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work under awards if the subrecipients are institutions of higher education, hospitals, or other non-profit organizations. State and local government subrecipients are subject to the provisions of 34 CFR Part 80—Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

Subpart B-Pre-Award


$74.10 Purpose.

Sections 74.11 through 74.17 prescribes forms and instructions and other pre-award matters to be used in applying for awards. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

$74.12 Forms for applying for Federal

assistance. (a) The Secretary complies with the applicable report clearance requirements of 5 CFR Part 1320_Controlling Paperwork Burdens on the Publicwith regard to all forms used by ED in place of or as a supplement to the Standard Form 424 (SF-424) series.

(b) Applicants shall use the SF-424 series or those forms and instructions prescribed by the Secretary.

(c) For Federal programs covered by E.O. 12372-Intergovernmental Review of Federal Programs (implemented by the Secretary in 34 CFR Part 79Intergovernmental Review of Department of Education Programs and Activities) the applicant shall complete the appropriate sections of the SF-424 (Application for Federal Assistance) indicating whether the application was subject to review by the State Single Point of Contact (SPOC). The name and address of the SPOC for a particular State can be obtained from the Secretary or the Catalog of Federal Domestic Assistance (available from the Superintendent of Documents, Government Printing Office). The SPOC shall advise the applicant whether the program for which application is made has been selected by that State for review.

(d) If ED does not use the SF-424 form, the Secretary may indicate whether the application is subject to review by the State under E.O. 12372. (Approved by the Office of Management and Budget under control number 1880-0513) (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110) (59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]

8 74.11 Pre-award policies.

(a) Use of grants and cooperative agreements, and contracts. In each instance, the Secretary decides on the appropriate award instrument (i.e., grant, cooperative agreement, or contract). The Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301-08) governs the use of grants, cooperative agreements, and contracts. A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute. The statutory criterion for choosing between grants and cooperative agreements is that for the latter, substantial involve ment is expected between ED and the recipient when carrying out the activity contemplated in the agreement. Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government.

(b) Public notice and priority setting. The Secretary notifies the public of intended funding priorities for discretionary grant programs, unless funding priorities are established by Federal statute. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

$74.13 Debarment and suspension.

The Secretary and recipients shall comply with the nonprocurement debarment and suspension common rule (implemented by the Secretary in 34 CFR part 85). This common rule restricts subawards and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

$74.14 Special award conditions. $74.16 Resource Conservation and Re(a) The Secretary may impose special

covery Act. award conditions, if an applicant or re

Under the Resource Conservation and cipient

Recovery Act (RCRA) (Pub. L. 94-580 (1) Has a history of poor performance; codified at 42 U.S.C. 6962), any State (2) Is not financially stable;

agency or agency of a political subdivi(3) Has a management system that

sion of a State which is using approdoes not meet the standards prescribed

priated Federal funds must comply in this part;

with section 6002 of the RCRA. Section (4) Has not conformed to the terms

6002 requires that preference be given and conditions of a previous award; or

in procurement programs to the pur(5) Is not otherwise responsible.

chase of specific products containing (b) If special award conditions are es

recycled materials identified in guidetablished under paragraph (a) of this

lines developed by the Environmental section, the Secretary notifies the ap

Protection Agency (EPA) (40 CFR parts plicant or recipient of

247-254). Accordingly, recipients that

receive direct Federal awards or other (1) The nature of the additional re

Federal funds shall give preference in quirements; (2) The reason why the additional re

their procurement programs funded

with Federal funds to the purchase of quirements are being imposed;

recycled products pursuant to the EPA (3) The nature of the corrective ac

guidelines. tion needed;

(4) The time allowed for completing (Authority: 20 U.S.C. 1221e-3, 3474; OMB Cirthe corrective actions; and

cular A-110) (5) The method for requesting recon- $74.17 Certifications and representasideration of the additional require tions. ments imposed. (c) Any special conditions

Unless prohibited by statute or codi

are promptly removed once the conditions

fied regulation, the Secretary allows that prompted them have been cor

recipients to submit certifications and rected.

representations required by statute,

executive order, or regulation on an (Authority: 20 U.S.C. 1221e-3, 3474; OMB Cir annual basis, if the recipients have oncular A-110)

going and continuing relationships

with ED. Annual certifications and rep$74.15 Metric system of measurement.

resentations shall be signed by responThe Metric Conversion Act, as sible officials with the authority to enamended by the Omnibus Trade and sure recipients' compliance with the Competitiveness Act (15 U.S.C. 205) de pertinent requirements. clares that the metric system is the preferred measurement system for U.S.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Cir

cular A-110) trade and commerce. The Act requires each Federal agency to establish a date

Subpart C-Post-Award or dates in consultation with the Secretary of Commerce, when the metric

Requirements system of measurement will be used in the agency's procurements, grants, and

FINANCIAL AND PROGRAM MANAGEMENT other business-related activities. Met- $74.20 Purpose of financial and proric implementation may take longer gram management. where the use of the system is initially

Sections 74.21 through 74.28 prescribe impractical or likely to cause signifi

standards for financial management cant inefficiencies in the accomplish- systems, methods for making payment of federally-funded activities.

ments and rules for The Secretary follows the provisions of

(a) Satisfying cost sharing and E.O. 12770—Metric Usage in Federal

matching requirements; Government Programs.

