CFR 2014 Title2 Vol1 Part200

PART 200UNIFORM ADMINISTRA- 200.48 General purpose equipment.
200.49 Generally Accepted Accounting Prin-

TIVE REQUIREMENTS, COST PRIN- ciples (GAAP).
CIPLES, AND AUDIT REQUIRE- 200.50 Generally Accepted Government Au-
MENTS FOR FEDERAL AWARDS diting Standards (GAGAS).
200.51 Grant agreement.
200.52 Hospital.
Subpart AAcronyms and 200.53 Improper payment.
Definitions 200.54 Indian tribe (or federally recognized
Indian tribe).
ACRONYMS 200.55 Institutions of Higher Education
Sec. (IHEs).
200.0 Acronyms. 200.56 Indirect (facilities & administrative
200.1 Definitions. (F&A)) costs.
200.2 Acquisition cost. 200.57 Indirect cost rate proposal.
200.3 Advance payment. 200.58 Information technology systems.
200.4 Allocation. 200.59 Intangible property.
200.5 Audit finding. 200.60 Intermediate cost objective.
200.6 Auditee. 200.61 Internal controls.
200.7 Auditor. 200.62 Internal control over compliance re-
200.8 Budget. quirements for Federal awards.
200.9 Central service cost allocation plan. 200.63 Loan.
200.10 Catalog of Federal Domestic Assist- 200.64 Local government.
ance (CFDA) number. 200.65 Major program.
200.11 CFDA program title. 200.66 Management decision.
200.12 Capital assets. 200.67 Micro-purchase.
200.13 Capital expenditures. 200.68 Modified Total Direct Cost (MTDC).
200.14 Claim. 200.69 Non-Federal entity.
200.15 Class of Federal awards. 200.70 Nonprofit organization.
200.16 Closeout. 200.71 Obligations.
200.17 Cluster of programs. 200.72 Office of Management and Budget
200.18 Cognizant agency for audit. (OMB).
200.19 Cognizant agency for indirect costs. 200.73 Oversight agency for audit.
200.20 Computing devices. 200.74 Pass-through entity.
200.21 Compliance supplement. 200.75 Participant support costs.
200.22 Contract. 200.76 Performance goal.
200.23 Contractor.
200.77 Period of performance.
200.24 Cooperative agreement.
200.78 Personal property.
200.25 Cooperative audit resolution.
200.79 Personally Identifiable Information
200.26 Corrective action.
(PII).
200.27 Cost allocation plan.
200.80 Program income.
200.28 Cost objective.
200.81 Property.
200.29 Cost sharing or matching.
200.30 Cross-cutting audit finding. 200.82 Protected Personally Identifiable In-
200.31 Disallowed costs. formation (Protected PII).
200.32 Data Universal Numbering System 200.83 Project cost.
(DUNS) number. 200.84 Questioned cost.
200.33 Equipment. 200.85 Real property.
200.34 Expenditures. 200.86 Recipient.
200.35 Federal agency. 200.87 Research and Development (R&D).
200.36 Federal Audit Clearinghouse (FAC). 200.88 Simplified acquisition threshold.
200.37 Federal awarding agency. 200.89 Special purpose equipment.
200.38 Federal award. 200.90 State.
200.39 Federal award date. 200.91 Student Financial Aid (SFA).
200.40 Federal financial assistance. 200.92 Subaward.
200.41 Federal interest. 200.93 Subrecipient.
200.42 Federal program. 200.94 Supplies.
200.95 Termination.
wreier-aviles on DSK5TPTVN1PROD with CFR
200.43 Federal share.

200.44 Final cost objective. 200.96 Third-party in-kind contributions.
200.45 Fixed amount awards. 200.97 Unliquidated obligations.
200.46 Foreign public entity. 200.98 Unobligated balance.
200.47 Foreign organization. 200.99 Voluntary committed cost sharing.
77
VerDate Mar<15>2010 14:08 Mar 14, 2014 Jkt 232005 PO 00000 Frm 00087 Fmt 8010 Sfmt 8010 Y:\SGML\232005.XXX 232005
Pt. 200 2 CFR Ch. II (1114 Edition)
Subpart BGeneral Provisions 200.315 Intangible property.

200.316 Property trust relationship.
200.100 Purpose.
200.101 Applicability. PROCUREMENT STANDARDS
200.102 Exceptions.
200.317 Procurements by states.
200.103 Authorities.
200.104 Supersession. 200.318 General procurement standards.
200.105 Effect on other issuances. 200.319 Competition.
200.106 Agency implementation. 200.320 Methods of procurement to be fol-
200.107 OMB responsibilities. lowed.
200.108 Inquiries. 200.321 Contracting with small and minority
200.109 Review date. businesses, womens business enterprises,
200.110 Effective/applicability date. and labor surplus area firms.
200.111 English language. 200.322 Procurement of recovered materials.
200.112 Conflict of interest. 200.323 Contract cost and price.
200.113 Mandatory disclosures. 200.324 Federal awarding agency or pass-
through entity review.
Subpart CPre-Federal Award Require- 200.325 Bonding requirements.
ments and Contents of Federal Awards 200.326 Contract provisions.
200.200 Purpose. PERFORMANCE AND FINANCIAL MONITORING
200.201 Use of grant agreements (including AND REPORTING
fixed amount awards), cooperative agree-
ments, and contracts. 200.327 Financial reporting.
200.202 Requirement to provide public no- 200.328 Monitoring and reporting program
tice of Federal financial assistance pro- performance.
grams. 200.329 Reporting on real property.
200.203 Notices of funding opportunities.
SUBRECIPIENT MONITORING AND MANAGEMENT
200.204 Federal awarding agency review of
merit of proposals. 200.330 Subrecipient and contractor deter-
200.205 Federal awarding agency review of minations.
risk posed by applicants. 200.331 Requirements for pass-through enti-
200.206 Standard application requirements. ties.
200.207 Specific conditions. 200.332 Fixed amount subawards.
200.208 Certifications and representations.
200.209 Pre-award costs. RECORD RETENTION AND ACCESS
200.210 Information contained in a Federal
award. 200.333 Retention requirements for records.
200.211 Public access to Federal award infor- 200.334 Requests for transfer of records.
mation. 200.335 Methods for collection, transmission
and storage of information.
Subpart DPost Federal Award 200.336 Access to records.
Requirements 200.337 Restrictions on public access to
records.
STANDARDS FOR FINANCIAL AND PROGRAM
MANAGEMENT REMEDIES FOR NONCOMPLIANCE
200.300 Statutory and national policy re- 200.338 Remedies for noncompliance.
quirements. 200.339 Termination.
200.301 Performance measurement. 200.340 Notification of termination require-
200.302 Financial management. ment.
200.303 Internal controls. 200.341 Opportunities to object, hearings
200.304 Bonds. and appeals.
200.305 Payment. 200.342 Effects of suspension and termi-
200.306 Cost sharing or matching. nation.
200.307 Program income.
200.308 Revision of budget and program CLOSEOUT
plans.
200.343 Closeout.
200.309 Period of performance.
POST-CLOSEOUT ADJUSTMENTS AND
PROPERTY STANDARDS
CONTINUING RESPONSIBILITIES
200.310 Insurance coverage.
200.344 Post-closeout adjustments and con-
200.311 Real property.

200.312 Federally-owned and exempt prop- tinuing responsibilities.
erty. COLLECTION OF AMOUNTS DUE
200.313 Equipment.
200.314 Supplies. 200.345 Collection of amounts due.
78
OMB Guidance Pt. 200
Subpart ECost Principles 200.438 Entertainment costs.

200.439 Equipment and other capital expend-
GENERAL PROVISIONS itures.
200.400 Policy guide. 200.440 Exchange rates.
200.401 Application. 200.441 Fines, penalties, damages and other
settlements.
BASIC CONSIDERATIONS 200.442 Fund raising and investment man-
agement costs.
200.402 Composition of costs. 200.443 Gains and losses on disposition of de-
200.403 Factors affecting allowability of preciable assets.
costs. 200.444 General costs of government.
200.404 Reasonable costs. 200.445 Goods or services for personal use.
200.405 Allocable costs. 200.446 Idle facilities and idle capacity.
200.406 Applicable credits. 200.447 Insurance and indemnification.
200.407 Prior written approval (prior ap- 200.448 Intellectual property.
proval). 200.449 Interest.
200.408 Limitation on allowance of costs. 200.450 Lobbying.
200.409 Special considerations. 200.451 Losses on other awards or contracts.
200.410 Collection of unallowable costs. 200.452 Maintenance and repair costs.
200.411 Adjustment of previously negotiated 200.453 Materials and supplies costs, includ-
indirect (F&A) cost rates containing un- ing costs of computing devices.
allowable costs. 200.454 Memberships, subscriptions, and pro-
DIRECT AND INDIRECT (F&A) COSTS fessional activity costs.
200.455 Organization costs.
200.412 Classification of costs. 200.456 Participant support costs.
200.413 Direct costs. 200.457 Plant and security costs.
200.414 Indirect (F&A) costs. 200.458 Pre-award costs.
200.415 Required certifications. 200.459 Professional service costs.
200.460 Proposal costs.
SPECIAL CONSIDERATIONS FOR STATES, LOCAL 200.461 Publication and printing costs.
GOVERNMENTS AND INDIAN TRIBES 200.462 Rearrangement and reconversion
200.416 Cost allocation plans and indirect costs.
cost proposals. 200.463 Recruiting costs.
200.417 Interagency service. 200.464 Relocation costs of employees.
200.465 Rental costs of real property and
SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF equipment.
HIGHER EDUCATION 200.466 Scholarships and student aid costs.
200.467 Selling and marketing costs.
200.418 Costs incurred by states and local
200.468 Specialized service facilities.
governments.
200.469 Student activity costs.
200.419 Cost accounting standards and dis-
200.470 Taxes (including Value Added Tax).
closure statement.
200.471 Termination costs.
GENERAL PROVISIONS FOR SELECTED ITEMS OF 200.472 Training and education costs.
COST 200.473 Transportation costs.
200.474 Travel costs.
200.420 Considerations for selected items of 200.475 Trustees.
cost.
200.421 Advertising and public relations. Subpart FAudit Requirements
200.422 Advisory councils.
200.423 Alcoholic beverages. GENERAL
200.424 Alumni/ae activities.
200.500 Purpose.
200.425 Audit services.
200.426 Bad debts. AUDITS
200.427 Bonding costs.
200.428 Collections of improper payments. 200.501 Audit requirements.
200.429 Commencement and convocation 200.502 Basis for determining Federal
costs. awards expended.
200.430 Compensationpersonal services. 200.503 Relation to other audit require-
200.431 Compensationfringe benefits. ments.
200.432 Conferences. 200.504 Frequency of audits.
200.433 Contingency provisions. 200.505 Sanctions.
200.434 Contributions and donations. 200.506 Audit costs.
200.507 Program-specific audits.
200.435 Defense and prosecution of criminal

and civil proceedings, claims, appeals
AUDITEES
and patent infringements.
200.436 Depreciation. 200.508 Auditee responsibilities.
200.437 Employee health and welfare costs. 200.509 Auditor selection.
79
200.0 2 CFR Ch. II (1114 Edition)
200.510 Financial statements. CFR Code of Federal Regulations
200.511 Audit findings follow-up. CMIA Cash Management Improve-
200.512 Report submission. ment Act
FEDERAL AGENCIES COG Councils Of Governments
COSO Committee of Sponsoring Orga-
200.513 Responsibilities.
nizations of the Treadway Commis-
AUDITORS sion
D&B Dun and Bradstreet
200.514 Scope of audit.
200.515 Audit reporting.
DUNS Data Universal Numbering
200.516 Audit findings. System
200.517 Audit documentation. EPA Environmental Protection Agen-
200.518 Major program determination. cy
200.519 Criteria for Federal program risk. ERISA Employee Retirement Income
200.520 Criteria for a low-risk auditee. Security Act of 1974 (29 U.S.C. 1301
MANAGEMENT DECISIONS
1461)
EUI Energy Usage Index
200.521 Management decision. F&A Facilities and Administration
APPENDIX I TO PART 200FULL TEXT OF NO- FAC Federal Audit Clearinghouse
TICE OF FUNDING OPPORTUNITY FAIN Federal Award Identification
APPENDIX II TO PART 200CONTRACT PROVI- Number
SIONS FOR NON-FEDERAL ENTITY CON-
FAPIIS Federal Awardee Perform-
TRACTS UNDER FEDERAL AWARDS
APPENDIX III TO PART 200INDIRECT (F&A)
ance and Integrity Information Sys-
COSTS IDENTIFICATION AND ASSIGNMENT, tem
AND RATE DETERMINATION FOR INSTITU- FAR Federal Acquisition Regulation
TIONS OF HIGHER EDUCATION (IHES) FFATA Federal Funding Account-
APPENDIX IV TO PART 200INDIRECT (F&A) ability and Transparency Act of 2006
COSTS IDENTIFICATION AND ASSIGNMENT, or Transparency ActPublic Law
AND RATE DETERMINATION FOR NONPROFIT 109282, as amended by section 6202(a)
ORGANIZATIONS of Public Law 110252 (31 U.S.C. 6101)
APPENDIX V TO PART 200STATE/LOCAL GOV- FICA Federal Insurance Contribu-
ERNMENT AND INDIAN TRIBE-WIDE CEN-
TRAL SERVICE COST ALLOCATION PLANS
tions Act
APPENDIX VI TO PART 200PUBLIC ASSIST- FOIA Freedom of Information Act
ANCE COST ALLOCATION PLANS FR Federal Register
APPENDIX VII TO PART 220STATES AND FTE Full-time equivalent
LOCAL GOVERNMENT AND INDIAN TRIBE IN- GAAP Generally Accepted Account-
DIRECT COST PROPOSALS ing Principles
APPENDIX VIII TO PART 200NONPROFIT OR- GAGAS Generally Accepted Govern-
GANIZATIONS EXEMPTED FROM SUBPART ment Accounting Standards
ECOST PRINCIPLES OF PART 200 GAO General Accounting Office
APPENDIX IX TO PART 200HOSPITAL COST
PRINCIPLES
GOCO Government owned, contractor
APPENDIX X TO PART 200DATA COLLECTION operated
FORM (FORM SFSAC) GSA General Services Administration
APPENDIX XI TO PART 200COMPLIANCE SUP- IBS Institutional Base Salary
PLEMENT IHE Institutions of Higher Education
AUTHORITY: 31 U.S.C. 503 IRC Internal Revenue Code
ISDEAA Indian Self-Determination
SOURCE: 78 FR 78608, Dec. 26, 2013, unless and Education and Assistance Act
otherwise noted. MTC Modified Total Cost
MTDC Modified Total Direct Cost
Subpart AAcronyms and OMB Office of Management and Budg-
Definitions et
PII Personally Identifiable Informa-
ACRONYMS tion
PRHP Post-retirement Health Plans
200.0 Acronyms. PTE Pass-through Entity
ACRONYM TERM REUI Relative Energy Usage Index
SAM System for Award Management

CAS Cost Accounting Standards SFA Student Financial Aid
CFDA Catalog of Federal Domestic SNAP Supplemental Nutrition Assist-
Assistance ance Program
80
OMB Guidance 200.10
SPOC Single Point of Contact 200.5 Audit finding.

TANF Temporary Assistance for
Needy Families Audit finding means deficiencies
TFM Treasury Financial Manual which the auditor is required by
U.S.C. United States Code 200.516 Audit findings, paragraph (a)
VAT Value Added Tax to report in the schedule of findings
and questioned costs.
200.1 Definitions.
These are the definitions for terms 200.6 Auditee.
used in this part. Different definitions Auditee means any non-Federal enti-
may be found in Federal statutes or ty that expends Federal awards which
regulations that apply more specifi- must be audited under Subpart F
cally to particular programs or activi- Audit Requirements of this part.
ties. These definitions could be supple-
mented by additional instructional in- 200.7 Auditor.
formation provided in governmentwide
Auditor means an auditor who is a
standard information collections.
public accountant or a Federal, state
200.2 Acquisition cost. or local government audit organiza-
Acquisition cost means the cost of the tion, which meets the general stand-
asset including the cost to ready the ards specified in generally accepted
asset for its intended use. Acquisition government auditing standards
cost for equipment, for example, means (GAGAS). The term auditor does not
the net invoice price of the equipment, include internal auditors of nonprofit
including the cost of any modifica- organizations.
tions, attachments, accessories, or aux-
iliary apparatus necessary to make it 200.8 Budget.
usable for the purpose for which it is Budget means the financial plan for
acquired. Acquisition costs for soft- the project or program that the Fed-
ware includes those development costs eral awarding agency or pass-through
capitalized in accordance with gen- entity approves during the Federal
erally accepted accounting principles award process or in subsequent amend-
(GAAP). Ancillary charges, such as ments to the Federal award. It may in-
taxes, duty, protective in transit insur-
clude the Federal and non-Federal
ance, freight, and installation may be
share or only the Federal share, as de-
included in or excluded from the acqui-
sition cost in accordance with the non- termined by the Federal awarding
Federal entitys regular accounting agency or pass-through entity.
practices.
200.9 Central service cost allocation
200.3 Advance payment. plan.
Advance payment means a payment Central service cost allocation plan
that a Federal awarding agency or means the documentation identifying,
pass-through entity makes by any ap- accumulating, and allocating or devel-
propriate payment mechanism, includ- oping billing rates based on the allow-
ing a predetermined payment schedule, able costs of services provided by a
before the non-Federal entity disburses state, local government, or Indian tribe
the funds for program purposes. on a centralized basis to its depart-
ments and agencies. The costs of these
200.4 Allocation. services may be allocated or billed to
Allocation means the process of as- users.
signing a cost, or a group of costs, to
one or more cost objective(s), in rea- 200.10 Catalog of Federal Domestic
sonable proportion to the benefit pro- Assistance (CFDA) number.
vided or other equitable relationship. CFDA number means the number as-
The process may entail assigning a signed to a Federal program in the

cost(s) directly to a final cost objective CFDA.
or through one or more intermediate
cost objectives.
81
200.11 CFDA program title. tities to which specific provisions or

exceptions may apply.
CFDA program title means the title of
the program under which the Federal 200.16 Closeout.
award was funded in the CFDA.
Closeout means the process by which
200.12 Capital assets. the Federal awarding agency or pass-
through entity determines that all ap-
Capital assets means tangible or in- plicable administrative actions and all
tangible assets used in operations hav- required work of the Federal award
ing a useful life of more than one year have been completed and takes actions
which are capitalized in accordance as described in 200.343 Closeout.
with GAAP. Capital assets include:
(a) Land, buildings (facilities), equip- 200.17 Cluster of programs.
ment, and intellectual property (in-
Cluster of programs means a grouping
cluding software) whether acquired by of closely related programs that share
purchase, construction, manufacture, common compliance requirements. The
lease-purchase, exchange, or through types of clusters of programs are re-
capital leases; and search and development (R&D), student
(b) Additions, improvements, modi- financial aid (SFA), and other clusters.
fications, replacements, rearrange- Other clusters are as defined by OMB
ments, reinstallations, renovations or in the compliance supplement or as
alterations to capital assets that mate- designated by a state for Federal
rially increase their value or useful life awards the state provides to its sub-
(not ordinary repairs and mainte- recipients that meet the definition of a
nance). cluster of programs. When designating
200.13 Capital expenditures. an other cluster, a state must iden-
tify the Federal awards included in the
Capital expenditures means expendi- cluster and advise the subrecipients of
tures to acquire capital assets or ex- compliance requirements applicable to
penditures to make additions, improve- the cluster, consistent with 200.331
ments, modifications, replacements, Requirements for pass-through enti-
rearrangements, reinstallations, ren- ties, paragraph (a). A cluster of pro-
ovations, or alterations to capital as- grams must be considered as one pro-
sets that materially increase their gram for determining major programs,
value or useful life. as described in 200.518 Major program
determination, and, with the exception
200.14 Claim.
of R&D as described in 200.501 Audit
Claim means, depending on the con- requirements, paragraph (c), whether a
text, either: program-specific audit may be elected.
(a) A written demand or written as-
sertion by one of the parties to a Fed- 200.18 Cognizant agency for audit.
eral award seeking as a matter of Cognizant agency for audit means the
right: Federal agency designated to carry out
(1) The payment of money in a sum the responsibilities described in
certain; 200.513 Responsibilities, paragraph (a).
(2) The adjustment or interpretation The cognizant agency for audit is not
of the terms and conditions of the Fed- necessarily the same as the cognizant
eral award; or agency for indirect costs. A list of cog-
(3) Other relief arising under or relat- nizant agencies for audit may be found
ing to a Federal award. at the FAC Web site.
(b) A request for payment that is not
in dispute when submitted. 200.19 Cognizant agency for indirect
costs.
200.15 Class of Federal awards. Cognizant agency for indirect costs
Class of Federal awards means a group means the Federal agency responsible
of Federal awards either awarded under for reviewing, negotiating, and approv-
a specific program or group of pro- ing cost allocation plans or indirect
grams or to a specific type of non-Fed- cost proposals developed under this
eral entity or group of non-Federal en- part on behalf of all Federal agencies.
82
OMB Guidance 200.25
The cognizant agency for indirect cost tween a Federal awarding agency or
is not necessarily the same as the cog- pass-through entity and a non-Federal
nizant agency for audit. For assign- entity that, consistent with 31 U.S.C.
ments of cognizant agencies see the 63026305:
following: (a) Is used to enter into a relation-
(a) For IHEs: Appendix III to Part ship the principal purpose of which is
200Indirect (F&A) Costs Identifica- to transfer anything of value from the
tion and Assignment, and Rate Deter- Federal awarding agency or pass-
mination for Institutions of Higher through entity to the non-Federal enti-
Education (IHEs), paragraph C.10. ty to carry out a public purpose au-
(b) For nonprofit organizations: Ap- thorized by a law of the United States
pendix IV to Part 200Indirect (F&A) (see 31 U.S.C. 6101(3)); and not to ac-
Costs Identification and Assignment, quire property or services for the Fed-
and Rate Determination for Nonprofit eral government or pass-through enti-
Organizations, paragraph C.1. tys direct benefit or use;
(c) For state and local governments: (b) Is distinguished from a grant in
Appendix V to Part 200State/Local that it provides for substantial involve-
Government and Indian Tribe-Wide ment between the Federal awarding
Central Service Cost Allocation Plans, agency or pass-through entity and the
paragraph F.1. non-Federal entity in carrying out the
200.20 Computing devices. activity contemplated by the Federal
award.
Computing devices means machines (c) The term does not include:
used to acquire, store, analyze, process, (1) A cooperative research and devel-
and publish data and other information opment agreement as defined in 15
electronically, including accessories U.S.C. 3710a; or
(or peripherals) for printing, trans-
(2) An agreement that provides only:
mitting and receiving, or storing elec-
tronic information. See also 200.94 (i) Direct United States Government
Supplies and 200.58 Information tech- cash assistance to an individual;
nology systems. (ii) A subsidy;
(iii) A loan;
200.21 Compliance supplement. (iv) A loan guarantee; or
Compliance supplement means Appen- (v) Insurance.
dix XI to Part 200Compliance Supple-
ment (previously known as the Cir- 200.25 Cooperative audit resolution.
cular A133 Compliance Supplement). Cooperative audit resolution means the
use of audit follow-up techniques which
200.22 Contract. promote prompt corrective action by
Contract means a legal instrument by improving communication, fostering
which a non-Federal entity purchases collaboration, promoting trust, and de-
property or services needed to carry veloping an understanding between the
out the project or program under a Federal agency and the non-Federal en-
Federal award. The term as used in tity. This approach is based upon:
this part does not include a legal in- (a) A strong commitment by Federal
strument, even if the non-Federal enti- agency and non-Federal entity leader-
ty considers it a contract, when the ship to program integrity;
substance of the transaction meets the (b) Federal agencies strengthening
definition of a Federal award or partnerships and working coopera-
subaward (see 200.92 Subaward). tively with non-Federal entities and
their auditors; and non-Federal enti-
200.23 Contractor. ties and their auditors working coop-
Contractor means an entity that re- eratively with Federal agencies;
ceives a contract as defined in 200.22 (c) A focus on current conditions and
Contract. corrective action going forward;
(d) Federal agencies offering appro-

