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at the employee's regular rate of pay equipment and buildings. The depreciaexclusive of the employee's fringe ben tion or use allowances for this property efits and overhead costs. If the services are not treated as third party in-kind are in a different line of work, para contributions. Instead, they are treatgraph (c)(1) of this section applies.
ed as costs incurred by the grantee or (d) Valuation of third party donated subgrantee. They are computed and alsupplies and loaned equipment of space. located (usually as indirect costs) in (1) If a third party donates supplies, accordance with the cost principles the contribution will be valued at the specified in $ 602.22, in the same way as market value of the supplies at the depreciation or use allowances for purtime of donation.
chased equipment and buildings. The (2) If a third party donates the use of amount of depreciation or use allowequipment or space in a building but ances for donated equipment and buildretains title, the contribution will be ings is based on the property's market valued at the fair rental rate of the value at the time it was donated. equipment or space.
(1) Valuation of grantee or subgrantee (e) Valuation of third party donated donated real property for construction/acequipment, buildings, and land. If a third quisition. If a grantee or subgrantee doparty donates equipment, buildings, or nates real property for a construction land, and title passes to a grantee or or facilities acquisition project, the subgrantee, the treatment of the do- current market value of that property nated property will depend upon the may be counted as cost sharing or purpose of the grant or subgrant, as matching. If any part of the donated follows:
property was acquired with Federal (1) Awards for capital expenditures. If funds, only the non-federal share of the the purpose of the grant or subgrant is property may be counted as cost sharto assist the grantee or subgrantee in ing or matching. the acquisition of property, the market (8) Appraisal of real property. In some value of that property at the time of cases under paragraphs (d), (e) and (1) donation may be counted as cost shar of this section, it will be necessary to ing or matching,
establish the market value of land or a (2) Other awards. If assisting in the building or the fair rental rate of land acquisition of property is not the pur or of space in a building. In these cases, pose of the grant or subgrant, para- the Federal agency may require the graphs (e)(2) (i) and (ii) of this section market value or fair rental value be set apply:
by an independent appraiser, and that (i) If approval is obtained from the the value or rate be certified by the awarding agency, the market value at grantee. This requirement will also be the time of donation of the donated imposed by the grantee on subgrantees. equipment or buildings and the fair rental rate of the donated land may be SOUZ.70
8 602.25 Program income. counted as cost sharing or matching. (a) General. Grantees are encouraged In the case of a subgrant, the terms of to earn income to defray program the grant agreement may require that costs. Program income includes income the approval be obtained from the Fed from fees for services performed, from eral agency as well as the grantee. In the use or rental of real or personal all cases, the approval may be given property acquired with grant funds, only if a purchase of the equipment or from the sale of commodities or items rental of the land would be approved as fabricated under a grant agreement, an allowable direct cost. If any part of and from payments of principal and inthe donated property was acquired terest on loans made with grant funds. with Federal funds, only the non-fed Except as otherwise provided in regulaeral share of the property may be tions of the Federal agency, program counted as cost-sharing or matching. income does not include interest on
(ii) If approval is not obtained under grant funds, rebates, credits, discounts, paragraph (e)(2)(i) of this section, no refunds, etc. and interest earned on amount may be counted for donated any of them. land, and only depreciation or use al- (b) Definition of program income. Prolowances may be counted for donated gram income means gross income re
ceived by the grantee or subgrantee di- gram income which the grantee did not rectly generated by a grant supported anticipate at the time of the award activity, or earned only as a result of shall be used to reduce the Federal the grant agreement during the grant agency and grantee contributions rathperiod. “During the grant period" is er than to increase the funds committhe time between the effective date of ted to the project. the award and the ending date of the (2) Addition. When authorized, proaward reflected in the final financial gram income may be added to the report.
funds committed to the grant agree(c) Cost of generating program income. ment by the Federal agency and the If authorized by Federal regulations or grantee. The program income shall be the grant agreement, costs incident to used for the purposes and under the the generation of program income may conditions of the grant agreement. be deducted from gross income to de (3) Cost sharing or matching. When autermine program income.
