(2) For the purpose of this paragraph, an activity will be treated as having been initiated at the time at which non-Federal resources were first committed in furtherance of that activity. The signing of a lease for a facility to be used in an activity, the beginning of renovation work on a facility already owned, and the hiring of personnel are examples of commitments that would indicate initiation of an activity within the meaning of the paragraph.

(3) The date of application to the Office of Economic Opportunity will be the date on which a bona fide application for support of the activity is received in the appropriate OEO regional office.

(c) Activities undertaken with temporary financial support. (1) When assistance is sought for the continuance or expansion of an activity for which temporary non-Federal support has been received, the prior level of non-Federal support for the activity will not be required to be continued as a condition of Federal assistance. Nevertheless, if only a portion of the previous non-Federal support was temporary, the level of other non-Federal support for the activity will be required to be continued.

(2) Support will be considered to have been temporary only if the person or organization providing the support intended, at the time of the initial decision to provide support, that the support would be terminated (or reduced) after a limited, defined period of time, and not continued or renewed indefinitely. Support will not be considered temporary merely because it has been provided through annual, biennial, or other periodic appropriations, budgets, or grants, or because the project supported has been denominated a pilot or demonstration project. Examples of temporary support are a grant given with the fixed intention that the grantor's support terminate at the end of 3 years, a commitment of support made with the fixed intention that it last only until a Federal grant is received, and a grant of $50,000 to be available until spent, made on the understanding that there would be no renewal. Support will not be considered to have been temporary in any case in which a source of support for a limited, defined period of time has replaced a source of support which was not temporary.

(3) To qualify for relief under this paragraph, an applicant must demonstrate that the requisite intention existed

at the time of the initial decision to provide financial support for the activity. Where possible, contemporaneous written evidence of that intention should be submitted. Such evidence may include correspondence, minutes of meetings of the directors of the organizations providing financial support, written recommendations made to the directors, and any other relevant material. Where documentary evidence of this type is not available, the applicant should submit signed statements evidencing the existence of the intention, such as reports of verbal understandings, agreements, or commitments reached at the time of the decision to provide financial support. A statement will not be considered sufficient if it does no more than assert the existence of an intention or understanding that support for a particular activity would be temporary. Statements must relate the facts from which the existence of such an intention or understanding can be inferred.

(d) Impairment of a community's ability to support an activity. (1) When assistance is sought for the continuation of an activity which has been conducted with non-Federal support in a community whose per capita income is less than $750 per annum, and such non-Federal support is to be reduced or terminated as a reasonable consequence of an impairment of the community's ability to provide such support, the prior level of non-Federal support will not be required to be continued as a condition of Federal assistance. Continuation of non-Federal support will be required to the extent that such support is not affected by the impairment of the community's ability.

(2) The per capita income of a community will be determined from such evidence as may be available. Data on per capita incomes for 1959, as indicated by the 1960 census for counties and for many other areas, may be obtained from the Office of Economic Opportunity. In the absence of other evidence, this census data will be accepted as establishing the present level of per capita income for the areas for which it is available.

(3) A community's ability to provide support will be considered to be impaired in any case in which the provision of support has become substantially more difficult, in the recent past, as a result of a decline in population, a decline in per capita income, an increase in other community needs, or other causes. However, a community's ability to provide

support will not be considered to be impaired by a decision of any person or group, public or private, to discontinue or reduce financial assistance to the community or to any activity conducted in the community. The requirement that the prior level of non-Federal support be continued will thus not be waived simply because a source of support is withdrawn.

(4) A decision to discontinue or reduce non-Federal support for an activity will be treated as a reasonable consequence of an impairment of ability to support only if the decision was a reasonable reaction to the impairment of ability, considered without regard to the availability of Economic Opportunity Act funds as an alternative source of support. It will not be assumed that programs for the benefit of the poor should be the first to be sacrificed when available resources are reduced.