200.24 Cooperative agreement. priate relief for past noncompliance
Cooperative agreement means a legal when audits show prompt corrective
instrument of financial assistance be- action has occurred; and
83
(e) Federal agency leadership sending ty determines to be unallowable, in ac-

a clear message that continued failure cordance with the applicable Federal
to correct conditions identified by au- statutes, regulations, or the terms and
dits which are likely to cause improper conditions of the Federal award.
payments, fraud, waste, or abuse is un-
acceptable and will result in sanctions. 200.32 Data Universal Numbering
System (DUNS) number.
200.26 Corrective action. DUNS number means the nine-digit
Corrective action means action taken number established and assigned by
by the auditee that: Dun and Bradstreet, Inc. (D&B) to
(a) Corrects identified deficiencies; uniquely identify entities. A non-Fed-
(b) Produces recommended improve- eral entity is required to have a DUNS
ments; or number in order to apply for, receive,
(c) Demonstrates that audit findings and report on a Federal award. A DUNS
are either invalid or do not warrant number may be obtained from D&B by
auditee action. telephone (currently 8667055711) or
the Internet (currently at http://
200.27 Cost allocation plan. fedgov.dnb.com/webform).
Cost allocation plan means central
service cost allocation plan or public 200.33 Equipment.
assistance cost allocation plan. Equipment means tangible personal
property (including information tech-
200.28 Cost objective. nology systems) having a useful life of
Cost objective means a program, func- more than one year and a per-unit ac-
tion, activity, award, organizational quisition cost which equals or exceeds
subdivision, contract, or work unit for the lesser of the capitalization level es-
which cost data are desired and for tablished by the non-Federal entity for
which provision is made to accumulate financial statement purposes, or $5,000.
and measure the cost of processes, See also 200.12 Capital assets, 200.20
products, jobs, capital projects, etc. A Computing devices, 200.48 General pur-
cost objective may be a major function pose equipment, 200.58 Information
of the non-Federal entity, a particular technology systems, 200.89 Special pur-
service or project, a Federal award, or pose equipment, and 200.94 Supplies.
an indirect (Facilities & Administra-
tive (F&A)) cost activity, as described 200.34 Expenditures.
in Subpart ECost Principles of this Expenditures means charges made by
Part. See also 200.44 Final cost objec- a non-Federal entity to a project or
tive and 200.60 Intermediate cost objec- program for which a Federal award was
tive. received.
(a) The charges may be reported on a
200.29 Cost sharing or matching.
cash or accrual basis, as long as the
Cost sharing or matching means the methodology is disclosed and is con-
portion of project costs not paid by sistently applied.
Federal funds (unless otherwise author- (b) For reports prepared on a cash
ized by Federal statute). See also basis, expenditures are the sum of:
200.306 Cost sharing or matching. (1) Cash disbursements for direct
charges for property and services;
200.30 Cross-cutting audit finding. (2) The amount of indirect expense
Cross-cutting audit finding means an charged;
audit finding where the same under- (3) The value of third-party in-kind
lying condition or issue affects Federal contributions applied; and
awards of more than one Federal (4) The amount of cash advance pay-
awarding agency or pass-through enti- ments and payments made to sub-
ty. recipients.
(c) For reports prepared on an ac-
200.31 Disallowed costs. crual basis, expenditures are the sum

Disallowed costs means those charges of:
to a Federal award that the Federal (1) Cash disbursements for direct
awarding agency or pass-through enti- charges for property and services;
84
OMB Guidance 200.40
(2) The amount of indirect expense through entity, as described in 200.101

incurred; Applicability.
(3) The value of third-party in-kind (b) The instrument setting forth the
contributions applied; and terms and conditions. The instrument
(4) The net increase or decrease in is the grant agreement, cooperative
the amounts owed by the non-Federal agreement, other agreement for assist-
entity for: ance covered in paragraph (b) of 200.40
(i) Goods and other property re- Federal financial assistance, or the
ceived; cost-reimbursement contract awarded
(ii) Services performed by employees, under the Federal Acquisition Regula-
contractors, subrecipients, and other tions.
payees; and (c) Federal award does not include
(iii) Programs for which no current other contracts that a Federal agency
services or performance are required uses to buy goods or services from a
such as annuities, insurance claims, or contractor or a contract to operate
other benefit payments. Federal government owned, contractor
operated facilities (GOCOs).
200.35 Federal agency. (d) See also definitions of Federal fi-
nancial assistance, grant agreement,
Federal agency means an agency as
and cooperative agreement.
defined at 5 U.S.C. 551(1) and further
clarified by 5 U.S.C. 552(f). 200.39 Federal award date.
200.36 Federal Audit Clearinghouse Federal award date means the date
(FAC). when the Federal award is signed by
the authorized official of the Federal
FAC means the clearinghouse des-
awarding agency.
ignated by OMB as the repository of
record where non-Federal entities are 200.40 Federal financial assistance.
required to transmit the reporting
packages required by Subpart FAudit (a) For grants and cooperative agree-
Requirements of this part. The mailing ments, Federal financial assistance
address of the FAC is Federal Audit means assistance that non-Federal en-
Clearinghouse, Bureau of the Census, tities receive or administer in the form
1201 E. 10th Street, Jeffersonville, IN of:
47132 and the web address is: http://har- (1) Grants;
vester.census.gov/sac/. Any future up- (2) Cooperative agreements;
dates to the location of the FAC may (3) Non-cash contributions or dona-
be found at the OMB Web site. tions of property (including donated
surplus property);
200.37 Federal awarding agency. (4) Direct appropriations;
(5) Food commodities; and
Federal awarding agency means the (6) Other financial assistance (except
Federal agency that provides a Federal assistance listed in paragraph (b) of
award directly to a non-Federal entity. this section).
(b) For Subpart FAudit Require-
200.38 Federal award.
ments of this part, Federal financial as-
Federal award has the meaning, de- sistance also includes assistance that
pending on the context, in either para- non-Federal entities receive or admin-
graph (a) or (b) of this section: ister in the form of:
(a)(1) The Federal financial assist- (1) Loans;
ance that a non-Federal entity receives (2) Loan Guarantees;
directly from a Federal awarding agen- (3) Interest subsidies; and
cy or indirectly from a pass-through (4) Insurance.
entity, as described in 200.101 Applica- (c) Federal financial assistance does
bility; or not include amounts received as reim-
(2) The cost-reimbursement contract bursement for services rendered to in-
under the Federal Acquisition Regula- dividuals as described in 200.502 Basis

tions that a non-Federal entity re- for determining Federal awards ex-
ceives directly from a Federal award- pended, paragraph (h) and (i) of this
ing agency or indirectly from a pass- part.
85
200.41 Federal interest. type of Federal award reduces some of

the administrative burden and record-
Federal interest means, for purposes of
keeping requirements for both the non-
200.329 Reporting on real property or
Federal entity and Federal awarding
when used in connection with the ac-
agency or pass-through entity. Ac-
quisition or improvement of real prop-
countability is based primarily on per-
erty, equipment, or supplies under a
formance and results. See 200.201 Use
Federal award, the dollar amount that
of grant agreements (including fixed
is the product of the:
amount awards), cooperative agree-
(a) Federal share of total project
ments, and contracts, paragraph (b)
costs; and
and 200.332 Fixed amount subawards.
(b) Current fair market value of the
property, improvements, or both, to 200.46 Foreign public entity.
the extent the costs of acquiring or im-
proving the property were included as Foreign public entity means:
project costs. (a) A foreign government or foreign
governmental entity;
200.42 Federal program. (b) A public international organiza-
tion, which is an organization entitled
Federal program means: to enjoy privileges, exemptions, and
(a) All Federal awards which are as- immunities as an international organi-
signed a single number in the CFDA. zation under the International Organi-
(b) When no CFDA number is as- zations Immunities Act (22 U.S.C. 288
signed, all Federal awards to non-Fed- 288f);
eral entities from the same agency (c) An entity owned (in whole or in
made for the same purpose should be part) or controlled by a foreign govern-
combined and considered one program. ment; or
(c) Notwithstanding paragraphs (a) (d) Any other entity consisting whol-
and (b) of this definition, a cluster of ly or partially of one or more foreign
programs. The types of clusters of pro- governments or foreign governmental
grams are: entities.
(1) Research and development (R&D);
(2) Student financial aid (SFA); and 200.47 Foreign organization.
(3) Other clusters, as described in Foreign organization means an entity
the definition of Cluster of Programs. that is:
200.43 Federal share. (a) A public or private organization
located in a country other than the
Federal share means the portion of United States and its territories that
the total project costs that are paid by are subject to the laws of the country
Federal funds. in which it is located, irrespective of
the citizenship of project staff or place
200.44 Final cost objective.
of performance;
Final cost objective means a cost ob- (b) A private nongovernmental orga-
jective which has allocated to it both nization located in a country other
direct and indirect costs and, in the than the United States that solicits
non-Federal entitys accumulation sys- and receives cash contributions from
tem, is one of the final accumulation the general public;
points, such as a particular award, in- (c) A charitable organization located
ternal project, or other direct activity in a country other than the United
of a non-Federal entity. See also States that is nonprofit and tax ex-
200.28 Cost objective and 200.60 Inter- empt under the laws of its country of
mediate cost objective. domicile and operation, and is not a
university, college, accredited degree-
200.45 Fixed amount awards. granting institution of education, pri-
Fixed amount awards means a type of vate foundation, hospital, organization
grant agreement under which the Fed- engaged exclusively in research or sci-
eral awarding agency or pass-through entific activities, church, synagogue,

entity provides a specific level of sup- mosque or other similar entities orga-
port without regard to actual costs in- nized primarily for religious purposes;
curred under the Federal award. This or
86
OMB Guidance 200.55
(d) An organization located in a (c) Does not include an agreement

country other than the United States that provides only:
not recognized as a Foreign Public En- (1) Direct United States Government
tity. cash assistance to an individual;
(2) A subsidy;
200.48 General purpose equipment. (3) A loan;
General purpose equipment means (4) A loan guarantee; or
equipment which is not limited to re- (5) Insurance.
search, medical, scientific or other
technical activities. Examples include 200.52 Hospital.
office equipment and furnishings, mod- Hospital means a facility licensed as
ular offices, telephone networks, infor- a hospital under the law of any state or
mation technology equipment and sys- a facility operated as a hospital by the
tems, air conditioning equipment, re- United States, a state, or a subdivision
production and printing equipment, of a state.
and motor vehicles. See also Equip-
ment and Special Purpose Equipment. 200.53 Improper payment.
200.49 Generally Accepted Account- (a) Improper payment means any pay-
ing Principles (GAAP). ment that should not have been made
GAAP has the meaning specified in or that was made in an incorrect
accounting standards issued by the amount (including overpayments and
Government Accounting Standards underpayments) under statutory, con-
Board (GASB) and the Financial Ac- tractual, administrative, or other le-
counting Standards Board (FASB). gally applicable requirements; and
(b) Improper payment includes any
200.50 Generally Accepted Govern- payment to an ineligible party, any
ment Auditing Standards (GAGAS). payment for an ineligible good or serv-
GAGAS means generally accepted ice, any duplicate payment, any pay-
government auditing standards issued ment for a good or service not received
by the Comptroller General of the (except for such payments where au-
United States, which are applicable to thorized by law), any payment that
financial audits. does not account for credit for applica-
ble discounts, and any payment where
200.51 Grant agreement. insufficient or lack of documentation
Grant agreement means a legal instru- prevents a reviewer from discerning
ment of financial assistance between a whether a payment was proper.
Federal awarding agency or pass-
through entity and a non-Federal enti- 200.54 Indian tribe (or federally rec-
ognized Indian tribe).
ty that, consistent with 31 U.S.C. 6302,
6304: Indian tribe means any Indian tribe,
(a) Is used to enter into a relation- band, nation, or other organized group
ship the principal purpose of which is or community, including any Alaska
to transfer anything of value from the Native village or regional or village
Federal awarding agency or pass- corporation as defined in or established
through entity to the non-Federal enti- pursuant to the Alaska Native Claims
ty to carry out a public purpose au- Settlement Act (43 U.S.C. Chapter 33),
thorized by a law of the United States which is recognized as eligible for the
(see 31 U.S.C. 6101(3)); and not to ac- special programs and services provided
quire property or services for the Fed- by the United States to Indians be-
eral awarding agency or pass-through cause of their status as Indians (25
entitys direct benefit or use; U.S.C. 450b(e)). See annually published
(b) Is distinguished from a coopera- Bureau of Indian Affairs list of Indian
tive agreement in that it does not pro- Entities Recognized and Eligible to Re-
vide for substantial involvement be- ceive Services.
tween the Federal awarding agency or

pass-through entity and the non-Fed- 200.55 Institutions of Higher Edu-
eral entity in carrying out the activity cation (IHEs).
contemplated by the Federal award. IHE is defined at 20 U.S.C. 1001.
87
200.56 Indirect (facilities & adminis- to one or more indirect cost pools or
trative (F&A)) costs. final cost objectives. See also 200.28
Indirect (F&A) costs means those costs Cost objective and 200.44 Final cost
incurred for a common or joint purpose objective.
benefitting more than one cost objec-
tive, and not readily assignable to the 200.61 Internal controls.
cost objectives specifically benefitted, Internal controls means a process, im-
without effort disproportionate to the plemented by a non-Federal entity, de-
results achieved. To facilitate equi- signed to provide reasonable assurance
table distribution of indirect expenses regarding the achievement of objec-
to the cost objectives served, it may be tives in the following categories:
necessary to establish a number of (a) Effectiveness and efficiency of op-
pools of indirect (F&A) costs. Indirect erations;
(F&A) cost pools should be distributed (b) Reliability of reporting for inter-
to benefitted cost objectives on bases nal and external use; and
that will produce an equitable result in (c) Compliance with applicable laws
consideration of relative benefits de- and regulations.
rived.
200.62 Internal control over compli-
200.57 Indirect cost rate proposal. ance requirements for Federal
Indirect cost rate proposal means the awards.
documentation prepared by a non-Fed- Internal control over compliance re-
eral entity to substantiate its request quirements for Federal awards means a
for the establishment of an indirect process implemented by a non-Federal
cost rate as described in Appendix III entity designed to provide reasonable
to Part 200Indirect (F&A) Costs Iden- assurance regarding the achievement
tification and Assignment, and Rate of the following objectives for Federal
Determination for Institutions of High- awards:
er Education (IHEs) through Appendix (a) Transactions are properly re-
VII to Part 200States and Local Gov- corded and accounted for, in order to:
ernment and Indian Tribe Indirect Cost (1) Permit the preparation of reliable
Proposals of this part. financial statements and Federal re-
200.58 Information technology sys- ports;
tems. (2) Maintain accountability over as-
sets; and
Information technology systems means
computing devices, ancillary equip- (3) Demonstrate compliance with
ment, software, firmware, and similar Federal statutes, regulations, and the
procedures, services (including support terms and conditions of the Federal
services), and related resources. See award;
also 200.20 Computing devices and (b) Transactions are executed in com-
200.33 Equipment. pliance with:
(1) Federal statutes, regulations, and
200.59 Intangible property. the terms and conditions of the Federal
Intangible property means property award that could have a direct and ma-
having no physical existence, such as terial effect on a Federal program; and
trademarks, copyrights, patents and (2) Any other Federal statutes and
patent applications and property, such regulations that are identified in the
as loans, notes and other debt instru- Compliance Supplement; and
ments, lease agreements, stock and (c) Funds, property, and other assets
other instruments of property owner- are safeguarded against loss from un-
ship (whether the property is tangible authorized use or disposition.
or intangible).
200.63 Loan.
200.60 Intermediate cost objective. Loan means a Federal loan or loan
Intermediate cost objective means a guarantee received or administered by

cost objective that is used to accumu- a non-Federal entity, except as used in
late indirect costs or service center the definition of 200.80 Program in-
costs that are subsequently allocated come.
88
OMB Guidance 200.68
(a) The term direct loan means a (m) Any other agency or instrumen-
disbursement of funds by the Federal tality of a multi-, regional, or intra-
government to a non-Federal borrower state or local government.
under a contract that requires the re-
payment of such funds with or without 200.65 Major program.
interest. The term includes the pur- Major program means a Federal pro-
chase of, or participation in, a loan gram determined by the auditor to be a
made by another lender and financing major program in accordance with
arrangements that defer payment for 200.518 Major program determination
more than 90 days, including the sale of or a program identified as a major pro-
a Federal government asset on credit gram by a Federal awarding agency or
terms. The term does not include the pass-through entity in accordance with
acquisition of a federally guaranteed 200.503 Relation to other audit re-
loan in satisfaction of default claims or quirements, paragraph (e).
the price support loans of the Com-
modity Credit Corporation. 200.66 Management decision.
(b) The term direct loan obligation Management decision means the eval-
means a binding agreement by a Fed- uation by the Federal awarding agency
eral awarding agency to make a direct or pass-through entity of the audit
loan when specified conditions are ful- findings and corrective action plan and
filled by the borrower. the issuance of a written decision to
(c) The term loan guarantee means the auditee as to what corrective ac-
any Federal government guarantee, in- tion is necessary.
surance, or other pledge with respect
to the payment of all or a part of the 200.67 Micro-purchase.
principal or interest on any debt obli- Micro-purchase means a purchase of
gation of a non-Federal borrower to a supplies or services using simplified ac-
non-Federal lender, but does not in- quisition procedures, the aggregate
clude the insurance of deposits, shares, amount of which does not exceed the
or other withdrawable accounts in fi- micro-purchase threshold. Micro-pur-
nancial institutions. chase procedures comprise a subset of a
(d) The term loan guarantee com- non-Federal entitys small purchase
mitment means a binding agreement procedures. The non-Federal entity
by a Federal awarding agency to make uses such procedures in order to expe-
a loan guarantee when specified condi- dite the completion of its lowest-dollar
tions are fulfilled by the borrower, the small purchase transactions and mini-
lender, or any other party to the guar- mize the associated administrative
antee agreement. burden and cost. The micro-purchase
threshold is set by the Federal Acquisi-
200.64 Local government. tion Regulation at 48 CFR Subpart 2.1
Local government means any unit of (Definitions). It is $3,000 except as oth-
government within a state, including a: erwise discussed in Subpart 2.1 of that
(a) County; regulation, but this threshold is peri-
odically adjusted for inflation.
(b) Borough;
(c) Municipality; 200.68 Modified Total Direct Cost
(d) City; (MTDC).
(e) Town; MTDC means all direct salaries and
(f) Township; wages, applicable fringe benefits, mate-
(g) Parish; rials and supplies, services, travel, and
(h) Local public authority, including subawards and subcontracts up to the
any public housing agency under the first $25,000 of each subaward or sub-
United States Housing Act of 1937; contract (regardless of the period of
(i) Special district; performance of the subawards and sub-
(j) School district; contracts under the award). MTDC ex-
(k) Intrastate district; cludes equipment, capital expendi-

(l) Council of governments, whether tures, charges for patient care, rental
or not incorporated as a nonprofit cor- costs, tuition remission, scholarships
poration under state law; and and fellowships, participant support
89
costs and the portion of each subaward sight agency for audit and the process
and subcontract in excess of $25,000. for any reassignments are described in
Other items may only be excluded 200.513 Responsibilities, paragraph (b).
when necessary to avoid a serious in-
equity in the distribution of indirect 200.74 Pass-through entity.
costs, and with the approval of the cog- Pass-through entity means a non-Fed-
nizant agency for indirect costs. eral entity that provides a subaward to
a subrecipient to carry out part of a
200.69 Non-Federal entity. Federal program.
Non-Federal entity means a state,
local government, Indian tribe, institu- 200.75 Participant support costs.
tion of higher education (IHE), or non- Participant support costs means direct
profit organization that carries out a costs for items such as stipends or sub-
Federal award as a recipient or subsistence allowances, travel allowances,
recipient. and registration fees paid to or on be-
half of participants or trainees (but not
200.70 Nonprofit organization. employees) in connection with con-
Nonprofit organization means any cor- ferences, or training projects.
poration, trust, association, coopera-
tive, or other organization, not includ- 200.76 Performance goal.
ing IHEs, that: Performance goal means a target level
(a) Is operated primarily for sci- of performance expressed as a tangible,
entific, educational, service, chari- measurable objective, against which
table, or similar purposes in the public actual achievement can be compared,
interest; including a goal expressed as a quan-
(b) Is not organized primarily for titative standard, value, or rate. In
profit; and some instances (e.g., discretionary re-
(c) Uses net proceeds to maintain, search awards), this may be limited to
improve, or expand the operations of the requirement to submit technical
the organization. performance reports (to be evaluated in
accordance with agency policy).
200.71 Obligations.
When used in connection with a non- 200.77 Period of performance.
Federal entitys utilization of funds Period of performance means the time
under a Federal award, obligations during which the non-Federal entity
means orders placed for property and may incur new obligations to carry out
services, contracts and subawards the work authorized under the Federal
made, and similar transactions during award. The Federal awarding agency or
a given period that require payment by pass-through entity must include start
the non-Federal entity during the same and end dates of the period of perform-
or a future period. ance in the Federal award (see 200.210
Information contained in a Federal
200.72 Office of Management and award paragraph (a)(5) and 200.331 Re-
Budget (OMB). quirements for pass-through entities,
OMB means the Executive Office of paragraph (a)(1)(iv)).
the President, Office of Management
and Budget. 200.78 Personal property.
Personal property means property
200.73 Oversight agency for audit. other than real property. It may be
Oversight agency for audit means the tangible, having physical existence, or
Federal awarding agency that provides intangible.
the predominant amount of funding di-
rectly to a non-Federal entity not as- 200.79 Personally Identifiable Infor-
signed a cognizant agency for audit. mation (PII).
When there is no direct funding, the PII means information that can be
Federal awarding agency which is the used to distinguish or trace an individ-

predominant source of pass-through uals identity, either alone or when
funding must assume the oversight re- combined with other personal or iden-
sponsibilities. The duties of the over- tifying information that is linked or
90
OMB Guidance 200.86
linkable to a specific individual. Some 200.82 Protected Personally Identifi-

information that is considered to be able Information (Protected PII).
PII is available in public sources such Protected PII means an individuals
as telephone books, public Web sites, first name or first initial and last name
and university listings. This type of in- in combination with any one or more
formation is considered to be Public of types of information, including, but
PII and includes, for example, first and not limited to, social security number,
last name, address, work telephone passport number, credit card numbers,
number, email address, home telephone clearances, bank numbers, biometrics,
number, and general educational cre- date and place of birth, mothers maid-
dentials. The definition of PII is not en name, criminal, medical and finan-
anchored to any single category of in- cial records, educational transcripts.
formation or technology. Rather, it re- This does not include PII that is re-
quires a case-by-case assessment of the quired by law to be disclosed. (See also
specific risk that an individual can be 200.79 Personally Identifiable Informa-
identified. Non-PII can become PII tion (PII)).
whenever additional information is
made publicly available, in any me- 200.83 Project cost.
dium and from any source, that, when
Project cost means total allowable
combined with other available infor-
costs incurred under a Federal award
mation, could be used to identify an in-
and all required cost sharing and vol-
dividual.
untary committed cost sharing, includ-
200.80 Program income. ing third-party contributions.
Program income means gross income 200.84 Questioned cost.
earned by the non-Federal entity that
Questioned cost means a cost that is
is directly generated by a supported ac-
questioned by the auditor because of an
tivity or earned as a result of the Fed-
audit finding:
eral award during the period of per-
(a) Which resulted from a violation
formance. (See 200.77 Period of per-
or possible violation of a statute, regu-
formance.) Program income includes
lation, or the terms and conditions of a
but is not limited to income from fees
Federal award, including for funds used
for services performed, the use or rent-
to match Federal funds;
al or real or personal property acquired
under Federal awards, the sale of com- (b) Where the costs, at the time of
modities or items fabricated under a the audit, are not supported by ade-
Federal award, license fees and royal- quate documentation; or
ties on patents and copyrights, and (c) Where the costs incurred appear
principal and interest on loans made unreasonable and do not reflect the ac-
with Federal award funds. Interest tions a prudent person would take in
earned on advances of Federal funds is the circumstances.
not program income. Except as other- 200.85 Real property.
wise provided in Federal statutes, regu-
lations, or the terms and conditions of Real property means land, including
the Federal award, program income land improvements, structures and ap-
does not include rebates, credits, dis- purtenances thereto, but excludes
counts, and interest earned on any of moveable machinery and equipment.
them. See also 200.407 Prior written
200.86 Recipient.
approval (prior approval). See also 35
U.S.C. 200212 Disposition of Rights in Recipient means a non-Federal entity
Educational Awards applies to inven- that receives a Federal award directly
tions made under Federal awards. from a Federal awarding agency to
carry out an activity under a Federal
200.81 Property. program. The term recipient does not

Property means real property or per- include subrecipients. See also 200.69
sonal property. Non-Federal entity.
91
200.87 Research and Development Commonwealth of Puerto Rico, the