thorized, program income may be used (d) Governmental revenues. Taxes, spe to meet the cost sharing or matching cial assessments, levies, fines, and requirement of the grant agreement. other such revenues raised by a grantee The amount of the Federal grant award or subgrantee are not program income remains the same. unless the revenues are specifically (h) Income after the award period. identified in the grant agreement or There are no Federal requirements goyFederal agency regulations as program erning the disposition of program inincome.
come earned after the end of the award (e) Royalties. Income from royalties period (i.e., until the ending date of the and license fees for copyrighted mate final financial report, see paragraph (a) rial, patents, and inventions developed of this section), unless the terms of the by a grantee or subgrantee is program agreement or the Federal agency reguincome only if the revenues are specifi- lations provide otherwise. cally identified in the grant agreement or Federal agency regulations as pro
8602.26 Non-Federal audit. gram income. (See 8 602.34.)
(a) Basic rule. Grantees and (1) Property. Proceeds from the sale of subgrantees are responsible for obtainreal property or equipment will be han- ing audits in accordance with the Sindled in accordance with the require gle Audit Act of 1984 (31 U.S.C. 7501ments of $$ 602.31 and 602.32.
7507) and Federal agency implementing (g) Use of program income. Program regulations. The audits shall be made income shall be deducted from outlays by an independent auditor in accordwhich may be both Federal and non- ance with generally accepted governFederal as described below, unless the ment auditing standards covering fiFederal agency regulations or the nancial and compliance audits. grant agreement specify another alter- (b) Subgrantees. State or local governnative (or a combination of the alter- ments, as those terms are defined for natives). In specifying alternatives, the purposes of the Single Audit Act, that Federal agency may distinguish be- receive Federal financial assistance tween income earned by the grantee and provide $25,000 or more of it in a and income earned by subgrantees and fiscal year to a subgrantee shall: between the sources, kinds, or amounts (1) Determine whether State or local of income. When Federal agencies au- subgrantees have met the audit rethorize the alternatives in paragraphs quirements of the Act and whether (8) (2) and (3) of this section, program subgrantees covered by OMB Circular income in excess of any limits stipu- A-110, “Uniform Requirements for lated shall also be deducted from out- Grants and Other Agreements with Inlays.
stitutions of Higher Education, Hos(1) Deduction. Ordinarily program in- pitals and Other Nonprofit Organizacome shall be deducted from total al tions” have met the audit requirement. lowable costs to determine the net al. Commercial contractors (private lowable costs. Program income shall be forprofit and private and governmental used for current costs unless the Fed- organizations) providing goods and eral agency authorizes otherwise. Pro- services to State and local governments are not required to have a single changes is anticipated under a nonaudit performed. State and local construction award: govenments should use their own pro- (1) Any revision which would result cedures to ensure that the contractor in the need for additional funding. has complied with laws and regulations (ii) Unless waived by the awarding affecting the expenditure of Federal agency, cumulative transfers among difunds;
rect cost categories, or, if applicable, (2) Determine whether the among separately budgeted programs, subgrantee spent Federal assistance projects, functions, or activities which funds provided in accordance with ap exceed or are expected to exceed ten plicable laws and regulations. This percent of the current total approved may be accomplished by reviewing an budget, whenever the awarding agenaudit of the subgrantee made in ac- cy's share exceeds $100,000. cordance with the Act, Circular A-110, (iii) Transfer of funds allotted for or through other means (e.g., program training allowances (i.e., from direct reviews) if the subgrantee has not had payments to trainees to other expense such an audit;
categories). (3) Ensure that appropriate correc (2) Construction projects. Grantees and tive action is taken within six months subgrantees shall obtain prior written after receipt of the audit report in in- approval for any budget revision which stance of noncompliance with Federal would result in the need for additional laws and regulations;
funds. (4) Consider whether subgrantee au (3) Combined construction and nondits necessitate adjustment of the construction projects. When a grant or grantee's own records; and
subgrant provides funding for both con(5) Require each subgrantee to permit struction and nonconstruction activiindependent auditors to have access to ties, the grantee or subgrantee must the records and financial statements.
obtain prior written approval from the (c) Auditor selection. In arranging for awarding agency before making any audit services, $ 602.36 shall be followed. fund or budget transfer from non
construction to construction or vice CHANGES, PROPERTY, AND SUBAWARDS versa.