(b) Accounting for program income; (Authority: 20 U.S.C. 1221e-3, 3474; OMB Cir (c) Approving budget revisions; cular A-110)

(d) Making audits;

(e) Determining allowability of cost; and

(f) Establishing fund availability. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110) $74.21 Standards for financial man

agement systems. (a) Recipients shall relate financial data to performance data and develop unit cost information whenever practical.

(b) Recipients' financial management systems shall provide for the following:

(1) Accurate, current, and complete disclosure of the financial results of each federally-sponsored project in accordance with the reporting requirements established in $ 74.52. If the Secretary requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient shall not be required to establish an accrual accounting system. These recipients may develop accrual data for its reports on the basis of an analysis of the documentation on hand.

(2) Records that identify adequately the source and application of funds for federally-sponsored activities. These records shall contain information pertaining to awards, authorizations, obligations, unobligated balances, assets, outlays, income, and interest.

(3) Effective control over and accountability for all funds, property, and other assets. Recipients shall adequately safeguard all assets and assure they are used solely for authorized purposes.

(4) Comparison of outlays with budget amounts for each award. Whenever appropriate,

financial information should be related to performance and unit cost data.

(5) Written procedures to minimize the time elapsing between the transfer of funds to the recipient from the U.S. Treasury and the issuance or redemption of checks, warrants or payments by other means for program purposes by the recipient. To the extent that the provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, payment methods of State agencies, instrumentalities, and fiscal agents shall be consistent with CMIA Treasury-State Agreements or the

CMIA default procedures codified at 31 CFR Part 205—Withdrawal of Cash from the Treasury for Advances under Federal Grant and Other Programs.

(6) Written procedures for determining the reasonableness, allocability, and allowability of costs in accordance with the provisions of the applicable Federal cost principles and the terms and conditions of the award.

(7) Accounting records including cost accounting records that are supported by source documentation.

(c) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Secretary may require adequate bonding and insurance if the bonding and insurance requirements of the recipient are not deemed adequate to protect the interest of the Federal Government.

(d) The Secretary may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest.

(e) Where bonds are required under paragraphs (a) and (b) of this section, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR Part 223—Surety Companies Doing Business with the United States. (Approved by the Office of Management and Budget under control number 1880-0513) (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110) (59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995)

$74.22 Payment.

(a) Payment methods shall minimize the time elapsing between the transfer of funds from the United States Treasury and the issuance or redemption of checks, warrants, or payment by other means by the recipients. Payment methods of State agencies or instrumentalities shall be consistent with Treasury-State CMIA agreements or default procedures codified at 31 CFR part 205.

(b)(1) Recipients are paid in advance, provided they maintain or demonstrate the willingness to maintain

(i) Written procedures that minimize within 30 days after receipt of the billthe time elapsing between the transfer ing, unless the billing is improper. of funds and disbursement by the re (2) Recipients are authorized to subcipient; and

mit request for reimbursement at least (ii) Financial management systems monthly when electronic funds transthat meet the standards for fund con fers are not used. trol and accountability as established (f) If a recipient cannot meet the criin $74.21.

teria for advance payments and the (2) Cash advances to a recipient orga

Secretary has determined that reimnization are limited to the minimum bursement is not feasible because the amounts needed and be timed to be in

recipient lacks sufficient working capaccordance with the actual, immediate ital, the Secretary may provide cash on cash requirements of the recipient or

a working capital advance basis. Under ganization in carrying out the purpose

this procedure, the Secretary advances of the approved program or project.

cash to the recipient to cover its esti(3) The timing and amount of cash

mated disbursement needs for an iniadvances are as close as is administra

tial period generally geared to the tively feasible to the actual disburse

awardee's disbursing cycle. Thereafter, ments by the recipient organization for

the Secretary reimburses the recipient direct program or project costs and the

for its actual cash disbursements. The proportionate share of any allowable

working capital advance method of indirect costs.

payment is not used for recipients un(c) Whenever possible, advances are

willing or unable to provide timely adconsolidated to cover anticipated cash

vances to their subrecipient to meet needs for all awards made by the Sec

the subrecipient's actual cash disburse

ments. retary.