(R&D). Virgin Islands, Guam, American
R&D means all research activities, Samoa, the Commonwealth of the
both basic and applied, and all develop- Northern Mariana Islands, and any
ment activities that are performed by agency or instrumentality thereof ex-
non-Federal entities. The term re- clusive of local governments.
search also includes activities involv-
ing the training of individuals in re- 200.91 Student Financial Aid (SFA).
search techniques where such activities SFA means Federal awards under
utilize the same facilities as other re- those programs of general student as-
search and development activities and sistance, such as those authorized by
where such activities are not included Title IV of the Higher Education Act of
in the instruction function. 1965, as amended, (20 U.S.C. 10701099d),
Research is defined as a system- which are administered by the U.S. De-
atic study directed toward fuller sci- partment of Education, and similar
entific knowledge or understanding of programs provided by other Federal
the subject studied. Development is agencies. It does not include Federal
the systematic use of knowledge and awards under programs that provide
understanding gained from research di- fellowships or similar Federal awards
rected toward the production of useful to students on a competitive basis, or
materials, devices, systems, or meth- for specified studies or research.
ods, including design and development
of prototypes and processes. 200.92 Subaward.
200.88 Simplified acquisition thresh- Subaward means an award provided
old. by a pass-through entity to a sub-
recipient for the subrecipient to carry
Simplified acquisition threshold means
out part of a Federal award received by
the dollar amount below which a non-
the pass-through entity. It does not in-
Federal entity may purchase property
clude payments to a contractor or pay-
or services using small purchase meth-
ments to an individual that is a bene-
ods. Non-Federal entities adopt small
ficiary of a Federal program. A
purchase procedures in order to expe-
dite the purchase of items costing less subaward may be provided through any
than the simplified acquisition thresh- form of legal agreement, including an
old. The simplified acquisition thresh- agreement that the pass-through enti-
old is set by the Federal Acquisition ty considers a contract.
Regulation at 48 CFR Subpart 2.1 (Defi-
200.93 Subrecipient.
nitions) and in accordance with 41
U.S.C. 1908. As of the publication of Subrecipient means a non-Federal en-
this part, the simplified acquisition tity that receives a subaward from a
threshold is $150,000, but this threshold pass-through entity to carry out part
is periodically adjusted for inflation. of a Federal program; but does not in-
(Also see definition of 200.67 Micro- clude an individual that is a bene-
purchase.) ficiary of such program. A subrecipient
may also be a recipient of other Fed-
200.89 Special purpose equipment. eral awards directly from a Federal
Special purpose equipment means awarding agency.
equipment which is used only for re-
search, medical, scientific, or other 200.94 Supplies.
technical activities. Examples of spe- Supplies means all tangible personal
cial purpose equipment include micro- property other than those described in
scopes, x-ray machines, surgical instru- 200.33 Equipment. A computing device
ments, and spectrometers. See also is a supply if the acquisition cost is
200.33 Equipment and 200.48 General less than the lesser of the capitaliza-
purpose equipment. tion level established by the non-Fed-
eral entity for financial statement pur-

200.90 State. poses or $5,000, regardless of the length
State means any state of the United of its useful life. See also 200.20 Com-
States, the District of Columbia, the puting devices and 200.33 Equipment.
92
OMB Guidance 200.100
200.95 Termination. Federal awards to non-Federal entities,

as described in 200.101 Applicability.
Termination means the ending of a
Federal awarding agencies must not
Federal award, in whole or in part at
impose additional or inconsistent re-
any time prior to the planned end of
quirements, except as provided in
period of performance.
200.102 Exceptions and 200.210 Infor-
200.96 Third-party in-kind contribu- mation contained in a Federal award,
tions. or unless specifically required by Fed-
eral statute, regulation, or Executive
Third-party in-kind contributions
Order.
means the value of non-cash contribu-
(2) This part provides the basis for a
tions (i.e., property or services) that
systematic and periodic collection and
(a) Benefit a federally assisted
uniform submission by Federal agen-
project or program; and
cies of information on all Federal fi-
(b) Are contributed by non-Federal
nancial assistance programs to the Of-
third parties, without charge, to a non-
fice of Management and Budget (OMB).
Federal entity under a Federal award.
It also establishes Federal policies re-
200.97 Unliquidated obligations. lated to the delivery of this informa-
tion to the public, including through
Unliquidated obligations means, for fi- the use of electronic media. It pre-
nancial reports prepared on a cash scribes the manner in which General
basis, obligations incurred by the non- Services Administration (GSA), OMB,
Federal entity that have not been paid and Federal agencies that administer
(liquidated). For reports prepared on an Federal financial assistance programs
accrual expenditure basis, these are ob- are to carry out their statutory respon-
ligations incurred by the non-Federal sibilities under the Federal Program
entity for which an expenditure has Information Act (31 U.S.C. 61016106).
not been recorded. (b) Administrative requirements.
200.98 Unobligated balance. Subparts B through D of this part set
forth the uniform administrative re-
Unobligated balance means the quirements for grant and cooperative
amount of funds under a Federal award agreements, including the require-
that the non-Federal entity has not ob- ments for Federal awarding agency
ligated. The amount is computed by management of Federal grant pro-
subtracting the cumulative amount of grams before the Federal award has
the non-Federal entitys unliquidated been made, and the requirements Fed-
obligations and expenditures of funds eral awarding agencies may impose on
under the Federal award from the cu- non-Federal entities in the Federal
mulative amount of the funds that the award.
Federal awarding agency or pass- (c) Cost Principles. Subpart ECost
through entity authorized the non-Fed- Principles of this part establishes prin-
eral entity to obligate. ciples for determining the allowable
costs incurred by non-Federal entities
200.99 Voluntary committed cost
sharing. under Federal awards. The principles
are for the purpose of cost determina-
Voluntary committed cost sharing tion and are not intended to identify
means cost sharing specifically pledged the circumstances or dictate the extent
on a voluntary basis in the proposals of Federal government participation in
budget or the Federal award on the the financing of a particular program
part of the non-Federal entity and that or project. The principles are designed
becomes a binding requirement of Fed- to provide that Federal awards bear
eral award. their fair share of cost recognized
under these principles except where re-
Subpart BGeneral Provisions stricted or prohibited by statute.
(d) Single Audit Requirements and
200.100 Purpose. Audit Follow-up. Subpart FAudit Re-

(a)(1) This part establishes uniform quirements of this part is issued pursu-
administrative requirements, cost ant to the Single Audit Act Amend-
principles, and audit requirements for ments of 1996, (31 U.S.C. 75017507). It
93
sets forth standards for obtaining con- scribes what portions of this part apply
sistency and uniformity among Federal to which types of Federal awards. The
agencies for the audit of non-Federal terms and conditions of Federal awards
entities expending Federal awards. (including this part) flow down to sub-
These provisions also provide the poli- awards to subrecipients unless a par-
cies and procedures for Federal award- ticular section of this part or the terms
ing agencies and pass-through entities and conditions of the Federal award
when using the results of these audits. specifically indicate otherwise. This
(e) For OMB guidance to Federal means that non-Federal entities must
awarding agencies on Challenges and
comply with requirements in this part
Prizes, please see M1011 Guidance on
regardless of whether the non-Federal
the Use of Challenges and Prizes to
Promote Open Government, issued entity is a recipient or subrecipient of
March 8, 2010, or its successor. a Federal award. Pass-through entities
must comply with the requirements de-
200.101 Applicability. scribed in Subpart DPost Federal
(a) General applicability to Federal Award Requirements of this part,
agencies. The requirements established 200.330 Subrecipient and contractor
in this part apply to Federal agencies determinations through 200.332 Fixed
that make Federal awards to non-Fed- amount Subawards, but not any re-
eral entities. These requirements are quirements in this part directed to-
applicable to all costs related to Fed- wards Federal awarding agencies un-
eral awards. less the requirements of this part or
(b)(1) Applicability to different types of the terms and conditions of the Federal
Federal awards. The following table de- award indicate otherwise.
Are applicable to the following types of Are NOT applicable to the following
The following portions of the part: Federal Awards (except as noted in types of Federal Awards:
paragraphs (d) and (e) of this section):
This table must be read along with the other provisions of this section
Authority: 31 U.S.C. 503

Subpart AAcronyms and Definitions All.
Subpart BGeneral Provisions, except All.
for 200.111 English language,
200.112 Conflict of interest, 200.113
Mandatory disclosures
200.111 English language, 200.112 Grant agreements and cooperative Agreements for: loans, loan guaran-
Conflict of interest, and 200.113 agreements tees, interest subsidies, and insur-
ance.
Mandatory disclosures Cost-reimbursement contracts award-
ed under the Federal Acquisition Reg-
ulations and cost-reimbursement sub-
contracts under these contracts.
Subparts CD, except for Subrecipient Grant agreements and cooperative Agreements for: loans, loan guaran-
Monitoring and Management agreements tees, interest subsidies, and insur-
ance.
Cost-reimbursement contracts award-
ed under the Federal Acquisition Reg-
ulations and cost-reimbursement sub-
contracts under these contracts.
Subpart DPost Federal Award Require- All.
ments, Subrecipient Monitoring and
Management
Subpart ECost Principles Grant agreements and cooperative Grant agreements and cooperative
agreements, except those providing agreements providing food commod-
food commodities ities.
Cost-reimbursement contracts award- Fixed amount awards.
ed under the Federal Acquisition Reg- Agreements for: loans, loan guaran-
ulations and cost-reimbursement sub- tees, interest subsidies, insurance.
contracts under these contracts in ac- Federal awards to hospitals (see Ap-
cordance with the FAR pendix IX to Part 200Hospital Cost
Principles).
Subpart FAudit Requirements All.
94
(2) Federal award of cost-reimbursement nancial assistance programs and

contract under the FAR to a non-Federal 200.330 Subrecipient and contractor
entity. When a non-Federal entity is determinations through 200.332 Fixed
awarded a cost-reimbursement con- amount Subawards of Subpart DPost
tract, only Subpart DPost Federal Federal Award Requirements of this
Award Requirements of this part, part, the requirements in Subpart C
200.330 Subrecipient and contractor Pre-Federal Award Requirements and
determinations through 200.332 Fixed Contents of Federal Awards, Subpart
amount Subawards (in addition to any DPost Federal Award Requirements
FAR related requirements for of this part, and Subpart ECost Prin-
subaward monitoring), Subpart E ciples of this part do not apply to the
Cost Principles of this part and Sub- following programs:
part FAudit Requirements of this (1) The block grant awards author-
part are incorporated by reference into ized by the Omnibus Budget Reconcili-
the contract. However, when the Cost ation Act of 1981 (including Community
Accounting Standards (CAS) are appli- Services; Preventive Health and Health
cable to the contract, they take prece- Services; Alcohol, Drug Abuse, and
dence over the requirements of this Mental Health Services; Maternal and
part except for Subpart FAudit Re- Child Health Services; Social Services;
quirements of this part when they are Low-Income Home Energy Assistance;
in conflict. In addition, costs that are States Program of Community Devel-
made unallowable under 10 U.S.C. opment Block Grant Awards for Small
2324(e) and 41 U.S.C. 4304(a) as described Cities; and Elementary and Secondary
in the FAR subpart 31.2 and subpart Education other than programs admin-
31.603 are always unallowable. For re- istered by the Secretary of Education
quirements other than those covered in under title V, subtitle D, chapter 2,
Subpart DPost Federal Award Re- section 583the Secretarys discre-
quirements of this part, 200.330 Sub- tionary award program) and both the
recipient and contractor determina- Alcohol and Drug Abuse Treatment
tions through 200.332 Fixed amount and Rehabilitation Block Grant Award
Subawards, Subpart ECost Principles (42 U.S.C. 300x21 to 300x35 and 42
of this part and Subpart FAudit Re- U.S.C. 300x51 to 300x64) and the Mental
quirements of this part, the terms of Health Service for the Homeless Block
the contract and the FAR apply. Grant Award (42 U.S.C. 300x to 300x9)
(3) With the exception of Subpart F under the Public Health Services Act.
Audit Requirements of this part, which (2) Federal awards to local education
is required by the Single Audit Act, in agencies under 20 U.S.C. 77027703b,
any circumstances where the provi- (portions of the Impact Aid program);
sions of Federal statutes or regulations (3) Payments under the Department
differ from the provisions of this part, of Veterans Affairs State Home Per
the provision of the Federal statutes or Diem Program (38 U.S.C. 1741); and
regulations govern. This includes, for (4) Federal awards authorized under
agreements with Indian tribes, the pro- the Child Care and Development Block
visions of the Indian Self-Determina- Grant Act of 1990, as amended:
tion and Education and Assistance Act (i) Child Care and Development Block
(ISDEAA), as amended, 25 U.S.C 450 Grant (42 U.S.C. 9858)
458ddd2. (ii) Child Care Mandatory and Match-
(c) Federal agencies may apply sub- ing Funds of the Child Care and Devel-
parts A through E of this part to for- opment Fund (42 U.S.C. 9858)
profit entities, foreign public entities, (e) Except for 200.202 Requirement
or foreign organizations, except where to provide public notice of Federal fi-
the Federal awarding agency deter- nancial assistance programs the guid-
mines that the application these sub- ance in Subpart CPre-Federal Award
parts would be inconsistent with the Requirements and Contents of Federal
international obligations of the United Awards of this part does not apply to
States or the statute or regulations of the following programs:

a foreign government. (1) Entitlement Federal awards to
(d) Except for 200.202 Requirement carry out the following programs of the
to provide public notice of Federal fi- Social Security Act:
95
(i) Temporary Assistance to Needy (iii) State Administrative Expenses

Families (title IVA of the Social Secu- (section 7 of the Act, 42 U.S.C. section
rity Act, 42 U.S.C. 601619); 1776).
(ii) Child Support Enforcement and (6) Entitlement awards for State Ad-
Establishment of Paternity (title IVD ministrative Expenses under The Food
of the Social Security Act, 42 U.S.C. and Nutrition Act of 2008 (section 16 of
651669b); the Act, 7 U.S.C. 2025).
(iii) Foster Care and Adoption Assist- (7) Non-discretionary Federal awards
ance (title IVE of the Act, 42 U.S.C. under the following non-entitlement
670679c); programs:
(iv) Aid to the Aged, Blind, and Dis- (i) Special Supplemental Nutrition
abled (titles I, X, XIV, and XVIAABD Program for Women, Infants and Chil-
of the Act, as amended); and dren (section 17 of the Child Nutrition
(v) Medical Assistance (Medicaid) Act of 1966) 42 U.S.C. section 1786;
(title XIX of the Act, 42 U.S.C. 1396 (ii) The Emergency Food Assistance
1396w5) not including the State Med- Programs (Emergency Food Assistance
icaid Fraud Control program author- Act of 1983) 7 U.S.C. section 7501 note;
ized by section 1903(a)(6)(B) of the So- and
cial Security Act (42 U.S.C. (iii) Commodity Supplemental Food
1396b(a)(6)(B)). Program (section 5 of the Agriculture
(2) A Federal award for an experi- and Consumer Protection Act of 1973) 7
mental, pilot, or demonstration project U.S.C. section 612c note.
that is also supported by a Federal 200.102 Exceptions.
award listed in paragraph (e)(1) of this
section; (a) With the exception of Subpart F
(3) Federal awards under subsection Audit Requirements of this part, OMB
412(e) of the Immigration and Nation- may allow exceptions for classes of
ality Act and subsection 501(a) of the Federal awards or non-Federal entities
Refugee Education Assistance Act of subject to the requirements of this part
1980 (Pub. L. 96422, 94 Stat. 1809), for when exceptions are not prohibited by
cash assistance, medical assistance, statute. However, in the interest of
and supplemental security income ben- maximum uniformity, exceptions from
efits to refugees and entrants and the the requirements of this part will be
administrative costs of providing the permitted only in unusual cir-
assistance and benefits (8 U.S.C. cumstances. Exceptions for classes of
1522(e)); Federal awards or non-Federal entities
(4) Entitlement awards under the fol- will be published on the OMB Web site
lowing programs of The National at www.whitehouse.gov/omb.
(b) Exceptions on a case-by-case basis
School Lunch Act:
for individual non-Federal entities may
(i) National School Lunch Program
be authorized by the Federal awarding
(section 4 of the Act, 42 U.S.C. 1753),
agency or cognizant agency for indirect
(ii) Commodity Assistance (section 6 costs except where otherwise required
of the Act, 42 U.S.C. 1755), by law or where OMB or other approval
(iii) Special Meal Assistance (section is expressly required by this part. No
11 of the Act, 42 U.S.C. 1759a), case-by-case exceptions may be grant-
(iv) Summer Food Service Program ed to the provisions of Subpart F
for Children (section 13 of the Act, 42 Audit Requirements of this part.
U.S.C. 1761), and (c) The Federal awarding agency may
(v) Child and Adult Care Food Pro- apply more restrictive requirements to
gram (section 17 of the Act, 42 U.S.C. a class of Federal awards or non-Fed-
1766). eral entities when approved by OMB,
(5) Entitlement awards under the fol- required by Federal statutes or regula-
lowing programs of The Child Nutri- tions except for the requirements in
tion Act of 1966: Subpart FAudit Requirements of this
(i) Special Milk Program (section 3 of part. A Federal awarding agency may
the Act, 42 U.S.C. 1772), apply less restrictive requirements
(ii) School Breakfast Program (sec- when making fixed amount awards as
tion 4 of the Act, 42 U.S.C. 1773), and defined in Subpart AAcronyms and
96
Definitions of this part, except for and Budget and the Domestic Policy
those requirements imposed by statute Council in the Executive Office of the
or in Subpart FAudit Requirements President.
of this part. (c) Subpart FAudit Requirements
(d) On a case-by-case basis, OMB will of this part is authorized under the
approve new strategies for Federal Single Audit Act Amendments of 1996,
awards when proposed by the Federal (31 U.S.C. 75017507).
awarding agency in accordance with
OMB guidance (such as M1317) to de- 200.104 Supersession.
velop additional evidence relevant to As described in 200.110 Effective/ap-
addressing important policy challenges plicability date, this part supersedes
or to promote cost-effectiveness in and the following OMB guidance documents
across Federal programs. Proposals and regulations under Title 2 of the
may draw on the innovative program Code of Federal Regulations:
designs discussed in M1317 to expand (a) A21, Cost Principles for Edu-
or improve the use of effective prac- cational Institutions (2 CFR part 220);
tices in delivering Federal financial as- (b) A87, Cost Principles for State,
sistance while also encouraging inno- Local and Indian Tribal Governments
vation in service delivery. Proposals (2 CFR part 225) and also FEDERAL REG-
submitted to OMB in accordance with ISTER notice 51 FR 552 (January 6, 1986);
M1317 may include requests to waive (c) A89, Federal Domestic Assist-
requirements other than those in Sub- ance Program Information;
part FAudit Requirements of this (d) A102, Grant Awards and Cooper-
part. ative Agreements with State and Local
Governments;
200.103 Authorities. (e) A110, Uniform Administrative
This part is issued under the fol- Requirements for Awards and Other
lowing authorities. Agreements with Institutions of Higher
(a) Subpart BGeneral Provisions of Education, Hospitals, and Other Non-
this part through Subpart DPost Fed- profit Organizations (codified at 2
eral Award Requirements of this part CFR 215);
are authorized under 31 U.S.C. 503 (the (f) A122, Cost Principles for Non-
Chief Financial Officers Act, Functions Profit Organizations (2 CFR part 230);
of the Deputy Director for Manage- (g) A133, Audits of States, Local
ment), 31 U.S.C. 1111 (Improving Econ- Governments and Non-Profit Organiza-
omy and Efficiency of the United tions,; and
States Government), 41 U.S.C. 11011131 (h) Those sections of A50 related to
(the Office of Federal Procurement audits performed under Subpart F
Policy Act), Reorganization Plan No. 2 Audit Requirements of this part.
of 1970, and Executive Order 11541
(Prescribing the Duties of the Office 200.105 Effect on other issuances.
of Management and Budget and the Do- For Federal awards subject to this
mestic Policy Council in the Executive part, all administrative requirements,
Office of the President), the Single program manuals, handbooks and other
Audit Act Amendments of 1996, (31 non-regulatory materials that are in-
U.S.C. 75017507), as well as The Federal consistent with the requirements of
Program Information Act (Public Law this part must be superseded upon im-
95220 and Public Law 98169, as amend- plementation of this part by the Fed-
ed, codified at 31 U.S.C. 61016106). eral agency, except to the extent they
(b) Subpart ECost Principles of this are required by statute or authorized
part is authorized under the Budget in accordance with the provisions in
and Accounting Act of 1921, as amend- 200.102 Exceptions.
ed; the Budget and Accounting Proce-
dures Act of 1950, as amended (31 U.S.C. 200.106 Agency implementation.
11011125); the Chief Financial Officers The specific requirements and re-
Act of 1990 (31 U.S.C. 503504); Reorga- sponsibilities of Federal agencies and
nization Plan No. 2 of 1970; and Execu- non-Federal entities are set forth in
tive Order No. 11541, Prescribing the this part. Federal agencies making
Duties of the Office of Management Federal awards to non-Federal entities
97
must implement the language in the 200.111 English language.

Subpart CPre-Federal Award Re-
quirements and Contents of Federal (a) All Federal financial assistance
Awards of this part through Subpart announcements and Federal award in-
FAudit Requirements of this part in formation must be in the English lan-
codified regulations unless different guage. Applications must be submitted
provisions are required by Federal stat- in the English language and must be in
ute or are approved by OMB. the terms of U.S. dollars. If the Federal
awarding agency receives applications
200.107 OMB responsibilities. in another currency, the Federal
OMB will review Federal agency reg- awarding agency will evaluate the ap-
ulations and implementation of this plication by converting the foreign cur-
part, and will provide interpretations rency to United States currency using
of policy requirements and assistance the date specified for receipt of the ap-
to ensure effective and efficient imple- plication.
mentation. Any exceptions will be sub- (b) Non-Federal entities may trans-
ject to approval by OMB. Exceptions late the Federal award and other docu-
will only be made in particular cases ments into another language. In the
where adequate justification is pre- event of inconsistency between any
sented.
terms and conditions of the Federal
200.108 Inquiries. award and any translation into another
language, the English language mean-
Inquiries concerning this part may be
ing will control. Where a significant
directed to the Office of Federal Finan-
cial Management Office of Manage- portion of the non-Federal entitys em-
ment and Budget, in Washington, DC. ployees who are working on the Fed-
Non-Federal entities inquiries should eral award are not fluent in English,
be addressed to the Federal awarding the non-Federal entity must provide
agency, cognizant agency for indirect the Federal award in English and the
costs, cognizant or oversight agency language(s) with which employees are
for audit, or pass-through entity as ap- more familiar.
propriate.
200.112 Conflict of interest.
200.109 Review date. The Federal awarding agency must
OMB will review this part at least establish conflict of interest policies
every five years after December 26, for Federal awards. The non-Federal
2013. entity must disclose in writing any po-
tential conflict of interest to the Fed-
200.110 Effective/applicability date.
eral awarding agency or pass-through
(a) The standards set forth in this entity in accordance with applicable
part which affect administration of Federal awarding agency policy.
Federal awards issued by Federal agen-
cies become effective once imple- 200.113 Mandatory disclosures.
mented by Federal agencies or when
any future amendment to this part be- The non-Federal entity or applicant
comes final. Federal agencies must im- for a Federal award must disclose, in a
plement the policies and procedures ap- timely manner, in writing to the Fed-
plicable to Federal awards by promul- eral awarding agency or pass-through
gating a regulation to be effective by entity all violations of Federal crimi-
December 26, 2014 unless different pro- nal law involving fraud, bribery, or
visions are required by statute or ap- gratuity violations potentially affect-
proved by OMB. ing the Federal award. Failure to make
(b) The standards set forth in Sub- required disclosures can result in any
part FAudit Requirements of this of the remedies described in 200.338
part and any other standards which Remedies for noncompliance, including
apply directly to Federal agencies will suspension or debarment. (See also 2

be effective December 26, 2013 and will CFR part 180 and 31 U.S.C. 3321).
apply to audits of fiscal years begin-
ning on or after December 26, 2014.
98
Subpart CPre-Federal Award ty may use fixed amount awards if the

