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$ 600.33 for such participants. Exceptional circumstances have been declared for classified subject matter, high level radioactive waste, and uranium enrichment. In addition, if the cooperative agreement is affected by an international agreement or treaty, special provisions are to be included in the clause specified herein.

(2) Patent Rights (Long Form). As specified by 48 CFR 927.300(a), the clause set forth in 41 CFR 9-9.107-5(a) shall be included in all cooperative agreements awarded to participants other than small business firms or nonprofit organizations, where such cooperative agreements have as a purpose the conduct of experimental, developmental, demonstration, or research work. The applicant participant may request in advance of, or within thirty days after the award is signed, a waiver of all or any part of the rights of the United States with respect to subject inventions. DOE shall notify the applicant of this right by inserting the notice of 48 CFR 952.227–84 in all solicitations which may result in cooperative agreements calling for experimental, research, developmental, and demonstration work. For unsolicited applications, DOE shall provide this notice to the applicant prior to award. If a waiver is granted, the appropriate waiver clause shall be substituted for the Patent Rights (Long Form) clause. DOE also may authorize an advance waiver for a class of awards, when appropriate, and shall specify the applicable patent rights clause in every award covered by such a waiver. The clause set forth in 41 CFR 9-9.107-5(a) shall be modified in accordance with 41 CFR 9-9.107–5, as appropriate.

(3) Rights in Technical Data (Long Porm). The clause set forth in 48 CFR 952.227–75 shall be included in all cooperative agreements having as a purpose the conduct of experimental, developmental, demonstration, or research work. This clause shall be modified in accordance with 48 CFR 952.227-75 Alternate I and II, as appropriate.

(4) Additional technical data requirements. The clause set forth in 48 CFR 952.227-73 shall be included in all coop erative agreements having as a purpose the conduct of experimental, developmental, demonstration, or research

work unless all technical data requirements are known in advance of the agreement and are set forth in the cooperative agreement project description/statement of work.

(5) Patent indemnity. As specified in 48 CFR 927.300(a), the clause set forth in 41 CFR 9-9.103_3(b) shall be included in all cooperative agreements for experimental, developmental, demonstration, or research work, when DOE determines that the cooperative agreement will require standard supplies sold or offered for sale to the public on the commercial open market or will use the participant's practices or methods which normally are or have been used in providing goods and services on the commercial open market or will use any parts, components, practices, or methods to the extent to which the participant has secured indemnification from liability. The participant shall include this clause in contracts for the types of activities described in this paragraph.

(6) Classified inventions. As specified in 48 CFR 927.300(a), the clause set forth in 41 CFR 9_9.106 shall be included in every cooperative agreement which covers, or is likely to cover, classified subject matter.

(7) Authorization and consent. The clause set forth in $600.33(b)(5) shall be included in all cooperative agreements under which experimental, developmental, demonstration, or research work is to be performed within the United States, its possessions, or Puerto Rico.

(8) Notice and assistance. The clause set forth in $600.33(b)(6) shall be included in all cooperative agreements in excess of $10,000 for construction, experimental, developmental, demonstration, or research work which is to be performed within the United States, its possessions, or Puerto Rico.

(9) Reporting of royalties. In order that DOE may be informed regarding royalty payments to be made by a participant in connection with any cooperative agreement where the amount of the royalty payments is included in the proposed budget, the applicant shall provide:

(i) Information concerning the royalty payments expected to be made under the cooperative agreement, if awarded, together with the name of the licensors, and either the patent numbers involved or such other information as will permit identification of the patents and patent applications as well as the basis on which the royalties are to be paid; or

(ii) A certification that the proposed budget includes no amount representing any royalty that would be paid by the participant directly to others in connection with the performance of the award.

(iii) If the information or certification specified in paragraphs (b)(9)(i) and (b)(9)(ii) is not available at the time of award, DOE shall include the clause set forth in $600.33(c)(2) in any applicable cooperative agreement award.

(10) Subawards and contracts under cooperative agreements or subawards. The participant shall include the applicable clauses of this section in any subaward or contract awarded under a cooperative agreement and assure that the applicable clauses are also included by subrecipients in contracts.

(53 FR 5262, Feb. 22, 1988, as amended at 54 FR 23959, June 5, 1989; 59 FR 53266, Oct. 21, 1994]

the

responsibilities described in $600.308 of this subpart.

(b) Federal financial assistance means assistance provided by a Federal agency in the form of grants, contracts, cooperative agreements, loans, loan guarantees, property, interest subsidies, insurance, or direct appropriations, but does not include direct Federal cash assistance to individuals. It includes awards received directly from Federal agencies, or indirectly through other units of State and local governments.

(c) Federal agency has the same meaning as the term 'agency' in section 551(1) of title 5, United States Code.

(d) Generally accepted accounting principles has the meaning specified in the generally accepted government auditing standards.

(e) Generally accepted government auditing standards means the Standards For Audit of Government Organizations, Programs, Activities, and Functions, developed by the Comptroller General, dated February 27, 1981.

(f) Independent auditor means:

(1) A State or local government auditor who meets the independence standards specified in generally accepted government auditing standards; or

(2) A public accountant who meets such independence standards.