(5) In the event of recovery of ability to provide non-Federal support to an activity, the Office of Economic Opportunity may require, as a condition to continued Federal assistance, that previous non-Federal support be resumed, in whole or in part.

the

titles I and III of the EOA, other Federal agencies, State or local governments, and private agencies, if the programs meet all the following criteria:

(1) The program is administered by a CAA, a delegate agency of the CAA, or by an agency in which the CAA has a role in determining policy and program direction.

(2) The CAA contributes developmental or administrative services to the program resulting in an expenditure of title II funds, or requiring the services of personnel employed under a title II program, or the use of facilities leased or obtained under a title II program.

(3) The program is designed to serve beneficiaries in the CAA's target population.

(4) The program is directed toward and consistent with the general objectives of mobilizing and coordinating community resources against the causes and effects of poverty; in other words, it can be considered an integral part of the community's antipoverty effort.

(c) Program accounts. The identifiable program units by which the CAA's and CAP describe and administer the total range of CAP programs. The system is explained and the program accounts defined in OEO Instruction 6100-1, “Program Account Structure," dated June 21, 1968.1

(d) Expenditures. Expenditures, for the purpose of preparing the Administrative Costs Report, are considered to be:

(1) All allowable disbursements (Federal and non-Federal, OEO and nonOEO) chargeable to any title II program and any program assisted with title II funds, plus

(2) The recorded dollar value of all unpaid invoices for material received and services rendered through the last date of the reporting period for these programs.

In addition, all volunteered services and in-kind materials used in the CAA's operations during the period covered by the report are considered to be expenditures in the month utilized. "Costs" and "expenditures" are considered to have the same definition for the purpose of preparing the Administrative Costs Report. (e) Trainee. Any CAA employee or beneficiary who participates in training courses conducted either by or under the

1 Not filed with the Office of the Federal Register.

auspices of a CAA. In the case of employees, it includes only those who fall within the poverty income classification or who come within the poverty income classification immediately prior to employment, and who are receiving training as part of a program to increase their employability.

(f) Administrative costs. Administrative costs include all allowable expenditures incurred to develop and administer title II programs and all programs assisted with title II funds, if the expenditures cannot be directly allocated to an operating program or are not otherwise expressly excluded by this subpart. In particular, administrative costs include all expenditures charged to program accounts 01, 02, 03, 04, and 87 and any expenditures of funds received from title I or non-OEO sources that are clearly identified as administrative costs. However, the following expenditures are excluded from administrative costs even though incurred in programs funded under Program Accounts 01, 02, 03, 04, and 87:

NOTE: For purposes of completing the summary CAP Form 15d, these expenditures are not excluded from administrative costs.

(1) The personnel costs that are allocable to specific operating programs or to OEO program accounts other than 01, 02, 03, 04, and 87.

(2) Payments to any trainees, including salaries, stipends, and employer's share of fringe benefits;

(3) Salary payments to employees who fall within the poverty income classification. Also exclude salary payments to employees who fell within the poverty income classification immediately prior to their employment by the CAA, but only until the end of the first program year in which the employees were hired. These payments include the employer's share of fringe benefits.

(g) Total costs. All expenditures incurred in developing, administering, and operating title II programs and programs assisted with title II funds, whether the costs are met with OEO or none-OEO funds. Total costs include administrative costs as defined in paragraph (f) of this section, as well as payments to trainees and to employees formerly within the OEO poverty guidelines.

(h) Administrative Costs Ratio. The percentage obtained by dividing the total costs into the administrative costs. It

should be noted that the definition of administrative cost and total costs requires that expenditures for all title П programs and for all programs assisted with title II funds (including those met with funds from agencies other than OEO) be included in each.

(1) Operating programs. Programs administered by a CAA that provide direct benefits to program participants or beneficiaries. For programs funded by OEO, it includes all programs under program accounts other than 01, 02, 03, 04, and 87. For programs funded from other sources, it includes all programs that are not primarily related to the development, planning, administration, or evaluation of the CAA.