Requirements and Contents of project scope is specific and if adequate
Federal Awards cost, historical, or unit pricing data is
available to establish a fixed amount
200.200 Purpose. award with assurance that the non-
(a) Sections 200.201 Use of grant Federal entity will realize no incre-
agreements (including fixed amount ment above actual cost. Some of the
awards), cooperative agreements, and ways in which the Federal award may
contracts through 200.208 Certifications be paid include, but are not limited to:
and representations. Prescribe instruc- (i) In several partial payments, the
tions and other pre-award matters to amount of each agreed upon in ad-
be used in the announcement and appli- vance, and the milestone or event
cation process. triggering the payment also agreed
(b) Use of 200.203 Notices of funding upon in advance, and set forth in the
opportunities, 200.204 Federal awarding Federal award;
agency review of merit of proposals, (ii) On a unit price basis, for a de-
200.205 Federal awarding agency review fined unit or units, at a defined price or
of risk posed by applicants, and 200.207 prices, agreed to in advance of perform-
Specific conditions, is required only for ance of the Federal award and set forth
competitive Federal awards, but may in the Federal award; or,
also be used by the Federal awarding (iii) In one payment at Federal award
agency for non-competitive awards completion.
where appropriate or where required by (2) A fixed amount award cannot be
Federal statute. used in programs which require manda-
tory cost sharing or match.
200.201 Use of grant agreements (in-
cluding fixed amount awards), co- (3) The non-Federal entity must cer-
operative agreements, and con- tify in writing to the Federal awarding
tracts. agency or pass-through entity at the
(a) The Federal awarding agency or end of the Federal award that the
pass-through entity must decide on the project or activity was completed or
appropriate instrument for the Federal the level of effort was expended. If the
award (i.e., grant agreement, coopera- required level of activity or effort was
tive agreement, or contract) in accord- not carried out, the amount of the Fed-
ance with the Federal Grant and Coop- eral award must be adjusted.
erative Agreement Act (31 U.S.C. 6301 (4) Periodic reports may be estab-
08). lished for each Federal award.
(b) Fixed Amount Awards. In addi- (5) Changes in principal investigator,
tion to the options described in para- project leader, project partner, or scope
graph (a) of this section, Federal of effort must receive the prior written
awarding agencies, or pass-through en- approval of the Federal awarding agen-
tities as permitted in 200.332 Fixed cy or pass-through entity.
amount subawards, may use fixed
amount awards (see 200.45 Fixed 200.202 Requirement to provide pub-
amount awards) to which the following lic notice of Federal financial as-
sistance programs.
conditions apply:
(1) Payments are based on meeting (a) The Federal awarding agency
specific requirements of the Federal must notify the public of Federal pro-
award. Accountability is based on per- grams in the Catalog of Federal Do-
formance and results. The Federal mestic Assistance (CFDA), maintained
award amount is negotiated using the by the General Services Administra-
cost principles (or other pricing infor- tion (GSA).
mation) as a guide. Except in the case (1) The CFDA, or any OMB-des-
of termination before completion of ignated replacement, is the single, au-
the Federal award, there is no govern- thoritative, governmentwide com-
mental review of the actual costs in- prehensive source of Federal financial
curred by the non-Federal entity in assistance program information pro-
performance of the award. The Federal duced by the executive branch of the
awarding agency or pass-through enti- Federal government.
99
(2) The information that the Federal for Federal awards under the program
awarding agency must submit to GSA (e.g., type of non-Federal entity); and
for approval by OMB is listed in para- (6) Applicability of Single Audit Re-
graph (b) of this section. GSA must quirements as required by Subpart F
prescribe the format for the submis- Audit Requirements of this part.
sion.
(3) The Federal awarding agency may 200.203 Notices of funding opportuni-
ties.
not award Federal financial assistance
without assigning it to a program that For competitive grants and coopera-
has been included in the CFDA as re- tive agreements, the Federal awarding
quired in this section unless there are agency must announce specific funding
exigent circumstances requiring other- opportunities by providing the fol-
wise, such as timing requirements im- lowing information in a public notice:
posed by statute. (a) Summary Information in Notices of
(b) For each program that awards Funding Opportunities. The Federal
discretionary Federal awards, non-dis- awarding agency must display the fol-
cretionary Federal awards, loans, in- lowing information posted on the OMB-
surance, or any other type of Federal designated governmentwide Web site
financial assistance, the Federal for finding and applying for Federal fi-
awarding agency must submit the fol- nancial assistance, in a location pre-
lowing information to GSA: ceding the full text of the announce-
ment:
(1) Program Description, Purpose,
(1) Federal Awarding Agency Name;
Goals and Measurement. A brief sum-
(2) Funding Opportunity Title;
mary of the statutory or regulatory re-
(3) Announcement Type (whether the
quirements of the program and its in-
funding opportunity is the initial an-
tended outcome. Where appropriate,
nouncement of this funding oppor-
the Program Description, Purpose,
tunity or a modification of a pre-
Goals, and Measurement should align
viously announced opportunity);
with the strategic goals and objectives
(4) Funding Opportunity Number (re-
within the Federal awarding agencys
quired, if applicable). If the Federal
performance plan and should support awarding agency has assigned or will
the Federal awarding agencys per- assign a number to the funding oppor-
formance measurement, management, tunity announcement, this number
and reporting as required by Part 6 of must be provided;
OMB Circular A11; (5) Catalog of Federal Financial As-
(2) Identification of whether the pro- sistance (CFDA) Number(s);
gram makes Federal awards on a dis- (6) Key Dates. Key dates include due
cretionary basis or the Federal awards dates for applications or Executive
are prescribed by Federal statute, such Order 12372 submissions, as well as for
as in the case of formula grants. any letters of intent or pre-applica-
(3) Projected total amount of funds tions. For any announcement issued
available for the program. Estimates before a programs application mate-
based on previous year funding are ac- rials are available, key dates also in-
ceptable if current appropriations are clude the date on which those mate-
not available at the time of the sub- rials will be released; and any other ad-
mission; ditional information, as deemed appli-
(4) Anticipated Source of Available cable by the relevant Federal awarding
Funds: The statutory authority for agency.
funding the program and, to the extent (b) The Federal awarding agency
possible, agency, sub-agency, or, if must generally make all funding op-
known, the specific program unit that portunities available for application
will issue the Federal awards, and asso- for at least 60 calendar days. The Fed-
ciated funding identifier (e.g., Treasury eral awarding agency may make a de-
Account Symbol(s)); termination to have a less than 60 cal-
(5) General Eligibility Requirements: endar day availability period but no

The statutory, regulatory or other eli- funding opportunity should be avail-
gibility factors or considerations that able for less than 30 calendar days un-
determine the applicants qualification less exigent circumstances require as
100
determined by the Federal awarding rity information, such as Federal

agency head or delegate. Awardee Performance and Integrity In-
(c) Full Text of Funding Opportunities. formation System (FAPIIS), Dun and
The Federal awarding agency must in- Bradstreet, and Do Not Pay. See also
clude the following information in the suspension and debarment require-
full text of each funding opportunity. ments at 2 CFR part 180 as well as indi-
For specific instructions on the con- vidual Federal agency suspension and
tent required in this section, refer to debarment regulations in title 2 of the
Appendix I to Part 200Full Text of Code of Federal Regulations.
Notice of Funding Opportunity to this (b) In addition, for competitive
part. grants or cooperative agreements, the
(1) Full programmatic description of Federal awarding agency must have in
the funding opportunity. place a framework for evaluating the
(2) Federal award information, in- risks posed by applicants before they
cluding sufficient information to help receive Federal awards. This evalua-
an applicant make an informed deci- tion may incorporate results of the
sion about whether to submit an appli- evaluation of the applicants eligibility
cation. (See also 200.414 Indirect or the quality of its application. If the
(F&A) costs, paragraph (b)). Federal awarding agency determines
(3) Specific eligibility information, that a Federal award will be made, spe-
including any factors or priorities that cial conditions that correspond to the
affect an applicants or its applica- degree of risk assessed may be applied
tions eligibility for selection. to the Federal award. Criteria to be
(4) Application Preparation and Sub- evaluated must be described in the an-
mission Information, including the ap- nouncement of funding opportunity de-
plicable submission dates and time. scribed in 200.203 Notices of funding
(5) Application Review Information opportunities.
including the criteria and process to be (c) In evaluating risks posed by appli-
used to evaluate applications. See also cants, the Federal awarding agency
200.205 Federal awarding agency re- may use a risk-based approach and
view of risk posed by applicants. See may consider any items such as the fol-
also 2 CFR part 27. lowing:
(6) Federal Award Administration In- (1) Financial stability;
formation. See also 200.210 Informa- (2) Quality of management systems
tion contained in a Federal award. and ability to meet the management
standards prescribed in this part;
200.204 Federal awarding agency re- (3) History of performance. The appli-
view of merit of proposals. cants record in managing Federal
For competitive grants or coopera- awards, if it is a prior recipient of Fed-
tive agreements, unless prohibited by eral awards, including timeliness of
Federal statute, the Federal awarding compliance with applicable reporting
agency must design and execute a requirements, conformance to the
merit review process for applications. terms and conditions of previous Fed-
This process must be described or in- eral awards, and if applicable, the ex-
corporated by reference in the applica- tent to which any previously awarded
ble funding opportunity (see Appendix I amounts will be expended prior to fu-
to this part, Full text of the Funding ture awards;
Opportunity.) See also 200.203 Notices (4) Reports and findings from audits
of funding opportunities. performed under Subpart FAudit Re-
quirements of this part or the reports
200.205 Federal awarding agency re- and findings of any other available au-
view of risk posed by applicants. dits; and
(a) Prior to making a Federal award, (5) The applicants ability to effec-
the Federal awarding agency is re- tively implement statutory, regu-
quired by 31 U.S.C. 3321 and 41 U.S.C. latory, or other requirements imposed
2313 note to review information avail- on non-Federal entities.

able through any OMB-designated re- (d) In addition to this review, the
positories of governmentwide eligi- Federal awarding agency must comply
bility qualification or financial integ- with the guidelines on governmentwide
101
suspension and debarment in 2 CFR (5) Requiring the non-Federal entity

part 180, and must require non-Federal to obtain technical or management as-
entities to comply with these provi- sistance; or
sions. These provisions restrict Federal (6) Establishing additional prior ap-
awards, subawards and contracts with provals.
certain parties that are debarred, sus- (b) The Federal awarding agency or
pended or otherwise excluded from or pass-through entity must notify the
ineligible for participation in Federal applicant or non-Federal entity as to:
programs or activities. (1) The nature of the additional re-
200.206 Standard application requirements;
quirements. (2) The reason why the additional re-
quirements are being imposed;
(a) Paperwork clearances. The Federal
awarding agency may only use applica- (3) The nature of the action needed to
tion information collections approved remove the additional requirement, if
by OMB under the Paperwork Reduc- applicable;
tion Act of 1995 and OMBs imple- (4) The time allowed for completing
menting regulations in 5 CFR part 1320, the actions if applicable, and
Controlling Paperwork Burdens on the (5) The method for requesting recon-
Public. Consistent with these require- sideration of the additional require-
ments, OMB will authorize additional ments imposed.
information collections only on a lim- (c) Any special conditions must be
ited basis. promptly removed once the conditions
(b) If applicable, the Federal award- that prompted them have been cor-
ing agency may inform applicants and rected.
recipients that they do not need to pro-
vide certain information otherwise re- 200.208 Certifications and represen-
quired by the relevant information col- tations.
lection. Unless prohibited by Federal statutes
or regulations, each Federal awarding
200.207 Specific conditions. agency or pass-through entity is au-
(a) Based on the criteria set forth in thorized to require the non-Federal en-
200.205 Federal awarding agency re- tity to submit certifications and rep-
view of risk posed by applicants or resentations required by Federal stat-
when an applicant or recipient has a utes, or regulations on an annual basis.
history of failure to comply with the Submission may be required more fre-
general or specific terms and condi- quently if the non-Federal entity fails
tions of a Federal award, or failure to to meet a requirement of a Federal
meet expected performance goals as de- award.
scribed in 200.210 Information con-
tained in a Federal award, or is not 200.209 Pre-award costs.
otherwise responsible, the Federal
For requirements on costs incurred
awarding agency or pass-through enti-
by the applicant prior to the start date
ty may impose additional specific
of the period of performance of the
award conditions as needed under the
Federal award, see 200.458 Pre-award
procedure specified in paragraph (b) of
costs.
this section. These additional Federal
award conditions may include items 200.210 Information contained in a
such as the following: Federal award.
(1) Requiring payments as reimburse-
ments rather than advance payments; A Federal award must include the
(2) Withholding authority to proceed following information:
to the next phase until receipt of evi- (a) General Federal Award Information.
dence of acceptable performance within The Federal awarding agency must in-
a given period of performance; clude the following general Federal
(3) Requiring additional, more de- award information in each Federal

tailed financial reports; award:
(4) Requiring additional project mon- (1) Recipient name (which must
itoring; match registered name in DUNS);
102
(2) Recipients DUNS number (see (4) Wherever the general terms and
200.32 Data Universal Numbering Sys- conditions are publicly available, the
tem (DUNS) number); Federal awarding agency must main-
(3) Unique Federal Award Identifica- tain an archive of previous versions of
tion Number (FAIN); the general terms and conditions, with
(4) Federal Award Date (see 200.39 effective dates, for use by the non-Fed-
Federal award date); eral entity, auditors, or others.
(5) Period of Performance Start and (c) Federal Awarding Agency, Program,
End Date; or Federal Award Specific Terms and
(6) Amount of Federal Funds Obli- Conditions. The Federal awarding agen-
gated by this action; cy may include with each Federal
(7) Total Amount of Federal Funds award any terms and conditions nec-
Obligated; essary to communicate requirements
(8) Total Amount of the Federal that are in addition to the require-
Award; ments outlined in the Federal awarding
(9) Budget Approved by the Federal agencys general terms and conditions.
Awarding Agency; Whenever practicable, these specific
(10) Total Approved Cost Sharing or terms and conditions also should be
Matching, where applicable; shared on a public Web site and in no-
(11) Federal award project descrip- tices of funding opportunities (as out-
tion, (to comply with statutory re- lined in 200.203 Notices of funding op-
quirements (e.g., FFATA)); portunities) in addition to being in-
(12) Name of Federal awarding agen- cluded in a Federal award. See also
cy and contact information for award- 200.206 Standard application require-
ing official, ments.
(13) CFDA Number and Name; (d) Federal Award Performance Goals.
(14) Identification of whether the The Federal awarding agency must in-
award is R&D; and clude in the Federal award an indica-
(15) Indirect cost rate for the Federal tion of the timing and scope of ex-
award (including if the de minimis rate pected performance by the non-Federal
is charged per 200.414 Indirect (F&A) entity as related to the outcomes in-
costs). tended to be achieved by the program.
(b) General Terms and Conditions (1) In some instances (e.g., discretionary
Federal awarding agencies must incor- research awards), this may be limited
porate the following general terms and to the requirement to submit technical
conditions either in the Federal award performance reports (to be evaluated in
or by reference, as applicable: accordance with Federal awarding
(i) Administrative requirements im- agency policy). Where appropriate, the
plemented by the Federal awarding Federal award may include specific
agency as specified in this part. performance goals, indicators, mile-
(ii) National policy requirements. stones, or expected outcomes (such as
These include statutory, executive outputs, or services performed or pub-
order, other Presidential directive, or lic impacts of any of these) with an ex-
regulatory requirements that apply by pected timeline for accomplishment.
specific reference and are not program- Reporting requirements must be clear-
specific. See 200.300 Statutory and na- ly articulated such that, where appro-
tional policy requirements. priate, performance during the execu-
(2) The Federal award must include tion of the Federal award has a stand-
wording to incorporate, by reference, ard against which non-Federal entity
the applicable set of general terms and performance can be measured. The
conditions. The reference must be to Federal awarding agency may include
the Web site at which the Federal program-specific requirements, as ap-
awarding agency maintains the general plicable. These requirements should be
terms and conditions. aligned with agency strategic goals,
(3) If a non-Federal entity requests a strategic objectives or performance

copy of the full text of the general goals that are relevant to the program.
terms and conditions, the Federal See also OMB Circular A11, Prepara-
awarding agency must provide it. tion, Submission and Execution of the
103
Budget Part 6 for definitions of stra- the Act for the non-Federal entity at 2
tegic objectives and performance goals. CFR part 25 Financial Assistance Use
(e) Any other information required of Universal Identifier and Central
by the Federal awarding agency. Contractor Registration and 2 CFR
part 170 Reporting Subaward and Exec-
200.211 Public access to Federal utive Compensation Information. See
award information.
also statutory requirements for whis-
(a) In accordance with statutory re- tleblower protections at 10 U.S.C. 2409,
quirements for Federal spending trans- 41 U.S.C. 4712, and 10 U.S.C. 2324, 41
parency (e.g., FFATA), except as noted U.S.C. 4304 and 4310.
in this section, for applicable Federal
awards the Federal awarding agency 200.301 Performance measurement.
must announce all Federal awards pub-
licly and publish the required informa- The Federal awarding agency must
tion on a publicly available OMB-des- require the recipient to use OMB-ap-
ignated governmentwide Web site (at proved governmentwide standard infor-
time of publication, mation collections when providing fi-
www.USAspending.gov). nancial and performance information.
(b) Nothing in this section may be As appropriate and in accordance with
construed as requiring the publication above mentioned information collec-
of information otherwise exempt under tions, the Federal awarding agency
the Freedom of Information Act (5 must require the recipient to relate fi-
U.S.C 552), or controlled unclassified nancial data to performance accom-
information pursuant to Executive plishments of the Federal award. Also,
Order 13556. in accordance with above mentioned
governmentwide standard information
Subpart DPost Federal Award collections, and when applicable, re-
Requirements cipients must also provide cost infor-
mation to demonstrate cost effective
STANDARDS FOR FINANCIAL AND practices (e.g., through unit cost data).
PROGRAM MANAGEMENT The recipients performance should be
measured in a way that will help the
200.300 Statutory and national policy Federal awarding agency and other
requirements.
non-Federal entities to improve pro-
(a) The Federal awarding agency gram outcomes, share lessons learned,
must manage and administer the Fed- and spread the adoption of promising
eral award in a manner so as to ensure practices. The Federal awarding agen-
that Federal funding is expended and cy should provide recipients with clear
associated programs are implemented performance goals, indicators, and
in full accordance with U.S. statutory milestones as described in 200.210 In-
and public policy requirements: includ- formation contained in a Federal
ing, but not limited to, those pro- award. Performance reporting fre-
tecting public welfare, the environ- quency and content should be estab-
ment, and prohibiting discrimination.
lished to not only allow the Federal
The Federal awarding agency must
awarding agency to understand the re-
communicate to the non-Federal enti-
cipient progress but also to facilitate
ty all relevant public policy require-
identification of promising practices
ments, including those in general ap-
among recipients and build the evi-
propriations provisions, and incor-
porate them either directly or by ref- dence upon which the Federal awarding
erence in the terms and conditions of agencys program and performance de-
the Federal award. cisions are made.
(b) The non-Federal entity is respon-
200.302 Financial management.
sible for complying with all require-
ments of the Federal award. For all (a) Each state must expend and ac-
Federal awards, this includes the provi- count for the Federal award in accord-
sions of FFATA, which includes re- ance with state laws and procedures for
quirements on executive compensation, expending and accounting for the
and also requirements implementing states own funds. In addition, the
104
states and the other non-Federal enti- (3) Records that identify adequately
tys financial management systems, in- the source and application of funds for
cluding records documenting compli- federally-funded activities. These
ance with Federal statutes, regula- records must contain information per-
tions, and the terms and conditions of taining to Federal awards, authoriza-
the Federal award, must be sufficient tions, obligations, unobligated bal-
to permit the preparation of reports re- ances, assets, expenditures, income and
quired by general and program-specific interest and be supported by source
terms and conditions; and the tracing documentation.
of funds to a level of expenditures ade- (4) Effective control over, and ac-
quate to establish that such funds have countability for, all funds, property,
been used according to the Federal and other assets. The non-Federal enti-
statutes, regulations, and the terms ty must adequately safeguard all assets
and conditions of the Federal award. and assure that they are used solely for
See also 200.450 Lobbying. authorized purposes. See 200.303 Inter-
(b) The financial management sys- nal controls.
tem of each non-Federal entity must (5) Comparison of expenditures with
provide for the following (see also budget amounts for each Federal
200.333 Retention requirements for award.
(6) Written procedures to implement
records, 200.334 Requests for transfer of
the requirements of 200.305 Payment.
records, 200.335 Methods for collection,
(7) Written procedures for deter-
transmission and storage of informa-
mining the allowability of costs in ac-
tion, 200.336 Access to records, and
cordance with Subpart ECost Prin-
200.337 Restrictions on public access to
ciples of this part and the terms and
records):
conditions of the Federal award.
(1) Identification, in its accounts, of
all Federal awards received and ex- 200.303 Internal controls.
pended and the Federal programs under
The non-Federal entity must:
which they were received. Federal pro- (a) Establish and maintain effective
gram and Federal award identification internal control over the Federal
must include, as applicable, the CFDA award that provides reasonable assur-
title and number, Federal award identi- ance that the non-Federal entity is
fication number and year, name of the managing the Federal award in compli-
Federal agency, and name of the pass- ance with Federal statutes, regula-
through entity, if any. tions, and the terms and conditions of
(2) Accurate, current, and complete the Federal award. These internal con-
disclosure of the financial results of trols should be in compliance with
each Federal award or program in ac- guidance in Standards for Internal
cordance with the reporting require- Control in the Federal Government
ments set forth in 200.327 Financial issued by the Comptroller General of
reporting and 200.328 Monitoring and the United States and the Internal
reporting program performance. If a Control Integrated Framework, issued
Federal awarding agency requires re- by the Committee of Sponsoring Orga-
porting on an accrual basis from a re- nizations of the Treadway Commission
cipient that maintains its records on (COSO).
other than an accrual basis, the recipi- (b) Comply with Federal statutes,
ent must not be required to establish regulations, and the terms and condi-
an accrual accounting system. This re- tions of the Federal awards.
cipient may develop accrual data for (c) Evaluate and monitor the non-
its reports on the basis of an analysis Federal entitys compliance with stat-
of the documentation on hand. Simi- ute, regulations and the terms and con-
larly, a pass-through entity must not ditions of Federal awards.
require a subrecipient to establish an (d) Take prompt action when in-
accrual accounting system and must stances of noncompliance are identified
allow the subrecipient to develop ac- including noncompliance identified in

crual data for its reports on the basis audit findings.
of an analysis of the documentation on (e) Take reasonable measures to safe-
hand. guard protected personally identifiable
105
information and other information the agencies must require recipients to use
Federal awarding agency or pass- only OMB-approved standard govern-
through entity designates as sensitive mentwide information collection re-
or the non-Federal entity considers quests to request payment.
sensitive consistent with applicable (1) The non-Federal entity must be
Federal, state and local laws regarding paid in advance, provided it maintains
privacy and obligations of confiden- or demonstrates the willingness to
tiality. maintain both written procedures that
minimize the time elapsing between
200.304 Bonds. the transfer of funds and disbursement
The Federal awarding agency may in- by the non-Federal entity, and finan-
clude a provision on bonding, insur- cial management systems that meet
ance, or both in the following cir- the standards for fund control and ac-
cumstances: countability as established in this part.
(a) Where the Federal government Advance payments to a non-Federal en-
guarantees or insures the repayment of tity must be limited to the minimum
money borrowed by the recipient, the amounts needed and be timed to be in
Federal awarding agency, at its discre- accordance with the actual, immediate
tion, may require adequate bonding cash requirements of the non-Federal
and insurance if the bonding and insur- entity in carrying out the purpose of
ance requirements of the non-Federal the approved program or project. The
entity are not deemed adequate to pro- timing and amount of advance pay-
tect the interest of the Federal governments must be as close as is adminis-
ment. tratively feasible to the actual dis-
(b) The Federal awarding agency may bursements by the non-Federal entity
require adequate fidelity bond coverage for direct program or project costs and
where the non-Federal entity lacks suf- the proportionate share of any allow-
ficient coverage to protect the Federal able indirect costs. The non-Federal
governments interest. entity must make timely payment to
(c) Where bonds are required in the contractors in accordance with the
situations described above, the bonds contract provisions.
must be obtained from companies hold- (2) Whenever possible, advance pay-
ing certificates of authority as accept- ments must be consolidated to cover
able sureties, as prescribed in 31 CFR anticipated cash needs for all Federal
Part 223, Surety Companies Doing awards made by the Federal awarding
Business with the United States. agency to the recipient.
(i) Advance payment mechanisms in-
200.305 Payment. clude, but are not limited to, Treasury
(a) For states, payments are gov- check and electronic funds transfer and
erned by Treasury-State CMIA agree- should comply with applicable guid-
ments and default procedures codified ance in 31 CFR part 208.
at 31 CFR Part 205 Rules and Proce- (ii) Non-Federal entities must be au-
dures for Efficient Federal-State Funds thorized to submit requests for advance
Transfers and TFM 4A2000 Overall payments and reimbursements at least
Disbursing Rules for All Federal Agen- monthly when electronic fund transfers
cies. are not used, and as often as they like
(b) For non-Federal entities other when electronic transfers are used, in
than states, payments methods must accordance with the provisions of the
minimize the time elapsing between Electronic Fund Transfer Act (15
the transfer of funds from the United U.S.C. 1601).
States Treasury or the pass-through (3) Reimbursement is the preferred
entity and the disbursement by the method when the requirements in para-
non-Federal entity whether the pay- graph (b) cannot be met, when the Fed-
ment is made by electronic funds eral awarding agency sets a specific
transfer, or issuance or redemption of condition per 200.207 Specific condi-
checks, warrants, or payment by other tions, or when the non-Federal entity

means. See also 200.302 Financial requests payment by reimbursement.
management paragraph (f). Except as This method may be used on any Fed-
noted elsewhere in this part, Federal eral award for construction, or if the
106
major portion of the construction be withheld at any time during the pe-
project is accomplished through pri- riod of performance unless the condi-
vate market financing or Federal tions of 200.207 Specific conditions,
loans, and the Federal award con- Subpart DPost Federal Award Re-
stitutes a minor portion of the project. quirements of this part, 200.338 Rem-
When the reimbursement method is edies for Noncompliance, or the fol-
used, the Federal awarding agency or lowing apply:
pass-through entity must make pay- (i) The non-Federal entity has failed
ment within 30 calendar days after re- to comply with the project objectives,
ceipt of the billing, unless the Federal Federal statutes, regulations, or the
awarding agency or pass-through enti- terms and conditions of the Federal
ty reasonably believes the request to award.
be improper. (ii) The non-Federal entity is delin-
(4) If the non-Federal entity cannot quent in a debt to the United States as
meet the criteria for advance payments defined in OMB Guidance A129, Poli-
and the Federal awarding agency or cies for Federal Credit Programs and
pass-through entity has determined Non-Tax Receivables. Under such con-
that reimbursement is not feasible be- ditions, the Federal awarding agency
cause the non-Federal entity lacks suf- or pass-through entity may, upon rea-
ficient working capital, the Federal sonable notice, inform the non-Federal
awarding agency or pass-through enti- entity that payments must not be
ty may provide cash on a working cap- made for obligations incurred after a
ital advance basis. Under this proce- specified date until the conditions are
dure, the Federal awarding agency or corrected or the indebtedness to the
pass-through entity must advance cash Federal government is liquidated.
payments to the non-Federal entity to
(iii) A payment withheld for failure
cover its estimated disbursement needs
to comply with Federal award condi-
for an initial period generally geared
tions, but without suspension of the
to the non-Federal entitys disbursing
Federal award, must be released to the
cycle. Thereafter, the Federal award-
non-Federal entity upon subsequent
ing agency or pass-through entity must
reimburse the non-Federal entity for compliance. When a Federal award is
its actual cash disbursements. Use of suspended, payment adjustments will
the working capital advance method of be made in accordance with 200.342 Ef-
payment requires that the pass- fects of suspension and termination.
through entity provide timely advance (iv) A payment must not be made to
payments to any subrecipients in order a non-Federal entity for amounts that
to meet the subrecipients actual cash are withheld by the non-Federal entity
disbursements. The working capital ad- from payment to contractors to assure
vance method of payment must not be satisfactory completion of work. A
used by the pass-through entity if the payment must be made when the non-
reason for using this method is the un- Federal entity actually disburses the
willingness or inability of the pass- withheld funds to the contractors or to
through entity to provide timely ad- escrow accounts established to assure
vance payments to the subrecipient to satisfactory completion of work.
meet the subrecipients actual cash dis- (7) Standards governing the use of
bursements. banks and other institutions as deposi-
(5) Use of resources before requesting tories of advance payments under Fed-
cash advance payments. To the extent eral awards are as follows.
available, the non-Federal entity must (i) The Federal awarding agency and
disburse funds available from program pass-through entity must not require
income (including repayments to a re- separate depository accounts for funds
volving fund), rebates, refunds, con- provided to a non-Federal entity or es-
tract settlements, audit recoveries, and tablish any eligibility requirements for
interest earned on such funds before re- depositories for funds provided to the
questing additional cash payments. non-Federal entity. However, the non-