(g) To the extent available, recipi(1) Advance payment mechanisms in

ents shall disburse funds available from clude, but are not limited to, Treasury

repayments to and interest earned on a check, and electronic funds transfer.

revolving fund, program income, re(2) Advance payment mechanisms are

bates, refunds, contract settlements, subject to 31 CFR part 205.

audit recoveries, and interest earned (3) Recipients are authorized to sub

on these funds before requesting addimit requests for advances and reim

tional cash payments. bursements at least monthly when

(h) Unless otherwise required by statelectronic fund transfers are not used.

ute, the Secretary does not withhold (d) Requests for Treasury check ad payments for proper charges made by vance payment shall be submitted on

recipients at any time during the SF-270—Request for Advance or Reim

project period unlessbursement-or other forms as may be (1) A recipient has failed to comply authorized by OMB. This form is not to with the project objectives, the terms be used when Treasury check advance and conditions of the award, or Federal payments are made to the recipient reporting requirements; or automatically through the use of a pre (2) The recipient or subrecipient is determined payment schedule or if pre delinquent in a debt to the United cluded by ED instructions for elec States as defined in OMB Circular Atronic funds transfer.

129Managing Federal Credit Pro(e) Reimbursement is the preferred grams. Under these conditions, the method when the requirements in para Secretary may, upon reasonable notice, graph (b) of this section cannot be met. inform the recipient that ED does not The Secretary may also use this meth make payments for obligations inod on any construction agreement, or curred after a specified date until the if the major portion of the construc conditions are corrected or the indebttion project is accomplished through edness to the Federal Government is private market financing or Federal liquidated. loans, and the Federal assistance con (i) The standards governing the use stitutes a minor portion of the project. of banks and other institutions as de

(1) When the reimbursement method positories of funds advanced under is used, the Secretary makes payment awards are as follows:


an original and two copies of the following:

(1) SF-270_Request for Advance or Reimbursement. The Secretary adopts the SF-270 as a standard form for all nonconstruction programs when electronic funds transfer or predetermined advance methods are not used. The Secretary may, however, use this form for construction programs in lieu of the SF-271–Outlay Report and Request for Reimbursement for Construction Programs.

(2) SF-271–Outlay Report and Request for Reimbursement for Construction Programs. The Secretary adopts the SF-271 as the standard form to be used for requesting reimbursement for construction programs. However, the Secretary may substitute the SF-270 when the Secretary determines that it provides adequate information to meet Federal needs. (Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

(1) Except for situations described in paragraph (i)(2) of this section, the Secretary does not require separate depository accounts for funds provided to a recipient or establish any eligibility requirements for depositories for funds provided to a recipient. However, recipients must be able to account for the receipt, obligation, and expenditure of funds.

(2) Advances of Federal funds shall be deposited and maintained in insured accounts whenever possible.

(j) Consistent with the national goal of expanding the opportunities for women-owned and minority-owned business enterprises, recipients shall be encouraged to use women-owned and minority-owned banks (a bank which is owned at least 50 percent by women or minority group members).

(k) Recipients shall maintain advances of Federal funds in interest bearing accounts, unless

(1) The recipient receives less than $120,000 in Federal awards per year;

(2) The best reasonably available interest bearing account would not be expected to earn interest in excess of $250 per year on Federal cash balances; or

(3) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.

(1) For those entities where CMIA and its implementing regulations do not apply, interest earned on Federal advances deposited in interest bearing accounts shall be remitted annually to Department of Health and Human Services, Payment Management System, Rockville, MD 20852. Interest amounts up to $250 per year may be retained by the recipient for administrative expense. State universities and hospitals shall comply with CMIA, as it pertains to interest. If an entity subject to CMIA uses its own funds to pay pre-award

costs for discretionary awards without prior written approval from the Secretary, it waives its right to recover the interest under CMIA.

(m) Except as noted elsewhere in this part, only the following forms are authorized for the recipients in requesting advances and reimbursements. The Secretary does not require more than

$74.23 Cost sharing or matching.

(a) All contributions, including cash and third party in-kind, are accepted as part of the recipient's cost sharing or matching when contributions meet the following criteria:

(1) Are verifiable from the recipient's records.

(2) Are not included as contributions for any other federally-assisted project or program.

(3) Are necessary and reasonable for proper and efficient accomplishment of project or program objectives.

(4) Are allowable under the applicable cost principles.

(5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching.

(6) Are provided for in the approved budget when required by the Secretary.

(7) Conform to other provisions of this part, as applicable.

(b) Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Secretary.

(c) Values for recipient contributions of services and property shall be established in accordance with the applicable cost principles. If the Secretary authorizes recipients to donate buildings

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