges in professional journals 31. Pension plans 32. Plant security costs 33. Preaward costs 34. Professional service costs 35. Profits and losses on disposition of depreciable property or other capital assets 36. Public information service costs 37. Publication and printing costs 38. Rearrangement and alteration costs 39. Reconversion costs 40. Recruiting costs 41. Relocation costs 42. Rental costs 43. Royalties and other costs for use of patents and copyrights 44. Severance pay 45. Specialized service facilities 46. Taxes is unallowable; rather determination as to allowability in each case should be based on the treatment or principles provided for similar or related items of cost. 1. Advertising costs. a. Advertising costs mean the costs of media services and associated costs. Media advertising includes magazines, newspapers, radio and television programs, direct mail, exhibits, and the like. b. The only advertising costs allowable are those which are solely for (i) the recruitment of personnel when considered in conjunction with all other recruitment costs, as set forth in paragraph 40; (ii) the procurement of goods and services; (iii) the disposal of surplus materials acquired in the performance of the award except when organizations are reimbursed for disposals at a predetermined amount in accordance with Attachment N of OMB Circular A-110; or (iv) specific requirements of the award. 2. Bad debts. Bad debts, including losses (whether actual or estimated) arising from uncollectible accounts and other claims, related collection costs, and related legal costs, are unallowable. 3. Bid and proposal costs. (reserved) 4. Bonding costs. a. Bonding costs arise when the Government requires assurance against financial loss to itself or others by reason of the act or default of the organization. They arise also in instances where the organization requires similar assurance. Included are such bonds as bid, performance, payment, advance payment, infringement, and fidelity bonds. b. Costs of bonding required pursuant to the terms of the award are allowable. c. Costs of bonding required by the organization in the general conduct of its operations are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances 5. Communication costs. Costs incurred for telephone services, local and long distance telephone calls, telegrams, radiograms, postage and the like, are allowable. 6. Compensation for personal services. a. Definition. Compensation for personal services includes all compensation paid currently or accrued by the organization for services of employees rendered during the period of the award (except as otherwise provided in paragraph g. below). It includes, but is not limited to, salaries, wages, director's and executive committee member's fees, incentive awards, fringe benefits, pension plan costs, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost of living differentials. b. Allowability. Except as otherwise specifically provided in this paragraph the |