(d) Programmatic changes. Grantees or 4602.30 Changes.
subgrantees must obtain the prior ap(a) General. Grantees and subgrantees proval of the awarding agency whenare permitted to rebudget within the ever any of the following actions is anapproved direct cost budget to meet ticipated: unanticipated requirements and may (1) Any revision of the scope or objecmake limited program changes to the tives of the project (regardless of approved project. However, unless whether there is an associated budget waived by the awarding agency, certain revision requiring prior approval). types of post-award changes in budgets (2) Need to extend the period of availand projects shall require the prior ability of funds. written approval of the awarding agen (3) Changes in key persons in cases cy.
where specified in an application or a (b) Relation to cost principles. The ap grant award. In research projects, a plicable cost principles (see 8602.22) change in the project director or princontain requirements for prior ap cipal investigator shall always require proval of certain types of costs. Except approval unless waived by the awardwhere waived, those requirements ing agency. apply to all grants and subgrants even (4) Under nonconstruction projects, if paragraphs (c) through (f) of this sec contracting out, subgranting (if aution do not.
thorized by law) or otherwise obtaining (c) Budget changes—(1) Nonconstruc the services of a third party to perform tion projects. Except as stated in other activities which are central to the purregulations or an award document, poses of the award. This approval regrantees or subgrantees shall obtain quirement is in addition to the apthe prior approval of the awarding proval requirements of 8 602.36 but does agency whenever any of the following not apply to the procurement of equip
ment, supplies, and general support cy will be computed by applying the services.
awarding agency's percentage of par(e) Additional prior approval require- ticipation in the cost of the original ments. The awarding agency may not purchase to the fair market value of require prior approval for any budget the property. However, in those situarevision which is not described in para- tions where a grantee or subgrantee is graph (c) of this section.
disposing of real property acquired (f) Requesting prior approval. (1) A re- with grant funds and acquiring replacequest for prior approval of any budget ment real property under the same prorevision will be in the same budget for- gram, the net proceeds from the dismal the grantee used in its application position may be used as an offset to the and shall be accompanied by a nar- cost of the replacement property. rative justification for the proposed re- (2) Sale of property. Sell the property vision.
and compensate the awarding agency (2) A request for a prior approval The amount due to the awarding agenunder the applicable Federal cost prin cy will be calculated by applying the ciples (see 8 602.22) may be made by let awarding agency's percentage of parter.
ticipation in the cost of the original (3) A request by a subgrantee for purchase to the proceeds of the sale prior approval will be addressed in after deduction of any actual and reawriting to the grantee. The grantee sonable selling and fixing-up expenses. will promptly review such request and If the grant is still active, the net proshall approve or disapprove the request ceeds from sale may be offset against in writing. A grantee will not approve the original cost of the property. When any budget or project revision which is a grantee or subgrantee is directed to inconsistent with the purpose or terms sell property, sales procedures shall be and conditions of the Federal grant to followed that provide for competition the grantee. If the revision, requested to the extent practicable and result in by the subgrantee would result in a the highest possible return. change to the grantee's approved (3) Transfer of title. Transfer title to project which requires Federal prior the awarding agency or to a thirdapproval, the grantee will obtain the party designated/approved by the Federal agency's approval before ap awarding agency. The grantee or proving the subgrantee's request.
subgrantee shall be paid an amount
calculated by applying the grantee or 8 602.31 Real property.
subgrantee's percentage of participa(a) Title. Subject to the obligations tion in the purchase of the real prop and conditions set forth in this section, erty to the current fair market value title to real property acquired under a of the property. grant or subgrant will vest upon acquisition in the grantee or subgrantee re
$ 602.32 Equipment. spectively.