(6) Unless otherwise required by Fed- Federal entity must be able to account
eral statutes, payments for allowable for the receipt, obligation and expendi-
costs by non-Federal entities must not ture of funds.
107
(ii) Advance payments of Federal (b) For all Federal awards, any
funds must be deposited and main- shared costs or matching funds and all
tained in insured accounts whenever contributions, including cash and third
possible. party in-kind contributions, must be
(8) The non-Federal entity must accepted as part of the non-Federal en-
maintain advance payments of Federal titys cost sharing or matching when
awards in interest-bearing accounts, such contributions meet all of the fol-
unless the following apply. lowing criteria:
(i) The non-Federal entity receives (1) Are verifiable from the non-Fed-
less than $120,000 in Federal awards per eral entitys records;
year. (2) Are not included as contributions
(ii) The best reasonably available infor any other Federal award;
terest-bearing account would not be ex- (3) Are necessary and reasonable for
pected to earn interest in excess of $500 accomplishment of project or program
per year on Federal cash balances. objectives;
(iii) The depository would require an
(4) Are allowable under Subpart E
average or minimum balance so high
Cost Principles of this part;
that it would not be feasible within the
expected Federal and non-Federal cash (5) Are not paid by the Federal gov-
resources. ernment under another Federal award,
(iv) A foreign government or banking except where the Federal statute au-
system prohibits or precludes interest thorizing a program specifically pro-
bearing accounts. vides that Federal funds made avail-
(9) Interest earned on Federal ad- able for such program can be applied to
vance payments deposited in interest- matching or cost sharing requirements
bearing accounts must be remitted an- of other Federal programs;
nually to the Department of Health (6) Are provided for in the approved
and Human Services, Payment Man- budget when required by the Federal
agement System, Rockville, MD 20852. awarding agency; and
Interest amounts up to $500 per year (7) Conform to other provisions of
may be retained by the non-Federal en- this part, as applicable.
tity for administrative expense. (c) Unrecovered indirect costs, in-
cluding indirect costs on cost sharing
200.306 Cost sharing or matching. or matching may be included as part of
(a) Under Federal research proposals, cost sharing or matching only with the
voluntary committed cost sharing is prior approval of the Federal awarding
not expected. It cannot be used as a agency. Unrecovered indirect cost
factor during the merit review of appli- means the difference between the
cations or proposals, but may be con- amount charged to the Federal award
sidered if it is both in accordance with and the amount which could have been
Federal awarding agency regulations to the Federal award under the non-
and specified in a notice of funding op- Federal entitys approved negotiated
portunity. Criteria for considering vol- indirect cost rate.
untary committed cost sharing and (d) Values for non-Federal entity
any other program policy factors that contributions of services and property
may be used to determine who may re- must be established in accordance with
ceive a Federal award must be explic- 200.434 Contributions and donations. If
itly described in the notice of funding a Federal awarding agency authorizes
opportunity. Furthermore, only man- the non-Federal entity to donate build-
datory cost sharing or cost sharing spe- ings or land for construction/facilities
cifically committed in the project acquisition projects or long-term use,
budget must be included in the orga- the value of the donated property for
nized research base for computing the cost sharing or matching must be the
indirect (F&A) cost rate or reflected in lesser of paragraphs (d)(1) or (2) of this
any allocation of indirect costs. See section.
also 200.414 Indirect (F&A) costs, (1) The value of the remaining life of
200.203 Notices of funding opportuni- the property recorded in the non-Fed-
ties, and Appendix I to Part 200Full eral entitys accounting records at the
Text of Notice of Funding Opportunity. time of donation.
108
(2) The current fair market value. party-donated equipment, buildings

However, when there is sufficient jus- and land for which title passes to the
tification, the Federal awarding agen- non-Federal entity may differ accord-
cy may approve the use of the current ing to the purpose of the Federal
fair market value of the donated prop- award, if paragraph (h)(1) or (2) of this
erty, even if it exceeds the value de- section applies.
scribed in (1) above at the time of dona- (1) If the purpose of the Federal
tion. award is to assist the non-Federal enti-
(e) Volunteer services furnished by ty in the acquisition of equipment,
third-party professional and technical buildings or land, the aggregate value
personnel, consultants, and other of the donated property may be
skilled and unskilled labor may be claimed as cost sharing or matching.
counted as cost sharing or matching if (2) If the purpose of the Federal
the service is an integral and necessary award is to support activities that re-
part of an approved project or program. quire the use of equipment, buildings
Rates for third-party volunteer serv- or land, normally only depreciation
ices must be consistent with those paid charges for equipment and buildings
for similar work by the non-Federal en- may be made. However, the fair market
tity. In those instances in which the value of equipment or other capital as-
required skills are not found in the sets and fair rental charges for land
non-Federal entity, rates must be con- may be allowed, provided that the Fed-
sistent with those paid for similar eral awarding agency has approved the
work in the labor market in which the charges. See also 200.420 Consider-
non-Federal entity competes for the ations for selected items of cost.
kind of services involved. In either (i) The value of donated property
case, paid fringe benefits that are rea- must be determined in accordance with
sonable, necessary, allocable, and oth- the usual accounting policies of the
erwise allowable may be included in non-Federal entity, with the following
the valuation. qualifications:
(f) When a third-party organization (1) The value of donated land and
furnishes the services of an employee, buildings must not exceed its fair mar-
these services must be valued at the ket value at the time of donation to
employees regular rate of pay plus an the non-Federal entity as established
amount of fringe benefits that is rea- by an independent appraiser (e.g., cer-
sonable, necessary, allocable, and oth- tified real property appraiser or Gen-
erwise allowable, and indirect costs at eral Services Administration rep-
either the third-party organizations resentative) and certified by a respon-
approved federally negotiated indirect sible official of the non-Federal entity
cost rate or, a rate in accordance with as required by the Uniform Relocation
200.414 Indirect (F&A) costs, para- Assistance and Real Property Acquisi-
graph (d), provided these services em- tion Policies Act of 1970, as amended,
ploy the same skill(s) for which the (42 U.S.C. 46014655) (Uniform Act) ex-
employee is normally paid. Where do- cept as provided in the implementing
nated services are treated as indirect regulations at 49 CFR part 24.
costs, indirect cost rates will separate (2) The value of donated equipment
the value of the donated services so must not exceed the fair market value
that reimbursement for the donated of equipment of the same age and con-
services will not be made. dition at the time of donation.
(g) Donated property from third par- (3) The value of donated space must
ties may include such items as equip- not exceed the fair rental value of com-
ment, office supplies, laboratory sup- parable space as established by an inde-
plies, or workshop and classroom sup- pendent appraisal of comparable space
plies. Value assessed to donated prop- and facilities in a privately-owned
erty included in the cost sharing or building in the same locality.
matching share must not exceed the (4) The value of loaned equipment
fair market value of the property at must not exceed its fair rental value.
the time of the donation. (j) For third-party in-kind contribu-
(h) The method used for determining tions, the fair market value of goods
cost sharing or matching for third- and services must be documented and
109
to the extent feasible supported by the amounts specified must also be de-
same methods used internally by the ducted from expenditures.
non-Federal entity. (1) Deduction. Ordinarily program in-
come must be deducted from total al-
200.307 Program income. lowable costs to determine the net al-
(a) General. Non-Federal entities are lowable costs. Program income must be
encouraged to earn income to defray used for current costs unless the Fed-
program costs where appropriate. eral awarding agency authorizes other-
(b) Cost of generating program income. wise. Program income that the non-
If authorized by Federal regulations or Federal entity did not anticipate at the
the Federal award, costs incidental to time of the Federal award must be used
the generation of program income may to reduce the Federal award and non-
be deducted from gross income to de- Federal entity contributions rather
termine program income, provided than to increase the funds committed
these costs have not been charged to to the project.
the Federal award. (2) Addition. With prior approval of
(c) Governmental revenues. Taxes, spe- the Federal awarding agency, program
cial assessments, levies, fines, and income may be added to the Federal
other such revenues raised by a non- award by the Federal agency and the
Federal entity are not program income non-Federal entity. The program in-
unless the revenues are specifically come must be used for the purposes and
identified in the Federal award or Fed- under the conditions of the Federal
eral awarding agency regulations as award.
program income.
(3) Cost sharing or matching. With
(d) Property. Proceeds from the sale
prior approval of the Federal awarding
of real property or equipment are not
agency, program income may be used
program income; such proceeds will be
to meet the cost sharing or matching
handled in accordance with the re-
requirement of the Federal award. The
quirements of Subpart DPost Federal
amount of the Federal award remains
Award Requirements of this part, Prop-
the same.
erty Standards 200.311 Real property
and 200.313 Equipment, or as specifi- (f) Income after the period of perform-
cally identified in Federal statutes, ance. There are no Federal require-
regulations, or the terms and condi- ments governing the disposition of in-
tions of the Federal award. come earned after the end of the period
(e) Use of program income. If the Fed- of performance for the Federal award,
eral awarding agency does not specify unless the Federal awarding agency
in its regulations or the terms and con- regulations or the terms and condi-
ditions of the Federal award, or give tions of the Federal award provide oth-
prior approval for how program income erwise. The Federal awarding agency
is to be used, paragraph (e)(1) of this may negotiate agreements with recipi-
section must apply. For Federal awards ents regarding appropriate uses of in-
made to IHEs and nonprofit research come earned after the period of per-
institutions, if the Federal awarding formance as part of the grant closeout
agency does not specify in its regula- process. See also 200.343 Closeout.
tions or the terms and conditions of
the Federal award how program income 200.308 Revision of budget and pro-
is to be used, paragraph (e)(2) of this gram plans.
section must apply. In specifying alter- (a) The approved budget for the Fed-
natives to paragraphs (e)(1) and (2) of eral award summarizes the financial
this section, the Federal awarding aspects of the project or program as ap-
agency may distinguish between in- proved during the Federal award proc-
come earned by the recipient and in- ess. It may include either the Federal
come earned by subrecipients and be- and non-Federal share (see 200.43 Fed-
tween the sources, kinds, or amounts eral share) or only the Federal share,
of income. When the Federal awarding depending upon Federal awarding agen-
agency authorizes the approaches in cy requirements. It must be related to
paragraphs (e)(2) and (3) of this section, performance for program evaluation
program income in excess of any purposes whenever appropriate.
110
(b) Recipients are required to report written approvals required by para-

deviations from budget or project scope graph (c) this section. Such waivers
or objective, and request prior approv- may include authorizing recipients to
als from Federal awarding agencies for do any one or more of the following:
budget and program plan revisions, in (1) Incur project costs 90 calendar
accordance with this section. days before the Federal awarding agen-
(c) For non-construction Federal cy makes the Federal award. Expenses
awards, recipients must request prior more than 90 calendar days pre-award
approvals from Federal awarding agen- require prior approval of the Federal
cies for one or more of the following awarding agency. All costs incurred be-
program or budget-related reasons: fore the Federal awarding agency
(1) Change in the scope or the objec- makes the Federal award are at the re-
tive of the project or program (even if cipients risk (i.e., the Federal award-
there is no associated budget revision ing agency is under no obligation to re-
requiring prior written approval). imburse such costs if for any reason
(2) Change in a key person specified the recipient does not receive a Federal
in the application or the Federal award or if the Federal award is less
award. than anticipated and inadequate to
(3) The disengagement from the cover such costs). See also 200.458 Pre-
project for more than three months, or award costs.
a 25 percent reduction in time devoted (2) Initiate a one-time extension of
to the project, by the approved project the period of performance by up to 12
director or principal investigator. months unless one or more of the con-
(4) The inclusion, unless waived by ditions outlined in paragraphs (d)(2)(i)
the Federal awarding agency, of costs through (iii) of this section apply. For
that require prior approval in accord- one-time extensions, the recipient
ance with Subpart ECost Principles must notify the Federal awarding
of this part or 45 CFR Part 74 Appendix
agency in writing with the supporting
E, Principles for Determining Costs
reasons and revised period of perform-
Applicable to Research and Develop-
ance at least 10 calendar days before
ment under Awards and Contracts with
the end of the period of performance
Hospitals, or 48 CFR Part 31, Con-
specified in the Federal award. This
tract Cost Principles and Procedures,
one-time extension may not be exer-
as applicable.
cised merely for the purpose of using
(5) The transfer of funds budgeted for
unobligated balances. Extensions re-
participant support costs as defined in
quire explicit prior Federal awarding
200.75 Participant support costs to
other categories of expense. agency approval when:
(6) Unless described in the applica- (i) The terms and conditions of the
tion and funded in the approved Fed- Federal award prohibit the extension.
eral awards, the subawarding, transfer- (ii) The extension requires additional
ring or contracting out of any work Federal funds.
under a Federal award. This provision (iii) The extension involves any
does not apply to the acquisition of change in the approved objectives or
supplies, material, equipment or gen- scope of the project.
eral support services. (3) Carry forward unobligated bal-
(7) Changes in the amount of ap- ances to subsequent periods of perform-
proved cost-sharing or matching pro- ance.
vided by the non-Federal entity. No (4) For Federal awards that support
other prior approval requirements for research, unless the Federal awarding
specific items may be imposed unless a agency provides otherwise in the Fed-
deviation has been approved by OMB. eral award or in the Federal awarding
See also 200.102 Exceptions and agencys regulations, the prior ap-
200.407 Prior written approval (prior approval requirements described in para-
proval). graph (d) are automatically waived
(d) Except for requirements listed in (i.e., recipients need not obtain such
paragraph (c)(1) of this section, the prior approvals) unless one of the con-
Federal awarding agency are author- ditions included in paragraph (d)(2) ap-
ized, at their option, to waive prior plies.
111
(e) The Federal awarding agency (i) Within 30 calendar days from the
may, at its option, restrict the transfer date of receipt of the request for budg-
of funds among direct cost categories et revisions, the Federal awarding
or programs, functions and activities agency must review the request and
for Federal awards in which the Fed- notify the recipient whether the budget
eral share of the project exceeds the revisions have been approved. If the re-
Simplified Acquisition Threshold and vision is still under consideration at
the cumulative amount of such trans- the end of 30 calendar days, the Federal
fers exceeds or is expected to exceed 10 awarding agency must inform the re-
percent of the total budget as last ap- cipient in writing of the date when the
proved by the Federal awarding agen- recipient may expect the decision.
cy. The Federal awarding agency can-
not permit a transfer that would cause 200.309 Period of performance.
any Federal appropriation to be used A non-Federal entity may charge to
for purposes other than those con- the Federal award only allowable costs
sistent with the appropriation. incurred during the period of perform-
(f) All other changes to non-construc- ance and any costs incurred before the
tion budgets, except for the changes de- Federal awarding agency or pass-
scribed in paragraph (c) of this section, through entity made the Federal award
do not require prior approval (see also that were authorized by the Federal
200.407 Prior written approval (prior awarding agency or pass-through enti-
approval)). ty.
(g) For construction Federal awards,
PROPERTY STANDARDS
the recipient must request prior writ-
ten approval promptly from the Fed- 200.310 Insurance coverage.
eral awarding agency for budget revi-
The non-Federal entity must, at a
sions whenever paragraph (g)(1), (2), or
minimum, provide the equivalent in-
(3) of this section applies.
surance coverage for real property and
(1) The revision results from changes equipment acquired or improved with
in the scope or the objective of the Federal funds as provided to property
project or program. owned by the non-Federal entity. Fed-
(2) The need arises for additional erally-owned property need not be in-
Federal funds to complete the project. sured unless required by the terms and
(3) A revision is desired which in- conditions of the Federal award.
volves specific costs for which prior
written approval requirements may be 200.311 Real property.
imposed consistent with applicable (a) Title. Subject to the obligations
OMB cost principles listed in Subpart and conditions set forth in this section,
ECost Principles of this part. title to real property acquired or im-
(4) No other prior approval require- proved under a Federal award will vest
ments for budget revisions may be im- upon acquisition in the non-Federal en-
posed unless a deviation has been ap- tity.
proved by OMB. (b) Use. Except as otherwise provided
(5) When a Federal awarding agency by Federal statutes or by the Federal
makes a Federal award that provides awarding agency, real property will be
support for construction and non-con- used for the originally authorized pur-
struction work, the Federal awarding pose as long as needed for that purpose,
agency may require the recipient to ob- during which time the non-Federal en-
tain prior approval from the Federal tity must not dispose of or encumber
awarding agency before making any its title or other interests.
fund or budget transfers between the (c) Disposition. When real property is
two types of work supported. no longer needed for the originally au-
(h) When requesting approval for thorized purpose, the non-Federal enti-
budget revisions, the recipient must ty must obtain disposition instructions
use the same format for budget infor- from the Federal awarding agency or
mation that was used in the applica- pass-through entity. The instructions
tion, unless the Federal awarding agen- must provide for one of the following
cy indicates a letter of request suffices. alternatives:
112
(1) Retain title after compensating cy for further Federal agency utiliza-
the Federal awarding agency. The tion.
amount paid to the Federal awarding (b) If the Federal awarding agency
agency will be computed by applying has no further need for the property, it
the Federal awarding agencys percent- must declare the property excess and
age of participation in the cost of the report it for disposal to the appropriate
original purchase (and costs of any im- Federal disposal authority, unless the
provements) to the fair market value Federal awarding agency has statutory
of the property. However, in those situ- authority to dispose of the property by
ations where non-Federal entity is dis- alternative methods (e.g., the author-
posing of real property acquired or im- ity provided by the Federal Technology
proved with a Federal award and ac- Transfer Act (15 U.S.C. 3710 (i)) to do-
quiring replacement real property nate research equipment to edu-
under the same Federal award, the net cational and non-profit organizations
proceeds from the disposition may be in accordance with Executive Order
used as an offset to the cost of the re- 12999, Educational Technology: Ensur-
placement property. ing Opportunity for All Children in the
(2) Sell the property and compensate Next Century.). The Federal awarding
the Federal awarding agency. The agency must issue appropriate instruc-
amount due to the Federal awarding tions to the non-Federal entity.
agency will be calculated by applying (c) Exempt federally-owned property
the Federal awarding agencys percent- means property acquired under a Fed-
age of participation in the cost of the eral award the title based upon the ex-
original purchase (and cost of any im- plicit terms and conditions of the Fed-
provements) to the proceeds of the sale eral award that indicate the Federal
after deduction of any actual and rea- awarding agency has chosen to vest in
sonable selling and fixing-up expenses. the non-Federal entity without further
If the Federal award has not been
obligation to the Federal government
closed out, the net proceeds from sale
or under conditions the Federal agency
may be offset against the original cost
considers appropriate. The Federal
of the property. When non-Federal en-
awarding agency may exercise this op-
tity is directed to sell property, sales
tion when statutory authority exists.
procedures must be followed that pro-
Absent statutory authority and spe-
vide for competition to the extent
cific terms and conditions of the Fed-
practicable and result in the highest
eral award, title to exempt federally-
possible return.
owned property acquired under the
(3) Transfer title to the Federal
Federal award remains with the Fed-
awarding agency or to a third party
eral government.
designated/approved by the Federal
awarding agency. The non-Federal en- 200.313 Equipment.
tity is entitled to be paid an amount
calculated by applying the non-Federal See also 200.439 Equipment and
entitys percentage of participation in other capital expenditures.
the purchase of the real property (and (a) Title. Subject to the obligations
cost of any improvements) to the cur- and conditions set forth in this section,
rent fair market value of the property. title to equipment acquired under a
Federal award will vest upon acquisi-
200.312 Federally-owned and exempt tion in the non-Federal entity. Unless
property. a statute specifically authorizes the
(a) Title to federally-owned property Federal agency to vest title in the non-
remains vested in the Federal govern- Federal entity without further obliga-
ment. The non-Federal entity must tion to the Federal government, and
submit annually an inventory listing of the Federal agency elects to do so, the
federally-owned property in its custody title must be a conditional title. Title
to the Federal awarding agency. Upon must vest in the non-Federal entity
completion of the Federal award or subject to the following conditions:

when the property is no longer needed, (1) Use the equipment for the author-
the non-Federal entity must report the ized purposes of the project until fund-
property to the Federal awarding agen- ing for the project ceases, or until the
113
property is no longer needed for the (3) Notwithstanding the encourage-

purposes of the project. ment in 200.307 Program income to
(2) Not encumber the property with- earn program income, the non-Federal
out approval of the Federal awarding entity must not use equipment ac-
agency or pass-through entity. quired with the Federal award to pro-
(3) Use and dispose of the property in vide services for a fee that is less than
accordance with paragraphs (b), (c) and private companies charge for equiva-
(e) of this section. lent services unless specifically author-
(b) A state must use, manage and dis- ized by Federal statute for as long as
pose of equipment acquired under a the Federal government retains an in-
Federal award by the state in accord- terest in the equipment.
ance with state laws and procedures. (4) When acquiring replacement
Other non-Federal entities must follow equipment, the non-Federal entity may
paragraphs (c) through (e) of this sec- use the equipment to be replaced as a
tion. trade-in or sell the property and use
(c) Use. (1) Equipment must be used the proceeds to offset the cost of the
by the non-Federal entity in the pro- replacement property.
gram or project for which it was ac- (d) Management requirements. Proce-
quired as long as needed, whether or dures for managing equipment (includ-
not the project or program continues ing replacement equipment), whether
to be supported by the Federal award, acquired in whole or in part under a
and the non-Federal entity must not Federal award, until disposition takes
encumber the property without prior place will, as a minimum, meet the fol-
approval of the Federal awarding agen- lowing requirements:
cy. When no longer needed for the (1) Property records must be main-
original program or project, the equip- tained that include a description of the
ment may be used in other activities property, a serial number or other
supported by the Federal awarding identification number, the source of
agency, in the following order of pri- funding for the property (including the
ority: FAIN), who holds title, the acquisition
(i) Activities under a Federal award date, and cost of the property, percent-
from the Federal awarding agency age of Federal participation in the
which funded the original program or project costs for the Federal award
project, then under which the property was acquired,
(ii) Activities under Federal awards the location, use and condition of the
from other Federal awarding agencies. property, and any ultimate disposition
This includes consolidated equipment data including the date of disposal and
for information technology systems. sale price of the property.
(2) During the time that equipment is (2) A physical inventory of the prop-
used on the project or program for erty must be taken and the results rec-
which it was acquired, the non-Federal onciled with the property records at
entity must also make equipment least once every two years.
available for use on other projects or (3) A control system must be devel-
programs currently or previously sup- oped to ensure adequate safeguards to
ported by the Federal government, pro- prevent loss, damage, or theft of the
vided that such use will not interfere property. Any loss, damage, or theft
with the work on the projects or pro- must be investigated.
gram for which it was originally ac- (4) Adequate maintenance procedures
quired. First preference for other use must be developed to keep the property
must be given to other programs or in good condition.
projects supported by Federal awarding (5) If the non-Federal entity is au-
agency that financed the equipment thorized or required to sell the prop-
and second preference must be given to erty, proper sales procedures must be
programs or projects under Federal established to ensure the highest pos-
awards from other Federal awarding sible return.
agencies. Use for non-federally-funded (e) Disposition. When original or re-

programs or projects is also permis- placement equipment acquired under a
sible. User fees should be considered if Federal award is no longer needed for
appropriate. the original project or program or for
114
other activities currently or previously there is a residual inventory of unused

supported by a Federal awarding agen- supplies exceeding $5,000 in total aggre-
cy, except as otherwise provided in gate value upon termination or com-
Federal statutes, regulations, or Fed- pletion of the project or program and
eral awarding agency disposition in- the supplies are not needed for any
structions, the non-Federal entity other Federal award, the non-Federal
must request disposition instructions entity must retain the supplies for use
from the Federal awarding agency if on other activities or sell them, but
required by the terms and conditions of must, in either case, compensate the
the Federal award. Disposition of the Federal government for its share. The
equipment will be made as follows, in amount of compensation must be com-
accordance with Federal awarding puted in the same manner as for equip-
agency disposition instructions: ment. See 200.313 Equipment, para-
(1) Items of equipment with a current graph (e)(2) for the calculation method-
per unit fair market value of $5,000 or ology.
less may be retained, sold or otherwise (b) As long as the Federal govern-
disposed of with no further obligation ment retains an interest in the sup-
to the Federal awarding agency. plies, the non-Federal entity must not
(2) Except as provided in 200.312 Fed- use supplies acquired under a Federal
erally-owned and exempt property, award to provide services to other or-
paragraph (b), or if the Federal award- ganizations for a fee that is less than
ing agency fails to provide requested private companies charge for equiva-
disposition instructions within 120 lent services, unless specifically au-
days, items of equipment with a cur- thorized by Federal statute.
rent per-unit fair-market value in ex-
cess of $5,000 may be retained by the 200.315 Intangible property.
non-Federal entity or sold. The Federal
awarding agency is entitled to an (a) Title to intangible property (see
amount calculated by multiplying the 200.59 Intangible property) acquired
current market value or proceeds from under a Federal award vests upon ac-
sale by the Federal awarding agencys quisition in the non-Federal entity.
percentage of participation in the cost The non-Federal entity must use that
of the original purchase. If the equip- property for the originally-authorized
ment is sold, the Federal awarding purpose, and must not encumber the
agency may permit the non-Federal en- property without approval of the Fed-
tity to deduct and retain from the Fed- eral awarding agency. When no longer
eral share $500 or ten percent of the needed for the originally authorized
proceeds, whichever is less, for its sell- purpose, disposition of the intangible
ing and handling expenses. property must occur in accordance
(3) The non-Federal entity may with the provisions in 200.313 Equip-
transfer title to the property to the ment paragraph (e).
Federal Government or to an eligible (b) The non-Federal entity may copy-
third party provided that, in such right any work that is subject to copy-
cases, the non-Federal entity must be right and was developed, or for which
entitled to compensation for its attrib- ownership was acquired, under a Fed-
utable percentage of the current fair eral award. The Federal awarding agen-
market value of the property. cy reserves a royalty-free, nonexclu-
(4) In cases where a non-Federal enti- sive and irrevocable right to reproduce,
ty fails to take appropriate disposition publish, or otherwise use the work for
actions, the Federal awarding agency Federal purposes, and to authorize oth-
may direct the non-Federal entity to ers to do so.
take disposition actions. (c) The non-Federal entity is subject
to applicable regulations governing
200.314 Supplies. patents and inventions, including gov-
See also 200.453 Materials and sup- ernmentwide regulations issued by the
plies costs, including costs of com- Department of Commerce at 37 CFR

puting devices. Part 401, Rights to Inventions Made
(a) Title to supplies will vest in the by Nonprofit Organizations and Small
non-Federal entity upon acquisition. If Business Firms Under Government
115
Awards, Contracts and Cooperative yses, drafts of scientific papers, plans