(g) Internal controls means the plan of organization and methods and procedures adopted by management to ensure that:

(1) Resource use in consistent with laws, regulations, and policies;

(2) Resources are safeguarded against waste, loss, and misuse; and

(3) Reliable data are obtained, maintained, and fairly disclosed in reports.

(h) Indian tribe means any Indian tribe, band, nations, or other organized group or community, including any Alaskan Native village or regional or village corporations (as defined in, or established under, the Alaskan Native Claims Settlement Act) that is recognized by the United States as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.

(i) Local government means any unit of local government within a State, including a county, a borough, municipality, city, town, township, parish, local public authority, special district,

Subpart E-Audits of State and

Local Governments

SOURCE: 50 FR 42357, Oct. 18, 1985, unless otherwise noted. Redesignated at 59 FR 53265, Oct. 21, 1994.

8600.400 Scope and applicability.

This subpart implements, for DOE and recipients, the Single Audit Act of 1984, Public Law 98-502 and OMB Circular A-128. It establishes audit requirements for State and local governments that receive financial assistance from the Department of Energy and defines responsibilities with respect to those requirements.

8 600.401 Definitions.

For the purposes of this subpart, the following definitions from the Single Audit Act apply:

(a) Cognizant agency means the Federal agency assigned by the Office of Management and Budget to carry out

school district, intrastate district, council of governments, and any other instrumentality of local government.

(j) Major Federal Assistance Program, for State and local governments having Federal assistance expenditures between $100,000 and $100,000,000, means any program for which Federal expenditures during the applicable year exceed the larger of $300,000, or 3 percent of such total expenditures. Where total expenditures of Federal assistance exceed $100,000,000, the following criteria apply: Total expenditures of Federal financial Major Federal asassistance for all programs

sistance program

means any pro more than

but less than gram that exceeds $100 million $1 billion

$3 million. $1 billion $2 billion

$4 million. $2 billion $3 billion

$7 million. $3 billion $4 billion

$10 million. $4 billion $5 billion

$13 million. $5 billion $6 billion

$16 million. $6 billion $7 billion

$19 million. Over $7 billion

$20 million.

audit made in accordance with this subpart.

(b) State or local governments that receive between $25,000 and $100,000 a year shall have an audit made in accordance with this subpart or in accordance with Federal laws and regulations governing the programs they participate in.

(c) State or local governments that receive less than $25,000 a year shall be exempt from compliance with the Act and other Federal audit requirements. These State and local governments shall be governed by audit requirements prescribed by State or local law or regulation.

(d) Nothing in this paragraph exempts State and local governments from maintaining records of Federal financial assistance or from providing access to such records to Federal agencies, as provided for in Federal law and in $$ 600.25, 600.153, 600.242, and 600.305. (50 FR 42357, Oct. 18, 1985, as amended at 59 FR 53266, Oct. 21, 1994)

[graphic]

(k) Public accountants means those individuals who meet the qualification standards included in generally accepted government auditing standards for personnel performing government audits.

(1) State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands, any instrumentality thereof, and any multi-State, regional, or interstate entity that has governmental functions and any Indian tribe.

(m) Subrecipient means any person or government department, agency, or establishment that receives Federal financial assistance to carry out a program through a State or local government, but does not include an individual that is a beneficiary of such a program. A subrecipient may also be a direct recipient of Federal financial assistance.

$ 600.403 Scope of audit.

The Single Audit Act provides that:

(a) The audit shall be made by an independent auditor in accordance with generally accepted government auditing standards covering financial and compliance audits.

(b) The audit shall cover the entire operations of a State or local government or, at the option of that government, it may cover departments, agencies or establishments that received, expended, or otherwise administered Federal financial assistance during the year. However, if a State or local government receives $25,000 or more in General Revenue Sharing Funds in a fiscal year, it shall have an audit of its entire operations. A series of audits of individual departments, agencies, and establishments for the same fiscal year may be considered a single audit.

(c) Public hospitals and public colleges and universities may be excluded from State and local audits and the requirements of this subpart. However, if such entities are excluded, audits of these entities shall be made in accordance with statutory requirements and the provisions of $$ 600.126, 600.226, and 600.305.

$ 600.402 Policy.

The Single Audit Act requires the following:

(a) State or local governments that receive $100,000 or more a year in Federal financial assistance shall have an

(d) The auditor shall determine whether:

(1) The financial statements of the government, department, agency or establishment present fairly its financial position and the results of its financial operations in accordance with generally accepted accounting principles;

(2) The organization has internal accounting and other control systems to provide reasonable assurance that it is managing Federal financial assistance programs in compliance with applicable laws and regulations; and

(3) The organization has complied with laws and regulations that may have material effect on its financial statements and on each major Federal assistance program. (50 FR 42357, Oct. 18, 1985, as amended at 59 FR 53266, Oct. 21, 1994)

8 600.404 Frequency of audit.