(a) Title. Subject to the obligations (b) Use. Except as otherwise provided and conditions set forth in this section, by Federal statutes, real property will title to equipment acquired under a be used for the originally authorized grant or subgrant will vest upon acquipurposes as long as needed for that pur- sition in the grantee or subgrantee reposes, and the grantee or subgrantee spectively. shall not dispose of or encumber its (b) States. A State will use, manage, title or other interests.
and dispose of equipment acquired (c) Disposition. When real property is under a grant by the State in accordno longer needed for the originally au- ance with State laws and procedures. thorized purpose, the grantee or Other grantees and subgrantees will subgrantee will request disposition in follow paragraphs (c) through (e) of structions from the awarding agency. this section. The instructions will provide for one of (c) Use. (1) Equipment shall be used the following alternatives:
by the grantee or subgrantee in the (1) Retention of title. Retain title after program or project for which it was accompensating the awarding agency. quired as long as needed, whether or The amount paid to the awarding agen not the project or program continues
to be supported by Federal funds. When prevent loss, damage, or theft of the no longer needed for the original pro- property. Any loss, damage, or theft gram or project, the equipment may be shall be investigated. used in other activities currently or (4) Adequate maintenance procedures previously supported by a Federal must be developed to keep the property agency.
in good condition. (2) The grantee or subgrantee shall (5) If the grantee or subgrantee is aualso make equipment available for use thorized or required to sell the propon other projects or programs cur
erty, proper sales procedures must be rently or previously supported by the established to ensure the highest posFederal Government, providing such sible return. use will not interfere with the work on
(e) Disposition. When original or rethe projects or program for which it
placement equipment acquired under a was originally acquired. First pref
grant or subgrant is no longer needed erence for other use shall be given to
for the original project or program or other programs or projects supported
for other activities currently or preby the awarding agency. User fees
viously supported by a Federal agency, should be considered if appropriate.
disposition of the equipment will be (3) Notwithstanding the encourage
made as follows: ment in $602.25(a) to earn program in
(1) Items of equipment with a current come, the grantee or subgrantee must
per-unit fair market value of less than not use equipment acquired with grant
$5,000 may be retained, sold or otherfunds to provide services for a fee to
wise disposed of with no further obligacompete unfairly with private compa
tion to the awarding agency. nies that provide equivalent services,
(2) Items of equipment with a current unless specifically permitted or con
per unit fair market value in excess of templated by Federal statute.
$5,000 may be retained or sold and the (4) When acquiring replacement
awarding agency shall have a right to equipment, the grantee or subgrantee
an amount calculated by multiplying may use the equipment to be replaced
the current market value or proceeds as a trade-in or sell the property and
from sale by the awarding agency's use the proceeds to offset the cost of the replacement property, subject to
share of the equipment. the approval of the awarding agency.
(3) In cases where a grantee or (d) Management requirements. Proce
subgrantee fails to take appropriate dures for managing equipment (includ
disposition actions, the awarding agen
cy may direct the grantee or ing replacement equipment), whether acquired in whole or in part with grant
subgrantee to take excess and disposifunds, until disposition takes place
tion actions. will, as a minimum, meet the following
(1) Federal equipment. In the event a requirements:
grantee or subgrantee is provided fed(1) Property records must be main
erally-owned equipment: tained that include a description of the
(1) Title will remain vested in the property, a serial number or other
Federal Government. identification number, the source of
(2) Grantees or subgrantees will manproperty, who holds title, the acquisi- age the equipment in accordance with tion date, and cost of the property, per- Federal agency rules and procedures, centage of Federal participation in the and submit an annual inventory listcost of the property, the location, use ing. and condition of the property, and any
(3) When the equipment is no longer ultimate disposition data including the needed, the grantee or subgrantee will date of disposal and sale price of the request disposition instructions from property.
the Federal agency. (2) A physical inventory of the prop (8) Right to transfer title. The Federal erty must be taken and the results rec awarding agency may reserve the right onciled with the property records at to transfer title to the Federal Governleast once every two years.
ment or a third part named by the (3) A control system must be devel- awarding agency when such a third oped to ensure adequate safeguards to party is otherwise eligible under exist