Agreements. for future research, peer reviews, or
(d) The Federal government has the communications with colleagues. This
right to: recorded material excludes physical
(1) Obtain, reproduce, publish, or oth- objects (e.g., laboratory samples). Re-
erwise use the data produced under a search data also do not include:
Federal award; and (i) Trade secrets, commercial infor-
(2) Authorize others to receive, repro- mation, materials necessary to be held
duce, publish, or otherwise use such confidential by a researcher until they
data for Federal purposes. are published, or similar information
(e) Freedom of Information Act
which is protected under law; and
(FOIA).
(1) In addition, in response to a Free- (ii) Personnel and medical informa-
dom of Information Act (FOIA) request tion and similar information the dis-
for research data relating to published closure of which would constitute a
research findings produced under a clearly unwarranted invasion of per-
Federal award that were used by the sonal privacy, such as information that
Federal government in developing an could be used to identify a particular
agency action that has the force and person in a research study.
effect of law, the Federal awarding
agency must request, and the non-Fed- 200.316 Property trust relationship.
eral entity must provide, within a rea- Real property, equipment, and intan-
sonable time, the research data so that gible property, that are acquired or im-
they can be made available to the pub- proved with a Federal award must be
lic through the procedures established held in trust by the non-Federal entity
under the FOIA. If the Federal award- as trustee for the beneficiaries of the
ing agency obtains the research data project or program under which the
solely in response to a FOIA request, property was acquired or improved.
the Federal awarding agency may
The Federal awarding agency may re-
charge the requester a reasonable fee
quire the non-Federal entity to record
equaling the full incremental cost of
liens or other appropriate notices of
obtaining the research data. This fee
should reflect costs incurred by the record to indicate that personal or real
Federal agency and the non-Federal en- property has been acquired or improved
tity. This fee is in addition to any fees with a Federal award and that use and
the Federal awarding agency may as- disposition conditions apply to the
sess under the FOIA (5 U.S.C. property.
552(a)(4)(A)).
(2) Published research findings means PROCUREMENT STANDARDS
when:
200.317 Procurements by states.
(i) Research findings are published in
a peer-reviewed scientific or technical When procuring property and serv-
journal; or ices under a Federal award, a state
(ii) A Federal agency publicly and of- must follow the same policies and pro-
ficially cites the research findings in cedures it uses for procurements from
support of an agency action that has its non-Federal funds. The state will
the force and effect of law. Used by comply with 200.322 Procurement of
the Federal government in developing recovered materials and ensure that
an agency action that has the force and every purchase order or other contract
effect of law is defined as when an includes any clauses required by sec-
agency publicly and officially cites the tion 200.326 Contract provisions. All
research findings in support of an agen- other non-Federal entities, including
cy action that has the force and effect subrecipients of a state, will follow
of law. 200.318 General procurement stand-
(3) Research data means the recorded
ards through 200.326 Contract provi-
factual material commonly accepted in

sions.
the scientific community as necessary
to validate research findings, but not
any of the following: preliminary anal-
116
200.318 General procurement stand- able or appears to be unable to be im-

ards. partial in conducting a procurement
(a) The non-Federal entity must use action involving a related organiza-
its own documented procurement pro- tion.
cedures which reflect applicable State (d) The non-Federal entitys proce-
and local laws and regulations, pro- dures must avoid acquisition of unnec-
vided that the procurements conform essary or duplicative items. Consider-
to applicable Federal law and the ation should be given to consolidating
standards identified in this section. or breaking out procurements to ob-
(b) Non-Federal entities must maintain a more economical purchase.
tain oversight to ensure that contrac- Where appropriate, an analysis will be
tors perform in accordance with the made of lease versus purchase alter-
terms, conditions, and specifications of natives, and any other appropriate
their contracts or purchase orders. analysis to determine the most eco-
(c)(1) The non-Federal entity must nomical approach.
maintain written standards of conduct (e) To foster greater economy and ef-
covering conflicts of interest and gov- ficiency, and in accordance with efforts
erning the performance of its employ- to promote cost-effective use of shared
ees engaged in the selection, award and services across the Federal govern-
administration of contracts. No em- ment, the non-Federal entity is encour-
ployee, officer, or agent must partici- aged to enter into state and local inter-
pate in the selection, award, or admin- governmental agreements or inter-en-
istration of a contract supported by a tity agreements where appropriate for
Federal award if he or she has a real or procurement or use of common or
apparent conflict of interest. Such a shared goods and services.
conflict of interest would arise when
(f) The non-Federal entity is encour-
the employee, officer, or agent, any
aged to use Federal excess and surplus
member of his or her immediate fam-
property in lieu of purchasing new
ily, his or her partner, or an organiza-
equipment and property whenever such
tion which employs or is about to em-
use is feasible and reduces project
ploy any of the parties indicated here-
costs.
in, has a financial or other interest in
or a tangible personal benefit from a (g) The non-Federal entity is encour-
firm considered for a contract. The of- aged to use value engineering clauses
ficers, employees, and agents of the in contracts for construction projects
non-Federal entity must neither solicit of sufficient size to offer reasonable op-
nor accept gratuities, favors, or any- portunities for cost reductions. Value
thing of monetary value from contrac- engineering is a systematic and cre-
tors or parties to subcontracts. How- ative analysis of each contract item or
ever, non-Federal entities may set task to ensure that its essential func-
standards for situations in which the tion is provided at the overall lower
financial interest is not substantial or cost.
the gift is an unsolicited item of nomi- (h) The non-Federal entity must
nal value. The standards of conduct award contracts only to responsible
must provide for disciplinary actions contractors possessing the ability to
to be applied for violations of such perform successfully under the terms
standards by officers, employees, or and conditions of a proposed procure-
agents of the non-Federal entity. ment. Consideration will be given to
(2) If the non-Federal entity has a such matters as contractor integrity,
parent, affiliate, or subsidiary organi- compliance with public policy, record
zation that is not a state, local govern- of past performance, and financial and
ment, or Indian tribe, the non-Federal technical resources.
entity must also maintain written (i) The non-Federal entity must
standards of conduct covering organi- maintain records sufficient to detail
zational conflicts of interest. Organiza- the history of procurement. These
tional conflicts of interest means that records will include, but are not nec-
because of relationships with a parent essarily limited to the following: ra-
company, affiliate, or subsidiary orga- tionale for the method of procurement,
nization, the non-Federal entity is un- selection of contract type, contractor
117
selection or rejection, and the basis for work, and invitations for bids or re-
the contract price. quests for proposals must be excluded
(j)(1) The non-Federal entity may use from competing for such procurements.
time and material type contracts only Some of the situations considered to be
after a determination that no other restrictive of competition include but
contract is suitable and if the contract are not limited to:
includes a ceiling price that the con- (1) Placing unreasonable require-
tractor exceeds at its own risk. Time ments on firms in order for them to
and material type contract means a qualify to do business;
contract whose cost to a non-Federal (2) Requiring unnecessary experience
entity is the sum of: and excessive bonding;
(i) The actual cost of materials; and (3) Noncompetitive pricing practices
(ii) Direct labor hours charged at between firms or between affiliated
fixed hourly rates that reflect wages, companies;
general and administrative expenses, (4) Noncompetitive contracts to con-
and profit. sultants that are on retainer contracts;
(2) Since this formula generates an (5) Organizational conflicts of inter-
open-ended contract price, a time-and- est;
materials contract provides no positive (6) Specifying only a brand name
profit incentive to the contractor for product instead of allowing an equal
cost control or labor efficiency. There- product to be offered and describing
fore, each contract must set a ceiling the performance or other relevant re-
price that the contractor exceeds at its quirements of the procurement; and
own risk. Further, the non-Federal en- (7) Any arbitrary action in the pro-
tity awarding such a contract must as- curement process.
sert a high degree of oversight in order (b) The non-Federal entity must con-
to obtain reasonable assurance that duct procurements in a manner that
the contractor is using efficient meth- prohibits the use of statutorily or ad-
ods and effective cost controls. ministratively imposed state or local
(k) The non-Federal entity alone geographical preferences in the evalua-
must be responsible, in accordance tion of bids or proposals, except in
with good administrative practice and those cases where applicable Federal
sound business judgment, for the set- statutes expressly mandate or encour-
tlement of all contractual and adminis- age geographic preference. Nothing in
trative issues arising out of procure- this section preempts state licensing
ments. These issues include, but are laws. When contracting for architec-
not limited to, source evaluation, pro- tural and engineering (A/E) services,
tests, disputes, and claims. These geographic location may be a selection
standards do not relieve the non-Fed- criterion provided its application
eral entity of any contractual respon- leaves an appropriate number of quali-
sibilities under its contracts. The Fed- fied firms, given the nature and size of
eral awarding agency will not sub- the project, to compete for the con-
stitute its judgment for that of the tract.
non-Federal entity unless the matter is (c) The non-Federal entity must have
primarily a Federal concern. Viola- written procedures for procurement
tions of law will be referred to the transactions. These procedures must
local, state, or Federal authority hav- ensure that all solicitations:
ing proper jurisdiction. (1) Incorporate a clear and accurate
description of the technical require-
200.319 Competition. ments for the material, product, or
(a) All procurement transactions service to be procured. Such descrip-
must be conducted in a manner pro- tion must not, in competitive procure-
viding full and open competition con- ments, contain features which unduly
sistent with the standards of this sec- restrict competition. The description
tion. In order to ensure objective con- may include a statement of the quali-
tractor performance and eliminate un- tative nature of the material, product
fair competitive advantage, contrac- or service to be procured and, when
tors that develop or draft specifica- necessary, must set forth those min-
tions, requirements, statements of imum essential characteristics and
118
standards to which it must conform if (c) Procurement by sealed bids (for-

it is to satisfy its intended use. De- mal advertising). Bids are publicly so-
tailed product specifications should be licited and a firm fixed price contract
avoided if at all possible. When it is (lump sum or unit price) is awarded to
impractical or uneconomical to make a the responsible bidder whose bid, con-
clear and accurate description of the forming with all the material terms
technical requirements, a brand name and conditions of the invitation for
or equivalent description may be used bids, is the lowest in price. The sealed
as a means to define the performance bid method is the preferred method for
or other salient requirements of pro- procuring construction, if the condi-
curement. The specific features of the tions in paragraph (c)(1) of this section
named brand which must be met by of- apply.
fers must be clearly stated; and (1) In order for sealed bidding to be
(2) Identify all requirements which feasible, the following conditions
the offerors must fulfill and all other should be present:
factors to be used in evaluating bids or (i) A complete, adequate, and real-
proposals. istic specification or purchase descrip-
(d) The non-Federal entity must en- tion is available;
sure that all prequalified lists of per- (ii) Two or more responsible bidders
sons, firms, or products which are used are willing and able to compete effec-
in acquiring goods and services are cur- tively for the business; and
rent and include enough qualified (iii) The procurement lends itself to a
sources to ensure maximum open and firm fixed price contract and the selec-
free competition. Also, the non-Federal tion of the successful bidder can be
entity must not preclude potential bid- made principally on the basis of price.
ders from qualifying during the solici- (2) If sealed bids are used, the fol-
tation period. lowing requirements apply:
(i) The invitation for bids will be pub-
200.320 Methods of procurement to licly advertised and bids must be solic-
be followed. ited from an adequate number of
known suppliers, providing them suffi-
The non-Federal entity must use one cient response time prior to the date
of the following methods of procure- set for opening the bids;
ment. (ii) The invitation for bids, which
(a) Procurement by micro-purchases. will include any specifications and per-
Procurement by micro-purchase is the tinent attachments, must define the
acquisition of supplies or services, the items or services in order for the bidder
aggregate dollar amount of which does to properly respond;
not exceed $3,000 (or $2,000 in the case (iii) All bids will be publicly opened
of acquisitions for construction subject at the time and place prescribed in the
to the Davis-Bacon Act). To the extent invitation for bids;
practicable, the non-Federal entity (iv) A firm fixed price contract award
must distribute micro-purchases equi- will be made in writing to the lowest
tably among qualified suppliers. Micro- responsive and responsible bidder.
purchases may be awarded without so- Where specified in bidding documents,
liciting competitive quotations if the factors such as discounts, transpor-
non-Federal entity considers the price tation cost, and life cycle costs must
to be reasonable. be considered in determining which bid
(b) Procurement by small purchase is lowest. Payment discounts will only
procedures. Small purchase procedures be used to determine the low bid when
are those relatively simple and infor- prior experience indicates that such
mal procurement methods for securing discounts are usually taken advantage
services, supplies, or other property of; and
that do not cost more than the Sim- (v) Any or all bids may be rejected if
plified Acquisition Threshold. If small there is a sound documented reason.
purchase procedures are used, price or (d) Procurement by competitive pro-

rate quotations must be obtained from posals. The technique of competitive
an adequate number of qualified proposals is normally conducted with
sources. more than one source submitting an
119
offer, and either a fixed price or cost- (4) After solicitation of a number of
reimbursement type contract is award- sources, competition is determined in-
ed. It is generally used when conditions adequate.
are not appropriate for the use of
sealed bids. If this method is used, the 200.321 Contracting with small and
following requirements apply: minority businesses, womens busi-
(1) Requests for proposals must be ness enterprises, and labor surplus
area firms.
publicized and identify all evaluation
factors and their relative importance. (a) The non-Federal entity must take
Any response to publicized requests for all necessary affirmative steps to as-
proposals must be considered to the sure that minority businesses, womens
maximum extent practical; business enterprises, and labor surplus
(2) Proposals must be solicited from area firms are used when possible.
an adequate number of qualified (b) Affirmative steps must include:
sources; (1) Placing qualified small and mi-
(3) The non-Federal entity must have nority businesses and womens business
a written method for conducting tech- enterprises on solicitation lists;
nical evaluations of the proposals re- (2) Assuring that small and minority
ceived and for selecting recipients; businesses, and womens business en-
(4) Contracts must be awarded to the terprises are solicited whenever they
responsible firm whose proposal is are potential sources;
most advantageous to the program, (3) Dividing total requirements, when
with price and other factors consid- economically feasible, into smaller
ered; and tasks or quantities to permit max-
(5) The non-Federal entity may use imum participation by small and mi-
competitive proposal procedures for nority businesses, and womens busi-
qualifications-based procurement of ar- ness enterprises;
chitectural/engineering (A/E) profes- (4) Establishing delivery schedules,
sional services whereby competitors where the requirement permits, which
qualifications are evaluated and the encourage participation by small and
most qualified competitor is selected, minority businesses, and womens busi-
subject to negotiation of fair and rea- ness enterprises;
sonable compensation. The method, (5) Using the services and assistance,
where price is not used as a selection as appropriate, of such organizations as
factor, can only be used in procure- the Small Business Administration and
ment of A/E professional services. It the Minority Business Development
cannot be used to purchase other types Agency of the Department of Com-
of services though A/E firms are a po- merce; and
tential source to perform the proposed (6) Requiring the prime contractor, if
effort. subcontracts are to be let, to take the
(e) [Reserved] affirmative steps listed in paragraphs
(f) Procurement by noncompetitive (1) through (5) of this section.
proposals. Procurement by non-
competitive proposals is procurement 200.322 Procurement of recovered
through solicitation of a proposal from materials.
only one source and may be used only A non-Federal entity that is a state
when one or more of the following cir- agency or agency of a political subdivi-
cumstances apply: sion of a state and its contractors must
(1) The item is available only from a comply with section 6002 of the Solid
single source; Waste Disposal Act, as amended by the
(2) The public exigency or emergency Resource Conservation and Recovery
for the requirement will not permit a Act. The requirements of Section 6002
delay resulting from competitive solic- include procuring only items des-
itation; ignated in guidelines of the Environ-
(3) The Federal awarding agency or mental Protection Agency (EPA) at 40
pass-through entity expressly author- CFR part 247 that contain the highest
izes noncompetitive proposals in re- percentage of recovered materials prac-
sponse to a written request from the ticable, consistent with maintaining a
non-Federal entity; or satisfactory level of competition,
120
where the purchase price of the item Federal awarding agency or pass-
exceeds $10,000 or the value of the through entity, technical specifica-
quantity acquired by the preceding fis- tions on proposed procurements where
cal year exceeded $10,000; procuring the Federal awarding agency or pass-
solid waste management services in a through entity believes such review is
manner that maximizes energy and re- needed to ensure that the item or serv-
source recovery; and establishing an af- ice specified is the one being proposed
firmative procurement program for for acquisition. This review generally
procurement of recovered materials will take place prior to the time the
identified in the EPA guidelines. specification is incorporated into a so-
licitation document. However, if the
200.323 Contract cost and price. non-Federal entity desires to have the
(a) The non-Federal entity must per- review accomplished after a solicita-
form a cost or price analysis in connection has been developed, the Federal
tion with every procurement action in awarding agency or pass-through enti-
excess of the Simplified Acquisition ty may still review the specifications,
Threshold including contract modifica- with such review usually limited to the
tions. The method and degree of anal- technical aspects of the proposed pur-
ysis is dependent on the facts sur- chase.
rounding the particular procurement (b) The non-Federal entity must
situation, but as a starting point, the make available upon request, for the
non-Federal entity must make inde- Federal awarding agency or pass-
pendent estimates before receiving bids through entity pre-procurement re-
or proposals. view, procurement documents, such as
(b) The non-Federal entity must ne- requests for proposals or invitations
gotiate profit as a separate element of for bids, or independent cost estimates,
the price for each contract in which when:
there is no price competition and in all (1) The non-Federal entitys procure-
cases where cost analysis is performed. ment procedures or operation fails to
To establish a fair and reasonable prof- comply with the procurement stand-
it, consideration must be given to the ards in this part;
complexity of the work to be per- (2) The procurement is expected to
formed, the risk borne by the con- exceed the Simplified Acquisition
tractor, the contractors investment, Threshold and is to be awarded without
the amount of subcontracting, the competition or only one bid or offer is
quality of its record of past perform- received in response to a solicitation;
ance, and industry profit rates in the (3) The procurement, which is ex-
surrounding geographical area for pected to exceed the Simplified Acqui-
similar work. sition Threshold, specifies a brand
(c) Costs or prices based on estimated name product;
costs for contracts under the Federal (4) The proposed contract is more
award are allowable only to the extent than the Simplified Acquisition
that costs incurred or cost estimates Threshold and is to be awarded to
included in negotiated prices would be other than the apparent low bidder
allowable for the non-Federal entity under a sealed bid procurement; or
under Subpart ECost Principles of (5) A proposed contract modification
this part. The non-Federal entity may changes the scope of a contract or in-
reference its own cost principles that creases the contract amount by more
comply with the Federal cost prin- than the Simplified Acquisition
ciples. Threshold.
(d) The cost plus a percentage of cost (c) The non-Federal entity is exempt
and percentage of construction cost from the pre-procurement review in
methods of contracting must not be paragraph (b) of this section if the Fed-
used. eral awarding agency or pass-through
entity determines that its procurement
200.324 Federal awarding agency or systems comply with the standards of

pass-through entity review. this part.
(a) The non-Federal entity must (1) The non-Federal entity may re-
make available, upon request of the quest that its procurement system be
121
reviewed by the Federal awarding to assure payment as required by law

agency or pass-through entity to deter- of all persons supplying labor and ma-
mine whether its system meets these terial in the execution of the work pro-
standards in order for its system to be vided for in the contract.
certified. Generally, these reviews
must occur where there is continuous 200.326 Contract provisions.
high-dollar funding, and third party The non-Federal entitys contracts
contracts are awarded on a regular must contain the applicable provisions
basis; described in Appendix II to Part 200
(2) The non-Federal entity may self- Contract Provisions for non-Federal
certify its procurement system. Such Entity Contracts Under Federal
self-certification must not limit the Awards.
Federal awarding agencys right to sur-
vey the system. Under a self-certifi- PERFORMANCE AND FINANCIAL
cation procedure, the Federal awarding MONITORING AND REPORTING
agency may rely on written assurances
from the non-Federal entity that it is 200.327 Financial reporting.
complying with these standards. The Unless otherwise approved by OMB,
non-Federal entity must cite specific the Federal awarding agency may so-
policies, procedures, regulations, or licit only the standard, OMB-approved
standards as being in compliance with governmentwide data elements for col-
these requirements and have its system lection of financial information (at
available for review. time of publication the Federal Finan-
cial Report or such future collections
200.325 Bonding requirements. as may be approved by OMB and listed
For construction or facility improve- on the OMB Web site). This informa-
ment contracts or subcontracts exceed- tion must be collected with the fre-
ing the Simplified Acquisition Thresh- quency required by the terms and con-
old, the Federal awarding agency or ditions of the Federal award, but no
pass-through entity may accept the less frequently than annually nor more
bonding policy and requirements of the frequently than quarterly except in un-
non-Federal entity provided that the usual circumstances, for example
Federal awarding agency or pass- where more frequent reporting is nec-
through entity has made a determina- essary for the effective monitoring of
tion that the Federal interest is ade- the Federal award or could signifi-
quately protected. If such a determina- cantly affect program outcomes, and
tion has not been made, the minimum preferably in coordination with per-
requirements must be as follows: formance reporting.
(a) A bid guarantee from each bidder
equivalent to five percent of the bid 200.328 Monitoring and reporting pro-
price. The bid guarantee must con- gram performance.
sist of a firm commitment such as a (a) Monitoring by the non-Federal enti-
bid bond, certified check, or other ne- ty. The non-Federal entity is respon-
gotiable instrument accompanying a sible for oversight of the operations of
bid as assurance that the bidder will, the Federal award supported activities.
upon acceptance of the bid, execute The non-Federal entity must monitor
such contractual documents as may be its activities under Federal awards to
required within the time specified. assure compliance with applicable Fed-
(b) A performance bond on the part of eral requirements and performance ex-
the contractor for 100 percent of the pectations are being achieved. Moni-
contract price. A performance bond toring by the non-Federal entity must
is one executed in connection with a cover each program, function or activ-
contract to secure fulfillment of all the ity. See also 200.331 Requirements for
contractors obligations under such pass-through entities.
contract. (b) Non-construction performance re-
(c) A payment bond on the part of the ports. The Federal awarding agency
contractor for 100 percent of the con- must use standard, OMB-approved data
tract price. A payment bond is one elements for collection of performance
executed in connection with a contract information (including performance
122
progress reports, Research Perform- (iii) Additional pertinent information