Audits shall be made annually unless the State or local government has, by January 1, 1987, a constitutional or statutory requirement for less frequent audits. For those governments, the cognizant agency shall permit biennial audits, covering both years, if the government so requests. It shall also honor requests for biennial audits by governments that have an administrative policy calling for audits less frequent than annual, but only for fiscal years beginning before January 1, 1987. 8 600.405 Internal control and compli.

ance reviews. The Single Audit Act requires that the independent auditor determine and report on whether the organization has internal control systems to provide reasonable assurance that it is managing Federal assistance programs in compliance with applicable laws and regulations.

(a) Internal control review. In order to provide this assurance the auditor must make a study and evaluation of internal control systems used in administering Federal assistance programs. The study and evaluation must be made whether or not the auditor intends to place reliance on such systems. As part of this review, the auditor shall:

(1) Test whether these internal control systems are functioning in accordance with prescribed procedures.

(2) Examine the recipient's system for monitoring subrecipients and obtaining and acting on subrecipient audit reports.

(b) Compliance review. The law also requires the auditor to determine whether the organization has complied with laws and regulations that may have a material effect on each major Federal assistance program.

(1) In order to determine which major programs are to be tested for compliance, State and local governments shall identify in their accounts all Federal funds received and expended and the programs under which they were received. This shall include funds received directly from Federal agencies and through other State and local governments.

(2) The review must include the selection and testing of a representative number of charges from each major Federal assistance program. The selection and testing of transactions shall be based on the auditor's professional judgment considering such factors as the amount of expenditures for the program and the individual awards; the newness of the program or changes in its conditions; prior experience with the program, particularly as revealed in audits and other evaluations (e.g., inspections, program reviews); the extent to which the program is carried out through subrecipients; the extent to which the program contracts for goods or services; the level to which the program is already subject to program reviews or other forms of independent oversight; the adequacy of the controls for ensuring compliance; the expectation of adherence or lack of adherence to the applicable laws and regulations; and the potential impact of adverse findings.

(i) In making the test of transactions, the auditor shall determine whether:

(A) The amounts reported as expenditures were for allowable services, and

(B) The records show that those who received services or benefits were eligible to receive them.

cordance with this subpart, $ 600.126(a), or through other means (e.g., program reviews) if the subrecipient has not yet had such an audit;

(c) Ensure that appropriate corrective action is taken within six months after receipt of the audit report in instances of noncompliance with Federal laws and regulations;

(d) Consider whether subrecipient audits necessitate adjustment of the recipients own records; and

(e) Require each subrecipient to permit independent auditors to have access to the records and financial statements as necessary to comply with this part. (50 FR 42357, Oct. 18, 1985, as amended at 59 FR 53266, Oct. 21, 1994)

(it) In addition to transaction testing, the auditor shall determine whether:

(A) Matching requirements, levels of effort and earmarking limitations were met,

(B) Federal financial reports and claims for advances and reimbursements contain information that is supported by the books and records from which the basic financial statements have been prepared, and

(C) Amounts claimed or used for matching were determined in accordance with OMB Circular A-87, “Cost principles for State and local governments, and $ 600.424 of subpart E, as implemented by this part.

(iii) The principal compliance requirements of the largest Federal aid programs may be ascertained by referring to the Compliance Supplement for Single Audits of State and Local Governments, issued by OMB and available from the Government Printing Office. For those programs not covered in the Compliance Supplement, the auditor may ascertain compliance requirements by researching the statutes, regulations, and agreements governing individual programs.

(3) Transactions related to other Federal assistance programs that are selected in connection with examinations of financial statements and evaluations of internal controls shall be tested for compliance with Federal laws and regulations that apply to such transactions. (50 FR 42357, Oct. 18, 1985, as amended at 54 FR 23960, June 5, 1989) $600.406 Subrecipients.

State or local governments that receive Federal financial assistance and provide $25,000 or more of it in a fiscal year to a subrecipient shall:

(a) Determine whether State or local subrecipients have met the audit requirements of this subpart and whether those subrecipients covered by the audit requirements of $600.126(a) have met those requirements;

(b) Determine whether the subrecipient(s) spent Federal assistance funds provided in accordance with applicable laws and regulations. This may be accomplished by reviewing an audit of the subrecipient made in ac

8600.407 Relation to other audit re

quirements. (a) The Single Audit Act provides that an audit made in accordance with this subpart shall be in lieu of any financial or financial compliance audit required under individual Federal assistance programs. To the extent that a single audit provides DOE with information and assurances necessary to carry out its overall responsibilities, DOE shall rely upon and use such information. However, DOE shall make or have made any additional audits which are necessary to carry out its responsibilities under Federal law and regulation. Any additional Federal audit effort shall be planned and carried out in such a way as to avoid duplication. The DOE Contracting Officer will be the DOE official responsible for determining the need for any additional Federal financial and compliance audit after review of the evaluation of the audit report by the cognizant Federal audit organization and review of the audit report.

(b) The provisions of this subpart do not limit the authority of Federal agencies to make, or contract for audits and evaluations of Federal financial assistance programs, nor do they limit the authority of any Federal agency Inspector General or other Federal audit official.

(c) The provisions of this subpart do not authorize any State or local government or subrecipient thereof to constrain Federal agencies, in any man

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