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of this section), unless the terms of the agreement or the Federal agency regulations provide otherwise.
[53 FR 8086 and 8087, Mar. 11, 1988, as amended at 53 FR 8087, Mar. 11, 1988]
§ 18.26 Non-Federal audits.
(a) Basic rule. Grantees and Subgrantees are responsible for obtaining audits in accordance with the Single Audit Act Amendments of 1996 (31 U.S.C. 7501–7507) and revised OMB Circular A–133, “Audits of States, Local Governments, and Non-Profit Organizations.” The audits shall be made by an independent auditor in accordance with generally accepted government auditing standards covering financial audits. (b) Subgrantees. State or local governments, as those terms are defined for purposes of the Single Audit Act Amendments of 1996, that provide Federal awards to a subgrantee, which expends $300,000 or more (or other amount as specified by OMB) in Federal awards in a fiscal year, 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 Administrative Requirements for Grants and Agreements with Institutions of Higher Education, HOSpitals, and Other Non-Profit Organizations,” have met the audit requirements of the Act. Commercial ContraCtors (private for-profit 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 audit; (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, § 18.36 shall be followed.
[53 FR 8086 and 8087, Mar. 11, 1988, as amended at 61 FR 21387, May 10, 1996; 62 FR 45939, 45947, Aug. 29, 1997]
CHANGES, PROPERTY, AND SUBAWARDS
§ 18.30 Changes.
(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 $18.22) 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 nonconstruction award: (i) Any revision which would result in the need for additional funding. (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 momconstruction 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 VerS3,. (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 $18.36 but does not apply to the procurement of equipment, Supplies, and general Support Services. (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 $18.22) 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.
§ 18.31 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 reSpectively. (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 the same program, the net proceeds from the disposition may be used as an offset to the cost of the replacement property. (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 thirdparty 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. (d) If the conditions in 23 U.S.C. 103(e) (5), (6), or (7), as appropriate, are met and approval is given by the Secretary, States shall not be required to repay the Highway Trust Fund for the cost of right-of-way and other items when certain segments of the Interstate System are withdrawn.
[53 FR 8086 and 8087, Mar. 11, 1988, as amended at 53 FR 8087, Mar. 11, 1988]
§ 18.32 Equipment.
(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 reSpectively.
(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 a CQuired 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 agency. (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 §18.25(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 statute. (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 agency. (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 requirement.S: (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 years. (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 agency. (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 $18.32(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 the property.
§ 18.33 Supplies.
(a) Title. Title to supplies acquired under a grant or subgrant will vest, upon acquisition, in the grantee or Subgrantee respectively.
(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.
§ 18.34 Copyrights.
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 Government, purposes:
(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.
§ 18.35 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.”
§ 18.36 Procurement.
(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 nonFederal 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 this Section. (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 and Services. (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 COSt.S. (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 analylsis 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 technical resources. (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