ance Progress Report, or such future including, when appropriate, analysis
collections as may be approved by OMB and explanation of cost overruns or
and listed on the OMB Web site). high unit costs.
(1) The non-Federal entity must sub- (c) Construction performance reports.
mit performance reports at the inter- For the most part, onsite technical in-
val required by the Federal awarding spections and certified percentage of
agency or pass-through entity to best completion data are relied on heavily
inform improvements in program out- by Federal awarding agencies and pass-
comes and productivity. Intervals must through entities to monitor progress
be no less frequent than annually nor under Federal awards and subawards
more frequent than quarterly except in for construction. The Federal awarding
unusual circumstances, for example agency may require additional per-
where more frequent reporting is nec- formance reports only when considered
essary for the effective monitoring of necessary.
the Federal award or could signifi- (d) Significant developments. Events
cantly affect program outcomes. An- may occur between the scheduled per-
nual reports must be due 90 calendar formance reporting dates that have sig-
days after the reporting period; quar- nificant impact upon the supported ac-
terly or semiannual reports must be tivity. In such cases, the non-Federal
due 30 calendar days after the report- entity must inform the Federal award-
ing period. Alternatively, the Federal ing agency or pass-through entity as
awarding agency or pass-through enti- soon as the following types of condi-
ty may require annual reports before tions become known:
the anniversary dates of multiple year (1) Problems, delays, or adverse con-
Federal awards. The final performance ditions which will materially impair
report will be due 90 calendar days the ability to meet the objective of the
after the period of performance end Federal award. This disclosure must in-
date. If a justified request is submitted clude a statement of the action taken,
by a non-Federal entity, the Federal or contemplated, and any assistance
agency may extend the due date for needed to resolve the situation.
any performance report. (2) Favorable developments which en-
(2) The non-Federal entity must sub- able meeting time schedules and objec-
mit performance reports using OMB- tives sooner or at less cost than antici-
approved governmentwide standard in- pated or producing more or different
formation collections when providing beneficial results than originally
performance information. As appro- planned.
priate in accordance with above men- (e) The Federal awarding agency may
tioned information collections, these make site visits as warranted by pro-
reports will contain, for each Federal gram needs.
award, brief information on the fol- (f) The Federal awarding agency may
lowing unless other collections are ap- waive any performance report required
proved by OMB: by this part if not needed.
(i) A comparison of actual accom-
plishments to the objectives of the 200.329 Reporting on real property.
Federal award established for the pe- The Federal awarding agency or pass-
riod. Where the accomplishments of through entity must require a non-Fed-
the Federal award can be quantified, a eral entity to submit reports at least
computation of the cost (for example, annually on the status of real property
related to units of accomplishment) in which the Federal government re-
may be required if that information tains an interest, unless the Federal in-
will be useful. Where performance terest in the real property extends 15
trend data and analysis would be in- years or longer. In those instances
formative to the Federal awarding where the Federal interest attached is
agency program, the Federal awarding for a period of 15 years or more, the
agency should include this as a per- Federal awarding agency or pass-

formance reporting requirement. through entity, at its option, may re-
(ii) The reasons why established quire the non-Federal entity to report
goals were not met, if appropriate. at various multi-year frequencies (e.g.,
123
every two years or every three years, and creates a procurement relationship
not to exceed a five-year reporting pe- with the contractor. See 200.22 Con-
riod; or a Federal awarding agency or tract. Characteristics indicative of a
pass-through entity may require an- procurement relationship between the
nual reporting for the first three years non-Federal entity and a contractor
of a Federal award and thereafter re- are when the non-Federal entity re-
quire reporting every five years). ceiving the Federal funds:
(1) Provides the goods and services
SUBRECIPIENT MONITORING AND within normal business operations;
MANAGEMENT (2) Provides similar goods or services
to many different purchasers;
200.330 Subrecipient and contractor (3) Normally operates in a competi-
determinations.
tive environment;
The non-Federal entity may concur- (4) Provides goods or services that
rently receive Federal awards as a re- are ancillary to the operation of the
cipient, a subrecipient, and a con- Federal program; and
tractor, depending on the substance of (5) Is not subject to compliance re-
its agreements with Federal awarding quirements of the Federal program as a
agencies and pass-through entities. result of the agreement, though similar
Therefore, a pass-through entity must requirements may apply for other rea-
make case-by-case determinations sons.
whether each agreement it makes for (c) Use of judgment in making deter-
the disbursement of Federal program mination. In determining whether an
funds casts the party receiving the agreement between a pass-through en-
funds in the role of a subrecipient or a tity and another non-Federal entity
contractor. The Federal awarding casts the latter as a subrecipient or a
agency may supply and require recipi- contractor, the substance of the rela-
ents to comply with additional guid- tionship is more important than the
ance to support these determinations form of the agreement. All of the char-
provided such guidance does not con- acteristics listed above may not be
flict with this section. present in all cases, and the pass-
(a) Subrecipients. A subaward is for through entity must use judgment in
the purpose of carrying out a portion of classifying each agreement as a
a Federal award and creates a Federal subaward or a procurement contract.
assistance relationship with the sub-
recipient. See 200.92 Subaward. Char- 200.331 Requirements for pass-
acteristics which support the classi- through entities.
fication of the non-Federal entity as a All pass-through entities must:
subrecipient include when the non-Fed- (a) Ensure that every subaward is
eral entity: clearly identified to the subrecipient as
(1) Determines who is eligible to re- a subaward and includes the following
ceive what Federal assistance; information at the time of the
(2) Has its performance measured in subaward and if any of these data ele-
relation to whether objectives of a Fed- ments change, include the changes in
eral program were met; subsequent subaward modification.
(3) Has responsibility for pro- When some of this information is not
grammatic decision making; available, the pass-through entity
(4) Is responsible for adherence to ap- must provide the best information
plicable Federal program requirements available to describe the Federal award
specified in the Federal award; and and subaward. Required information
(5) In accordance with its agreement, includes:
uses the Federal funds to carry out a (1) Federal Award Identification.
program for a public purpose specified (i) Subrecipient name (which must
in authorizing statute, as opposed to match registered name in DUNS);
providing goods or services for the ben- (ii) Subrecipients DUNS number (see
efit of the pass-through entity. 200.32 Data Universal Numbering Sys-

(b) Contractors. A contract is for the tem (DUNS) number);
purpose of obtaining goods and services (iii) Federal Award Identification
for the non-Federal entitys own use Number (FAIN);
124
(iv) Federal Award Date (see 200.39 through 200.309 Period of performance,
Federal award date); and Subpart FAudit Requirements of
(v) Subaward Period of Performance this part; and
Start and End Date; (6) Appropriate terms and conditions
(vi) Amount of Federal Funds Obli- concerning closeout of the subaward.
gated by this action; (b) Evaluate each subrecipients risk
(vii) Total Amount of Federal Funds of noncompliance with Federal stat-
Obligated to the subrecipient; utes, regulations, and the terms and
(viii) Total Amount of the Federal conditions of the subaward for purposes
Award; of determining the appropriate sub-
(ix) Federal award project descrip- recipient monitoring described in para-
tion, as required to be responsive to graph (e) of this section, which may in-
the Federal Funding Accountability clude consideration of such factors as:
and Transparency Act (FFATA); (1) The subrecipients prior experi-
(x) Name of Federal awarding agency, ence with the same or similar sub-
pass-through entity, and contact infor- awards;
mation for awarding official, (2) The results of previous audits in-
(xi) CFDA Number and Name; the cluding whether or not the sub-
pass-through entity must identify the recipient receives a Single Audit in ac-
dollar amount made available under cordance with Subpart FAudit Re-
each Federal award and the CFDA quirements of this part, and the extent
number at time of disbursement; to which the same or similar subaward
(xii) Identification of whether the has been audited as a major program;
award is R&D; and
(3) Whether the subrecipient has new
(xiii) Indirect cost rate for the Fed-
personnel or new or substantially
eral award (including if the de minimis
changed systems; and
rate is charged per 200.414 Indirect
(4) The extent and results of Federal
(F&A) costs).
awarding agency monitoring (e.g., if
(2) All requirements imposed by the
the subrecipient also receives Federal
pass-through entity on the sub-
awards directly from a Federal award-
recipient so that the Federal award is
ing agency).
used in accordance with Federal stat-
utes, regulations and the terms and (c) Consider imposing specific
conditions of the Federal award. subaward conditions upon a sub-
(3) Any additional requirements that recipient if appropriate as described in
the pass-through entity imposes on the 200.207 Specific conditions.
subrecipient in order for the pass- (d) Monitor the activities of the sub-
through entity to meet its own respon- recipient as necessary to ensure that
sibility to the Federal awarding agency the subaward is used for authorized
including identification of any required purposes, in compliance with Federal
financial and performance reports; statutes, regulations, and the terms
(4) An approved federally recognized and conditions of the subaward; and
indirect cost rate negotiated between that subaward performance goals are
the subrecipient and the Federal gov- achieved. Pass-through entity moni-
ernment or, if no such rate exists, ei- toring of the subrecipient must in-
ther a rate negotiated between the clude:
pass-through entity and the sub- (1) Reviewing financial and pro-
recipient (in compliance with this grammatic reports required by the
part), or a de minimis indirect cost pass-through entity.
rate as defined in 200.414 Indirect (2) Following-up and ensuring that
(F&A) costs, paragraph (b) of this part. the subrecipient takes timely and ap-
(5) A requirement that the sub- propriate action on all deficiencies per-
recipient permit the pass-through enti- taining to the Federal award provided
ty and auditors to have access to the to the subrecipient from the pass-
subrecipients records and financial through entity detected through au-
statements as necessary for the pass- dits, on-site reviews, and other means.
through entity to meet the require- (3) Issuing a management decision for
ments of this section, 200.300 Statu- audit findings pertaining to the Fed-
tory and national policy requirements eral award provided to the subrecipient
125
from the pass-through entity as re- nent to a Federal award must be re-
quired by 200.521 Management deci- tained for a period of three years from
sion. the date of submission of the final ex-
(e) Depending upon the pass-through penditure report or, for Federal awards
entitys assessment of risk posed by that are renewed quarterly or annu-
the subrecipient (as described in para- ally, from the date of the submission of
graph (b) of this section), the following the quarterly or annual financial re-
monitoring tools may be useful for the port, respectively, as reported to the
pass-through entity to ensure proper Federal awarding agency or pass-
accountability and compliance with through entity in the case of a sub-
program requirements and achieve- recipient. Federal awarding agencies
ment of performance goals: and pass-through entities must not im-
(1) Providing subrecipients with pose any other record retention re-
training and technical assistance on quirements upon non-Federal entities.
program-related matters; and The only exceptions are the following:
(2) Performing on-site reviews of the (a) If any litigation, claim, or audit
subrecipients program operations; is started before the expiration of the
(3) Arranging for agreed-upon-proce- 3-year period, the records must be re-
dures engagements as described in tained until all litigation, claims, or
200.425 Audit services. audit findings involving the records
(f) Verify that every subrecipient is have been resolved and final action
audited as required by Subpart F taken.
Audit Requirements of this part when (b) When the non-Federal entity is
it is expected that the subrecipients notified in writing by the Federal
Federal awards expended during the re- awarding agency, cognizant agency for
spective fiscal year equaled or exceeded audit, oversight agency for audit, cog-
the threshold set forth in 200.501 Audit nizant agency for indirect costs, or
requirements. pass-through entity to extend the re-
(g) Consider whether the results of tention period.
the subrecipients audits, on-site re-
(c) Records for real property and
views, or other monitoring indicate
equipment acquired with Federal funds
conditions that necessitate adjust-
must be retained for 3 years after final
ments to the pass-through entitys own
disposition.
records.
(h) Consider taking enforcement ac- (d) When records are transferred to or
tion against noncompliant subrecipi- maintained by the Federal awarding
ents as described in 200.338 Remedies agency or pass-through entity, the 3-
for noncompliance of this part and in year retention requirement is not ap-
program regulations. plicable to the non-Federal entity.
(e) Records for program income
200.332 Fixed amount subawards. transactions after the period of per-
With prior written approval from the formance. In some cases recipients
Federal awarding agency, a pass- must report program income after the
through entity may provide subawards period of performance. Where there is
based on fixed amounts up to the Sim- such a requirement, the retention pe-
plified Acquisition Threshold, provided riod for the records pertaining to the
that the subawards meet the require- earning of the program income starts
ments for fixed amount awards in from the end of the non-Federal enti-
200.201 Use of grant agreements (in- tys fiscal year in which the program
cluding fixed amount awards), coopera- income is earned.
tive agreements, and contracts. (f) Indirect cost rate proposals and
cost allocations plans. This paragraph
RECORD RETENTION AND ACCESS applies to the following types of docu-
ments and their supporting records: in-
200.333 Retention requirements for direct cost rate computations or pro-
records. posals, cost allocation plans, and any

Financial records, supporting docu- similar accounting computations of
ments, statistical records, and all the rate at which a particular group of
other non-Federal entity records perti- costs is chargeable (such as computer
126
usage chargeback rates or composite is no need to create and retain paper

fringe benefit rates). copies. When original records are
(1) If submitted for negotiation. If the paper, electronic versions may be sub-
proposal, plan, or other computation is stituted through the use of duplication
required to be submitted to the Federal or other forms of electronic media pro-
government (or to the pass-through en- vided that they are subject to periodic
tity) to form the basis for negotiation quality control reviews, provide rea-
of the rate, then the 3-year retention sonable safeguards against alteration,
period for its supporting records starts and remain readable.
from the date of such submission.
(2) If not submitted for negotiation. If 200.336 Access to records.
the proposal, plan, or other computa- (a) Records of non-Federal entities. The
tion is not required to be submitted to Federal awarding agency, Inspectors
the Federal government (or to the General, the Comptroller General of
pass-through entity) for negotiation the United States, and the pass-
purposes, then the 3-year retention pe- through entity, or any of their author-
riod for the proposal, plan, or computa- ized representatives, must have the
tion and its supporting records starts right of access to any documents, pa-
from the end of the fiscal year (or
pers, or other records of the non-Fed-
other accounting period) covered by
eral entity which are pertinent to the
the proposal, plan, or other computa-
Federal award, in order to make au-
tion.
dits, examinations, excerpts, and tran-
200.334 Requests for transfer of scripts. The right also includes timely
records. and reasonable access to the non-Fed-
eral entitys personnel for the purpose
The Federal awarding agency must
of interview and discussion related to
request transfer of certain records to
such documents.
its custody from the non-Federal enti-
ty when it determines that the records (b) Only under extraordinary and
possess long-term retention value. rare circumstances would such access
However, in order to avoid duplicate include review of the true name of vic-
recordkeeping, the Federal awarding tims of a crime. Routine monitoring
agency may make arrangements for cannot be considered extraordinary and
the non-Federal entity to retain any rare circumstances that would neces-
records that are continuously needed sitate access to this information. When
for joint use. access to the true name of victims of a
crime is necessary, appropriate steps to
200.335 Methods for collection, trans- protect this sensitive information must
mission and storage of information. be taken by both the non-Federal enti-
In accordance with the May 2013 Ex- ty and the Federal awarding agency.
ecutive Order on Making Open and Ma- Any such access, other than under a
chine Readable the New Default for court order or subpoena pursuant to a
Government Information, the Federal bona fide confidential investigation,
awarding agency and the non-Federal must be approved by the head of the
entity should, whenever practicable, Federal awarding agency or delegate.
collect, transmit, and store Federal (c) Expiration of right of access. The
award-related information in open and rights of access in this section are not
machine readable formats rather than limited to the required retention pe-
in closed formats or on paper. The Fed- riod but last as long as the records are
eral awarding agency or pass-through retained. Federal awarding agencies
entity must always provide or accept and pass-through entities must not im-
paper versions of Federal award-related pose any other access requirements
information to and from the non-Fed- upon non-Federal entities.
eral entity upon request. If paper cop-
ies are submitted, the Federal award- 200.337 Restrictions on public access
ing agency or pass-through entity must to records.

not require more than an original and No Federal awarding agency may
two copies. When original records are place restrictions on the non-Federal
electronic and cannot be altered, there entity that limit public access to the
127
records of the non-Federal entity perti- regulations (or in the case of a pass-
nent to a Federal award, except for through entity, recommend such a pro-
protected personally identifiable infor- ceeding be initiated by a Federal
mation (PII) or when the Federal awarding agency).
awarding agency can demonstrate that (e) Withhold further Federal awards
such records will be kept confidential for the project or program.
and would have been exempted from (f) Take other remedies that may be
disclosure pursuant to the Freedom of legally available.
Information Act (5 U.S.C. 552) or con-
trolled unclassified information pursu- 200.339 Termination.
ant to Executive Order 13556 if the
(a) The Federal award may be termi-
records had belonged to the Federal
nated in whole or in part as follows:
awarding agency. The Freedom of In-
(1) By the Federal awarding agency
formation Act (5 U.S.C. 552) (FOIA)
or pass-through entity, if a non-Fed-
does not apply to those records that re-
eral entity fails to comply with the
main under a non-Federal entitys con-
terms and conditions of a Federal
trol except as required under 200.315
award;
Intangible property. Unless required by
Federal, state, or local statute, non- (2) By the Federal awarding agency
Federal entities are not required to or pass-through entity for cause;
permit public access to their records. (3) By the Federal awarding agency
The non-Federal entitys records pro- or pass-through entity with the con-
vided to a Federal agency generally sent of the non-Federal entity, in
will be subject to FOIA and applicable which case the two parties must agree
exemptions. upon the termination conditions, in-
cluding the effective date and, in the
REMEDIES FOR NONCOMPLIANCE case of partial termination, the portion
to be terminated; or
200.338 Remedies for noncompliance. (4) By the non-Federal entity upon
If a non-Federal entity fails to com- sending to the Federal awarding agen-
ply with Federal statutes, regulations cy or pass-through entity written noti-
or the terms and conditions of a Fed- fication setting forth the reasons for
eral award, the Federal awarding agen- such termination, the effective date,
cy or pass-through entity may impose and, in the case of partial termination,
additional conditions, as described in the portion to be terminated. However,
200.207 Specific conditions. If the Fed- if the Federal awarding agency or pass-
eral awarding agency or pass-through through entity determines in the case
entity determines that noncompliance of partial termination that the reduced
cannot be remedied by imposing addi- or modified portion of the Federal
tional conditions, the Federal awarding award or subaward will not accomplish
agency or pass-through entity may the purposes for which the Federal
take one or more of the following ac- award was made, the Federal awarding
tions, as appropriate in the cir- agency or pass-through entity may ter-
cumstances: minate the Federal award in its en-
(a) Temporarily withhold cash pay- tirety.
ments pending correction of the defi- (b) When a Federal award is termi-
ciency by the non-Federal entity or nated or partially terminated, both the
more severe enforcement action by the Federal awarding agency or pass-
Federal awarding agency or pass- through entity and the non-Federal en-
through entity. tity remain responsible for compliance
(b) Disallow (that is, deny both use of with the requirements in 200.343
funds and any applicable matching Closeout and 200.344 Post-closeout ad-
credit for) all or part of the cost of the justments and continuing responsibil-
activity or action not in compliance. ities.
(c) Wholly or partly suspend or ter-
minate the Federal award. 200.340 Notification of termination

(d) Initiate suspension or debarment requirement.
proceedings as authorized under 2 CFR (a) The Federal agency or pass-
part 180 and Federal awarding agency through entity must provide to the
128
non-Federal entity a notice of termi- non-Federal entity before the effective

nation. date of suspension or termination, are
(b) If the Federal award is terminated not in anticipation of it; and
for the non-Federal entitys failure to (b) The costs would be allowable if
comply with the Federal statutes, reg- the Federal award was not suspended
ulations, or terms and conditions of or expired normally at the end of the
the Federal award, the notification period of performance in which the ter-
must state that the termination deci- mination takes effect.
sion may be considered in evaluating
future applications received from the CLOSEOUT
non-Federal entity.
(c) Upon termination of a Federal 200.343 Closeout.
award, the Federal awarding agency The Federal agency or pass-through
must provide the information required entity will close-out the Federal award
under FFATA to the Federal Web site when it determines that all applicable
established to fulfill the requirements administrative actions and all required
of FFATA, and update or notify any work of the Federal award have been
other relevant governmentwide sys- completed by the non-Federal entity.
tems or entities of any indications of This section specifies the actions the
poor performance as required by 41 non-Federal entity and Federal award-
U.S.C. 417b and 31 U.S.C. 3321 and im- ing agency or pass-through entity must
plementing guidance at 2 CFR part 77. take to complete this process at the
See also the requirements for Suspen- end of the period of performance.
sion and Debarment at 2 CFR part 180.
(a) The non-Federal entity must sub-
200.341 Opportunities to object, hear- mit, no later than 90 calendar days
ings and appeals. after the end date of the period of per-
formance, all financial, performance,
Upon taking any remedy for non-
and other reports as required by or the
compliance, the Federal awarding
agency must provide the non-Federal terms and conditions of the Federal
entity an opportunity to object and award. The Federal awarding agency or
provide information and documenta- pass-through entity may approve ex-
tion challenging the suspension or ter- tensions when requested by the non-
mination action, in accordance with Federal entity.
written processes and procedures pub- (b) Unless the Federal awarding agen-
lished by the Federal awarding agency. cy or pass-through entity authorizes an
The Federal awarding agency or pass- extension, a non-Federal entity must
through entity must comply with any liquidate all obligations incurred under
requirements for hearings, appeals or the Federal award not later than 90
other administrative proceedings calendar days after the end date of the
which the non-Federal entity is enti- period of performance as specified in
tled under any statute or regulation the terms and conditions of the Federal
applicable to the action involved. award.
(c) The Federal awarding agency or
200.342 Effects of suspension and ter- pass-through entity must make prompt
mination. payments to the non-Federal entity for
Costs to the non-Federal entity re- allowable reimbursable costs under the
sulting from obligations incurred by Federal award being closed out.
the non-Federal entity during a sus- (d) The non-Federal entity must
pension or after termination of a Fed- promptly refund any balances of unob-
eral award or subaward are not allow- ligated cash that the Federal awarding
able unless the Federal awarding agen- agency or pass-through entity paid in
cy or pass-through entity expressly au- advance or paid and that is not author-
thorizes them in the notice of suspen- ized to be retained by the non-Federal
sion or termination or subsequently. entity for use in other projects. See
However, costs during suspension or OMB Circular A129 and see 200.345
after termination are allowable if: Collection of amounts due for require-
(a) The costs result from obligations ments regarding unreturned amounts
which were properly incurred by the that become delinquent debts.
129
(e) Consistent with the terms and ended in whole or in part with the con-
conditions of the Federal award, the sent of the Federal awarding agency or
Federal awarding agency or pass- pass-through entity and the non-Fed-
through entity must make a settle- eral entity, provided the responsibil-
ment for any upward or downward ad- ities of the non-Federal entity referred
justments to the Federal share of costs to in paragraph (a) of this section in-
after closeout reports are received. cluding those for property management
(f) The non-Federal entity must ac- as applicable, are considered and provi-
count for any real and personal prop- sions made for continuing responsibil-
erty acquired with Federal funds or re- ities of the non-Federal entity, as ap-
ceived from the Federal government in propriate.
accordance with 200.310 Insurance
coverage through 200.316 Property trust COLLECTION OF AMOUNTS DUE
relationship and 200.329 Reporting on
real property. 200.345 Collection of amounts due.
(g) The Federal awarding agency or (a) Any funds paid to the non-Federal
pass-through entity should complete entity in excess of the amount to
all closeout actions for Federal awards which the non-Federal entity is finally
no later than one year after receipt and determined to be entitled under the
acceptance of all required final reports. terms of the Federal award constitute
a debt to the Federal government. If
POST-CLOSEOUT ADJUSTMENTS AND not paid within 90 calendar days after
CONTINUING RESPONSIBILITIES demand, the Federal awarding agency
may reduce the debt by:
200.344 Post-closeout adjustments
and continuing responsibilities. (1) Making an administrative offset
against other requests for reimburse-
(a) The closeout of a Federal award ments;
does not affect any of the following. (2) Withholding advance payments
(1) The right of the Federal awarding otherwise due to the non-Federal enti-
agency or pass-through entity to dis- ty; or
allow costs and recover funds on the (3) Other action permitted by Federal
basis of a later audit or other review. statute.
The Federal awarding agency or pass-
(b) Except where otherwise provided
through entity must make any cost
by statutes or regulations, the Federal
disallowance determination and notify
awarding agency will charge interest
the non-Federal entity within the
on an overdue debt in accordance with
record retention period.
the Federal Claims Collection Stand-
(2) The obligation of the non-Federal
ards (31 CFR parts 900 through 999). The
entity to return any funds due as a re-
date from which interest is computed
sult of later refunds, corrections, or
is not extended by litigation or the fil-
other transactions including final indi-
ing of any form of appeal.
rect cost rate adjustments.
(3) Audit requirements in Subpart
FAudit Requirements of this part. Subpart ECost Principles
(4) Property management and dis-
position requirements in Subpart D GENERAL PROVISIONS
Post Federal Award Requirements of
200.400 Policy guide.
this part, 200.310 Insurance Coverage
through 200.316 Property trust relation- The application of these cost prin-
ship. ciples is based on the fundamental
(5) Records retention as required in premises that:
Subpart DPost Federal Award Re- (a) The non-Federal entity is respon-
quirements of this part, 200.333 Re- sible for the efficient and effective ad-
tention requirements for records ministration of the Federal award
through 200.337 Restrictions on public through the application of sound man-
access to records. agement practices.