§ 1068.3-3 Policy.

(a) Section 244 (7) of the Economic Opportunity Act states that no funds may be provided to any Community Action Agency if its cost to develop and administer programs funded under title II or assisted with title II funds exceeds 15 percent of the total costs of these programs. The Director may require CAAs, as a condition to providing funds under title II of the Act, to take specific actions to reduce their administrative costs and improve their operational effectiveness.

(b) The Director may grant a waiver of this requirement for periods of 6 months when the initial planning and developing of programs for a new or reorganized CAA has resulted in unusually high costs for these purposes during a program year or an on-going CAA has incurred unusually high planning cost in relation to the total cost of their programs in a program year and the benefits to be realized from such planning can be reasonably expected to extend over additional program years.

(c) CAAS must include all program costs, whether met with Federal or nonFederal funds (cash or in-kind contributions), in determining their administrative expenses except for the following:

(1) All costs incurred to conduct a specific operating program, such as Head Start or Legal Services, whether funded on a program account or component basis.

(2) Payments to trainees.

(3) Salary payments to employees whose incomes are within the OEO poverty guidelines. Also, salary payments to

employees whose incomes were within the OEO poverty guidelines immediately prior to being employed, but only until the end of the first program year in which the employees were hired.

§ 1068.3-4

Requirement for two reports

during each program year.

(a) CAA's must determine their administrative expenses, using the procedures and formats in this subpart, and submit Administrative Costs Reports to OEO twice during each program year, as follows:

(1) A report of the administrative costs incurred in the first 6 months of the program year will be submitted on CAP Form 15d, "Administrative Costs Report," when the Grantee Monthly Financial Report (CAP Form 15) for the basic CAA grant containing Program Account 01 is submitted for the sixth month of the program year.

NOTE: A CAA with a program year longer than 12 months should submit its initial CAP Form 15d 6 months prior to the end of its program year.

(2) A report of the administrative costs incurred during the entire program year will be submitted on CAP Form 15d when the final Grantee Monthly Financial Report for the basic CAA grant containing Program Account 01 is submitted for the program year. The final Grantee Monthly Financial Report shows all expenditures incurred for the program year and is due within 90 days after the end of the program year.

(b) In order to provide time for CAAS to analyze and, if necessary, allocate their administrative costs, no reports will be required until the CAP Form 15 reports are due for the month of September 1969. That is, a CAA whose sixth or 12th month of its program year ends on August 31, 1969, must submit a CAP Form 15d with its sixth-month CAP Form 15 report or with its final CAP Form 15 report for the program year, as applicable. Thereafter, the schedule described in paragraph (a) of this section will be followed.

(c) One copy of the Administrative Costs Report should be attached to each copy of the monthly financial report for the basic CAA grant containing Program Account 01 for the appropriate reporting period and submitted to the OEO ad

dress shown in paragraph H of Community Action Memo 44-A, "Grantee Monthly Financial Report," dated April 1, 1968.1

§ 1068.3-5 Reporting procedures.

(a) Forms. The following forms are to be used in reporting administrative costs:

(1) The Administrative Costs Report (CAP Form 15d) to be submitted to OEO with all six month and final Grantee Monthly Financial Reports. The data for this report may or may not be supported by CAP Form 15e, depending on the result of computations made in accordance with paragraph (b) of this section.

(2) Personnel Work Sheet (CAP Form 15e) provides a detailed format for allocating personnel costs to program accounts or equivalent nontitle II programs. It is prepared only if summary CAP Form 15d shows administrative costs to be in excess of 15 percent.

(b) Procedure. The reporting procedure is as follows:

(1) Prepare a summary CAP Form 15d. Include all nontitle II expenditures (non-OEO, titles I and III) and all title II expenditures during the reporting period and compute an Administrative Cost Ratio for the CAA as a whole.

(2) If the ratio is 15 percent or less, no further review of administrative costs is required, and the summary form should be submitted to OEO with the appropriate CAP Form 15 report.

(3) If the percentage computed in subparagraph (1) of this paragraph is over 15 percent, a further analysis of the administrative personnel costs must be made and reported. This analysis must also include a review of the CAA's programs to identify and exclude the nonadministrative costs described in § 1068.3-3(c) (2) and (3).

§ 1068.3-6 Source of data.

All expenditure data on the Administrative Cost Report must be taken from the grantee's books of account. Expenditures of OEO funded programs conducted by the CAA must agree in total with those for the same period reported on the CAP Forms 15 and 15a. Expenditures for other programs assisted with

1 Not filed with the Office of the Federal Register.

The Administrative Cost Report will be based on the expenditures incurred during the CAA's program year for its basic title II programs. Expenditures included in the report for other programs assisted with title II funds will be for the same period of time as the program year. This means that expenditures for these programs will be reported only for the appropriate months falling within the CAA's specific grant program year. § 1068.3-8 Maintenance of records.

(a) CAA's must retain a copy of each report required by this subpart as part of their permanent financial records. They must also retain completed copies of supporting work sheets (summary CAP Form 15d and CAP Form 15e) with each report, if these supporting forms are completed.

(b) If personnel costs are allocated among different programs in accordance with § 1068.3-5 (b) (3), a written explanation must be maintained to explain the basis for classifying and allocating these costs. The explanation should also include the basis for excluding payments to trainees and poverty level employees from administrative costs. In common with other financial records, these reports must be available for examination by OEO authorized auditors, inspectors, evaluation teams, and analysts and by authorized representatives of the U.S. General Accounting Office.

(a) If, after completing the analysis of administrative costs in accordance with § 1068.3-5(b) (3), the administrative costs ratio exceeds 15 percent, the CAA must submit a statement with the report explaining the reasons for the excessive rate, together with a plan of corrective action and target date for reducing the administrative costs ratio to an acceptable level. With the 6 months report, the statement should consider both the current and projected rates, for they may have a downward or upward trend during a program year.

(b) This information should be submitted to the OEO granting office that

awarded the basic CAA grant containing Program Account 01. At that time, a determination will be made as to what further computations or corrective measures are appropriate and whether a request for waiver of the 15 percent limitation should be made. The Director of the Community Action Program (for Headquarters grants) and Regional Directors (for Regional grants) or their designees will determine whether waivers should be granted based upon the criteria in this subpart and such other criteria as may have been prescribed.

(c) If a CAA with excessive administrative costs has received and is operating under a written waiver from OEO, it should submit a copy of the waiver with the report and a statement explaining the actions taken and progress made in reducing the administrative costs ratio to an acceptable level.

§ 1068.3-10 Availability of forms and instructions.

OEO has prepared two forms, the Administrative Costs Report (CAP Form 15d) and the Personnel Work Sheet (CAP Form 15e) for use in complying with this subpart. OEO has also prepared detailed instructions for completing these forms, including standards for allocating personnel costs in accordance with § 1068.3-5(b)(3). Copies of these forms and instructions may be obtained from the CAP Program Management Division, OEO Headquarters Office, 1200 19th Street NW., Washington, D.C., and from any OEO Regional Office.

Subpart-Allowability of Costs
Incurred To Borrow Funds

AUTHORITY: The provisions of this Subpart issued under sec. 602, 78 Stat. 530; 42 U.S.C. 2942.

SOURCE: The provisions of this Subpart appear at 34 F.R. 12784, Aug. 6, 1969, unless otherwise noted.

§ 1068.4-1 Applicability of this subpart.

This subpart applies to all programs financially assisted under Titles I, II, and III-B of the Economic Opportunity Act of 1964, as amended, if the assistance is administered by OEO.

§ 1068.4-2 Policy.

(a) Normally agencies (CAAS and other grantees) receiving grants from OEO are prohibited from using grant funds to pay interest or other charges