(b) After closeout of the Federal (b) The non-Federal entity assumes
award, a relationship created under the responsibility for administering Fed-
Federal award may be modified or eral funds in a manner consistent with
130
underlying agreements, program objec- non-Federal entity as a guide in the

tives, and the terms and conditions of pricing of fixed-price contracts and
the Federal award. subcontracts where costs are used in
(c) The non-Federal entity, in rec- determining the appropriate price. The
ognition of its own unique combination principles do not apply to:
of staff, facilities, and experience, has (1) Arrangements under which Fed-
the primary responsibility for employ- eral financing is in the form of loans,
ing whatever form of sound organiza- scholarships, fellowships, traineeships,
tion and management techniques may or other fixed amounts based on such
be necessary in order to assure proper
items as education allowance or pub-
and efficient administration of the
lished tuition rates and fees.
Federal award.
(d) The application of these cost prin- (2) For IHEs, capitation awards,
ciples should require no significant which are awards based on case counts
changes in the internal accounting or number of beneficiaries according to
policies and practices of the non-Fed- the terms and conditions of the Federal
eral entity. However, the accounting award.
practices of the non-Federal entity (3) Fixed amount awards. See also
must be consistent with these cost Subpart AAcronyms and Definitions,
principles and support the accumula- 200.45 Fixed amount awards and
tion of costs as required by the prin- 200.201 Use of grant agreements (includ-
ciples, and must provide for adequate ing fixed amount awards), cooperative
documentation to support costs agreements, and contracts.
charged to the Federal award. (4) Federal awards to hospitals (see
(e) In reviewing, negotiating and ap- Appendix IX to Part 200Hospital Cost
proving cost allocation plans or indi- Principles).
rect cost proposals, the cognizant agen- (5) Other awards under which the
cy for indirect costs should generally non-Federal entity is not required to
assure that the non-Federal entity is
account to the Federal government for
applying these cost accounting prin-
actual costs incurred.
ciples on a consistent basis during
their review and negotiation of indirect (b) Federal Contract. Where a Federal
cost proposals. Where wide variations contract awarded to a non-Federal en-
exist in the treatment of a given cost tity is subject to the Cost Accounting
item by the non-Federal entity, the Standards (CAS), it incorporates the
reasonableness and equity of such applicable CAS clauses, Standards, and
treatments should be fully considered. CAS administration requirements per
See 200.56 Indirect (facilities & admin- the 48 CFR Chapter 99 and 48 CFR part
istrative (F&A)) costs. 30 (FAR Part 30). CAS applies directly
(f) For non-Federal entities that edu- to the CAS-covered contract and the
cate and engage students in research, Cost Accounting Standards at 48 CFR
the dual role of students as both train- parts 9904 or 9905 takes precedence over
ees and employees contributing to the the cost principles in this Subpart E
completion of Federal awards for re- Cost Principles of this part with re-
search must be recognized in the appli- spect to the allocation of costs. When a
cation of these principles. contract with a non-Federal entity is
(g) The non-Federal entity may not subject to full CAS coverage, the al-
earn or keep any profit resulting from lowability of certain costs under the
Federal financial assistance, unless ex- cost principles will be affected by the
pressly authorized by the terms and allocation provisions of the Cost Ac-
conditions of the Federal award. See
counting Standards (e.g., CAS 41448
also 200.307 Program income.
CFR 9904.414, Cost of Money as an Ele-
200.401 Application. ment of the Cost of Facilities Capital,
and CAS 41748 CFR 9904.417, Cost of
(a) General. These principles must be
used in determining the allowable costs Money as an Element of the Cost of

of work performed by the non-Federal Capital Assets Under Construction),
entity under Federal awards. These apply rather the allowability provi-
principles also must be used by the sions of 200.449 Interest. In complying
131
with those requirements, the non-Fed- like circumstances has been allocated
eral entitys application of cost ac- to the Federal award as an indirect
counting practices for estimating, ac- cost.
cumulating, and reporting costs for (e) Be determined in accordance with
other Federal awards and other cost generally accepted accounting prin-
objectives under the CAS-covered con- ciples (GAAP), except, for state and
tract still must be consistent with its local governments and Indian tribes
cost accounting practices for the CAS- only, as otherwise provided for in this
covered contracts. In all cases, only part.
one set of accounting records needs to (f) Not be included as a cost or used
be maintained for the allocation of to meet cost sharing or matching re-
costs by the non-Federal entity. quirements of any other federally-fi-
(c) Exemptions. Some nonprofit orga- nanced program in either the current
nizations, because of their size and na- or a prior period. See also 200.306 Cost
ture of operations, can be considered to sharing or matching paragraph (b).
be similar to for-profit entities for pur- (g) Be adequately documented. See
pose of applicability of cost principles. also 200.300 Statutory and national
Such nonprofit organizations must op- policy requirements through 200.309 Pe-
erate under Federal cost principles ap- riod of performance of this part.
plicable to for-profit entities located at
48 CFR 31.2. A listing of these organiza- 200.404 Reasonable costs.
tions is contained in Appendix VIII to
A cost is reasonable if, in its nature
Part 200Nonprofit Organizations Ex-
and amount, it does not exceed that
empted From Subpart ECost Prin-
which would be incurred by a prudent
ciples of this part. Other organizations,
person under the circumstances pre-
as approved by the cognizant agency
vailing at the time the decision was
for indirect costs, may be added from
made to incur the cost. The question of
time to time.
reasonableness is particularly impor-
BASIC CONSIDERATIONS tant when the non-Federal entity is
predominantly federally-funded. In de-
200.402 Composition of costs. termining reasonableness of a given
Total cost. The total cost of a Federal cost, consideration must be given to:
award is the sum of the allowable di- (a) Whether the cost is of a type gen-
rect and allocable indirect costs less erally recognized as ordinary and nec-
any applicable credits. essary for the operation of the non-
Federal entity or the proper and effi-
200.403 Factors affecting allowability cient performance of the Federal
of costs. award.
Except where otherwise authorized (b) The restraints or requirements
by statute, costs must meet the fol- imposed by such factors as: sound busi-
lowing general criteria in order to be ness practices; arms-length bar-
allowable under Federal awards: gaining; Federal, state and other laws
(a) Be necessary and reasonable for and regulations; and terms and condi-
the performance of the Federal award tions of the Federal award.
and be allocable thereto under these (c) Market prices for comparable
principles. goods or services for the geographic
(b) Conform to any limitations or ex- area.
clusions set forth in these principles or (d) Whether the individuals con-
in the Federal award as to types or cerned acted with prudence in the cir-
amount of cost items. cumstances considering their respon-
(c) Be consistent with policies and sibilities to the non-Federal entity, its
procedures that apply uniformly to employees, where applicable its stu-
both federally-financed and other ac- dents or membership, the public at
tivities of the non-Federal entity. large, and the Federal government.
(d) Be accorded consistent treatment. (e) Whether the non-Federal entity

A cost may not be assigned to a Fed- significantly deviates from its estab-
eral award as a direct cost if any other lished practices and policies regarding
cost incurred for the same purpose in the incurrence of costs, which may
132
unjustifiably increase the Federal mented basis. Where the purchase of

awards cost. equipment or other capital asset is spe-
cifically authorized under a Federal
200.405 Allocable costs. award, the costs are assignable to the
(a) A cost is allocable to a particular Federal award regardless of the use
Federal award or other cost objective if that may be made of the equipment or
the goods or services involved are other capital asset involved when no
chargeable or assignable to that Fed- longer needed for the purpose for which
eral award or cost objective in accord- it was originally required. See also
ance with relative benefits received. 200.310 Insurance coverage through
This standard is met if the cost: 200.316 Property trust relationship and
(1) Is incurred specifically for the 200.439 Equipment and other capital ex-
Federal award;
penditures.
(2) Benefits both the Federal award
and other work of the non-Federal en- (e) If the contract is subject to CAS,
tity and can be distributed in propor- costs must be allocated to the contract
tions that may be approximated using pursuant to the Cost Accounting
reasonable methods; and Standards. To the extent that CAS is
(3) Is necessary to the overall oper- applicable, the allocation of costs in
ation of the non-Federal entity and is accordance with CAS takes precedence
assignable in part to the Federal award over the allocation provisions in this
in accordance with the principles in part.
this subpart.
(b) All activities which benefit from 200.406 Applicable credits.
the non-Federal entitys indirect (F&A) (a) Applicable credits refer to those
cost, including unallowable activities receipts or reduction-of-expenditure-
and donated services by the non-Fed- type transactions that offset or reduce
eral entity or third parties, will receive expense items allocable to the Federal
an appropriate allocation of indirect award as direct or indirect (F&A) costs.
costs. Examples of such transactions are: pur-
(c) Any cost allocable to a particular
chase discounts, rebates or allowances,
Federal award under the principles pro-
recoveries or indemnities on losses, in-
vided for in this part may not be
charged to other Federal awards to surance refunds or rebates, and adjust-
overcome fund deficiencies, to avoid re- ments of overpayments or erroneous
strictions imposed by Federal statutes, charges. To the extent that such cred-
regulations, or terms and conditions of its accruing to or received by the non-
the Federal awards, or for other rea- Federal entity relate to allowable
sons. However, this prohibition would costs, they must be credited to the
not preclude the non-Federal entity Federal award either as a cost reduc-
from shifting costs that are allowable tion or cash refund, as appropriate.
under two or more Federal awards in (b) In some instances, the amounts
accordance with existing Federal stat- received from the Federal government
utes, regulations, or the terms and con- to finance activities or service oper-
ditions of the Federal awards. ations of the non-Federal entity should
(d) Direct cost allocation principles. be treated as applicable credits. Spe-
If a cost benefits two or more projects cifically, the concept of netting such
or activities in proportions that can be credit items (including any amounts
determined without undue effort or used to meet cost sharing or matching
cost, the cost should be allocated to requirements) should be recognized in
the projects based on the proportional determining the rates or amounts to be
benefit. If a cost benefits two or more charged to the Federal award. (See
projects or activities in proportions
200.436 Depreciation and 200.468 Spe-
that cannot be determined because of
cialized service facilities, for areas of
the interrelationship of the work in-
potential application in the matter of

volved, then, notwithstanding para-
graph (c) of this section, the costs may Federal financing of activities.)
be allocated or transferred to bene-
fitted projects on any reasonable docu-
133
200.407 Prior written approval (prior (u) 200.467 Selling and marketing
approval). costs; and
Under any given Federal award, the (v) 200.474 Travel costs.
reasonableness and allocability of cer-
tain items of costs may be difficult to 200.408 Limitation on allowance of
costs.
determine. In order to avoid subse-
quent disallowance or dispute based on The Federal award may be subject to
unreasonableness or nonallocability, statutory requirements that limit the
the non-Federal entity may seek the allowability of costs. When the max-
prior written approval of the cognizant imum amount allowable under a limi-
agency for indirect costs or the Federal tation is less than the total amount de-
awarding agency in advance of the in- termined in accordance with the prin-
currence of special or unusual costs. ciples in this part, the amount not re-
Prior written approval should include coverable under the Federal award may
the timeframe or scope of the agree- not be charged to the Federal award.
ment. The absence of prior written ap-
proval on any element of cost will not, 200.409 Special considerations.
in itself, affect the reasonableness or
In addition to the basic consider-
allocability of that element, unless
ations regarding the allowability of
prior approval is specifically required
costs highlighted in this subtitle, other
for allowability as described under cer-
subtitles in this part describe special
tain circumstances in the following
considerations and requirements appli-
sections of this part:
cable to states, local governments, In-
(a) 200.201 Use of grant agreements
(including fixed amount awards), coop- dian tribes, and IHEs. In addition, cer-
erative agreements, and contracts, tain provisions among the items of cost
paragraph (b)(5); in this subpart, are only applicable to
(b) 200.306 Cost sharing or matching; certain types of non-Federal entities,
(c) 200.307 Program income; as specified in the following sections:
(d) 200.308 Revision of budget and (a) Direct and Indirect (F&A) Costs
program plans; ( 200.412 Classification of costs
(e) 200.332 Fixed amount subawards; through 200.415 Required certifications)
(f) 200.413 Direct costs, paragraph of this subpart;
(c); (b) Special Considerations for States,
(g) 200.430 Compensationpersonal Local Governments and Indian Tribes
services, paragraph (h); ( 200.416 Cost allocation plans and in-
(h) 200.431 Compensationfringe direct cost proposals and 200.417 Inter-
benefits; agency service) of this subpart; and
(i) 200.438 Entertainment costs; (c) Special Considerations for Insti-
(j) 200.439 Equipment and other cap- tutions of Higher Education ( 200.418
ital expenditures; Costs incurred by states and local gov-
(k) 200.440 Exchange rates; ernments and 200.419 Cost accounting
(l) 200.441 Fines, penalties, damages standards and disclosure statement) of
and other settlements; this subpart.
(m) 200.442 Fund raising and invest-
ment management costs; 200.410 Collection of unallowable
costs.
(n) 200.445 Goods or services for per-
sonal use; Payments made for costs determined
(o) 200.447 Insurance and indem- to be unallowable by either the Federal
nification; awarding agency, cognizant agency for
(p) 200.454 Memberships, subscrip- indirect costs, or pass-through entity,
tions, and professional activity costs, either as direct or indirect costs, must
paragraph (c); be refunded (including interest) to the
(q) 200.455 Organization costs; Federal government in accordance
(r) 200.456 Participant support costs; with instructions from the Federal
(s) 200.458 Pre-award costs; agency that determined the costs are
(t) 200.462 Rearrangement and recon- unallowable unless Federal statute or
version costs; regulation directs otherwise. See also
134
Subpart DPost Federal Award Re- the amount or proportion of unallow-

quirements of this part, 200.300 Stat- able costs included in the base year
utory and national policy requirements proposal used to establish the rate.
through 200.309 Period of performance.
DIRECT AND INDIRECT (F&A) COSTS
200.411 Adjustment of previously ne-
gotiated indirect (F&A) cost rates 200.412 Classification of costs.
containing unallowable costs.
There is no universal rule for
(a) Negotiated indirect (F&A) cost classifying certain costs as either di-
rates based on a proposal later found to rect or indirect (F&A) under every ac-
have included costs that: counting system. A cost may be direct
(1) Are unallowable as specified by with respect to some specific service or
Federal statutes, regulations or the function, but indirect with respect to
terms and conditions of a Federal the Federal award or other final cost
award; or objective. Therefore, it is essential
(2) Are unallowable because they are that each item of cost incurred for the
not allocable to the Federal award(s), same purpose be treated consistently
must be adjusted, or a refund must be in like circumstances either as a direct
made, in accordance with the require- or an indirect (F&A) cost in order to
ments of this section. These adjust- avoid possible double-charging of Fed-
ments or refunds are designed to cor- eral awards. Guidelines for determining
rect the proposals used to establish the direct and indirect (F&A) costs charged
rates and do not constitute a reopening to Federal awards are provided in this
of the rate negotiation. The adjust- subpart.
ments or refunds will be made regard-
less of the type of rate negotiated (pre- 200.413 Direct costs.
determined, final, fixed, or provi-
sional). (a) General. Direct costs are those
(b) For rates covering a future fiscal costs that can be identified specifically
year of the non-Federal entity, the un- with a particular final cost objective,
allowable costs will be removed from such as a Federal award, or other inter-
the indirect (F&A) cost pools and the nally or externally funded activity, or
rates appropriately adjusted. that can be directly assigned to such
(c) For rates covering a past period, activities relatively easily with a high
the Federal share of the unallowable degree of accuracy. Costs incurred for
costs will be computed for each year the same purpose in like circumstances
involved and a cash refund (including must be treated consistently as either
interest chargeable in accordance with direct or indirect (F&A) costs. See also
applicable regulations) will be made to 200.405 Allocable costs.
the Federal government. If cash re- (b) Application to Federal awards.
funds are made for past periods covered Identification with the Federal award
by provisional or fixed rates, appro- rather than the nature of the goods and
priate adjustments will be made when services involved is the determining
the rates are finalized to avoid dupli- factor in distinguishing direct from in-
cate recovery of the unallowable costs direct (F&A) costs of Federal awards.
by the Federal government. Typical costs charged directly to a
(d) For rates covering the current pe- Federal award are the compensation of
riod, either a rate adjustment or a re- employees who work on that award,
fund, as described in paragraphs (b) and their related fringe benefit costs, the
(c) of this section, must be required by costs of materials and other items of
the cognizant agency for indirect costs. expense incurred for the Federal award.
The choice of method must be at the If directly related to a specific award,
discretion of the cognizant agency for certain costs that otherwise would be
indirect costs, based on its judgment as treated as indirect costs may also in-
to which method would be most prac- clude extraordinary utility consump-
tical. tion, the cost of materials supplied

(e) The amount or proportion of unal- from stock or services rendered by spe-
lowable costs included in each years cialized facilities or other institutional
rate will be assumed to be the same as service operations.
135
(c) The salaries of administrative and 200.454 Memberships, subscriptions,

clerical staff should normally be treat- and professional activity costs and
ed as indirect (F&A) costs. Direct 200.450 Lobbying.
charging of these costs may be appro- (3) Promotion, lobbying, and other
priate only if all of the following condi- forms of public relations. See also
tions are met: 200.421 Advertising and public rela-
(1) Administrative or clerical serv- tions and 200.450 Lobbying.
ices are integral to a project or activ- (4) Conferences except those held to
ity; conduct the general administration of
(2) Individuals involved can be spe- the non-Federal entity. See also
cifically identified with the project or 200.432 Conferences.
activity; (5) Maintenance, protection, and in-
(3) Such costs are explicitly included vestment of special funds not used in
in the budget or have the prior written operation of the non-Federal entity.
approval of the Federal awarding agen- (6) Administration of group benefits
cy; and on behalf of members or clients, in-
(4) The costs are not also recovered cluding life and hospital insurance, an-
as indirect costs. nuity or retirement plans, and finan-
(d) Minor items. Any direct cost of cial aid. See also 200.431 Compensa-
minor amount may be treated as an in- tionfringe benefits.
direct (F&A) cost for reasons of practi-
cality where such accounting treat- 200.414 Indirect (F&A) costs.
ment for that item of cost is consist- (a) Facilities and Administration Classi-
ently applied to all Federal and non- fication. For major IHEs and major
Federal cost objectives. nonprofit organizations, indirect (F&A)
(e) The costs of certain activities are costs must be classified within two
not allowable as charges to Federal broad categories: Facilities and
awards. However, even though these Administration. Facilities is de-
costs are unallowable for purposes of fined as depreciation on buildings,
computing charges to Federal awards, equipment and capital improvement,
they nonetheless must be treated as di- interest on debt associated with cer-
rect costs for purposes of determining tain buildings, equipment and capital
indirect (F&A) cost rates and be allo- improvements, and operations and
cated their equitable share of the non- maintenance expenses. Administra-
Federal entitys indirect costs if they tion is defined as general administra-
represent activities which: tion and general expenses such as the
(1) Include the salaries of personnel, directors office, accounting, personnel
(2) Occupy space, and and all other types of expenditures not
(3) Benefit from the non-Federal enti- listed specifically under one of the sub-
tys indirect (F&A) costs. categories of Facilities (including
(f) For nonprofit organizations, the cross allocations from other pools,
costs of activities performed by the where applicable). For nonprofit orga-
non-Federal entity primarily as a serv- nizations, library expenses are included
ice to members, clients, or the general in the Administration category; for
public when significant and necessary institutions of higher education, they
to the non-Federal entitys mission are included in the Facilities cat-
must be treated as direct costs whether egory. Major IHEs are defined as those
or not allowable, and be allocated an required to use the Standard Format
equitable share of indirect (F&A) costs. for Submission as noted in Appendix III
Some examples of these types of activi- to Part 200Indirect (F&A) Costs Iden-
ties include: tification and Assignment, and Rate
(1) Maintenance of membership rolls, Determination for Institutions of High-
subscriptions, publications, and related er Education (IHEs) paragraph C. 11.
functions. See also 200.454 Member- Major nonprofit organizations are
ships, subscriptions, and professional those which receive more than $10 mil-
activity costs. lion dollars in direct Federal funding.

(2) Providing services and informa- (b) Diversity of nonprofit organizations.
tion to members, legislative or admin- Because of the diverse characteristics
istrative bodies, or the public. See also and accounting practices of nonprofit
136
organizations, it is not possible to quirements for pass-through entities,

specify the types of cost which may be paragraph (a)(4).
classified as indirect (F&A) cost in all (e) Requirements for development
situations. Identification with a Fed- and submission of indirect (F&A) cost
eral award rather than the nature of rate proposals and cost allocation
the goods and services involved is the plans are contained in Appendices III
determining factor in distinguishing VII as follows:
direct from indirect (F&A) costs of (1) Appendix III to Part 200Indirect
Federal awards. However, typical ex- (F&A) Costs Identification and Assign-
amples of indirect (F&A) cost for many ment, and Rate Determination for
nonprofit organizations may include (2) Appendix IV to Part 200Indirect
depreciation on buildings and equip- (F&A) Costs Identification and Assign-
ment, the costs of operating and main- ment, and Rate Determination for Non-
taining facilities, and general adminis- profit Organizations;
tration and general expenses, such as (3) Appendix V to Part 200State/
the salaries and expenses of executive Local Government and Indian Tribe-
officers, personnel administration, and Wide Central Service Cost Allocation
accounting. Plans;
(c) Federal Agency Acceptance of Nego- (4) Appendix VI to Part 200Public
tiated Indirect Cost Rates. (See also Assistance Cost Allocation Plans; and
200.306 Cost sharing or matching.) (5) Appendix VII to Part 200States
(1) The negotiated rates must be ac- and Local Government and Indian
cepted by all Federal awarding agen- Tribe Indirect Cost Proposals.
cies. A Federal awarding agency may (f) In addition to the procedures out-
use a rate different from the negotiated lined in the appendices in paragraph (e)
rate for a class of Federal awards or a of this section, any non-Federal entity
single Federal award only when re- that has never received a negotiated
quired by Federal statute or regula- indirect cost rate, except for those non-
tion, or when approved by a Federal Federal entities described in Appendix
awarding agency head or delegate VII to Part 200States and Local Gov-
based on documented justification as ernment and Indian Tribe Indirect Cost
described in paragraph (c)(3) of this Proposals, paragraph (d)(1)(B) may
section. elect to charge a de minimis rate of)
(2) The Federal awarding agency head 10% of modified total direct costs
or delegate must notify OMB of any ap- (MTDC) which may be used indefi-
proved deviations. nitely. As described in 200.403 Factors
(3) The Federal awarding agency affecting allowability of costs, costs
must implement, and make publicly must be consistently charged as either
available, the policies, procedures and indirect or direct costs, but may not be
general decision making criteria that double charged or inconsistently
their programs will follow to seek and charged as both. If chosen, this meth-
justify deviations from negotiated odology once elected must be used con-
rates. sistently for all Federal awards until
(4) As required under 200.203 Notices such time as a non-Federal entity
of funding opportunities, the Federal chooses to negotiate for a rate, which
awarding agency must include in the the non-Federal entity may apply to do
notice of funding opportunity the poli- at any time.
cies relating to indirect cost rate reim- (g) Any non-Federal entity that has a
bursement, matching, or cost share as federally negotiated indirect cost rate
approved under paragraph (e)(1) of this may apply for a one-time extension of
section. As appropriate, the Federal a current negotiated indirect cost rates
agency should incorporate discussion for a period of up to four years. This
of these policies into Federal awarding extension will be subject to the review
agency outreach activities with non- and approval of the cognizant agency
Federal entities prior to the posting of for indirect costs. If an extension is

a notice of funding opportunity. granted the non-Federal entity may
(d) Pass-through entities are subject not request a rate review until the ex-
to the requirements in 200.331 Re- tension period ends. At the end of the
137
4-year extension, the non-Federal enti- ance with the requirements. Such a
ty must re-apply to negotiate a rate. plan or rate may be based upon audited
historical data or such other data that
200.415 Required certifications. have been furnished to the cognizant
Required certifications include: agency for indirect costs and for which
(a) To assure that expenditures are it can be demonstrated that all unal-
proper and in accordance with the lowable costs have been excluded.
terms and conditions of the Federal When a cost allocation plan or indirect
award and approved project budgets, cost rate is unilaterally established by
the annual and final fiscal reports or the Federal government because the
vouchers requesting payment under the non-Federal entity failed to submit a
agreements must include a certifi- certified proposal, the plan or rate es-
cation, signed by an official who is au- tablished will be set to ensure that po-
thorized to legally bind the non-Fed- tentially unallowable costs will not be
eral entity, which reads as follows: By reimbursed.
signing this report, I certify to the best (c) Certifications by non-profit orga-
of my knowledge and belief that the re- nizations as appropriate that they did
port is true, complete, and accurate, not meet the definition of a major cor-
and the expenditures, disbursements poration as defined in 200.414 Indirect
and cash receipts are for the purposes (F&A) costs, paragraph (a).
and objectives set forth in the terms (d) See also 200.450 Lobbying for an-
and conditions of the Federal award. I other required certification.
am aware that any false, fictitious, or
fraudulent information, or the omis- SPECIAL CONSIDERATIONS FOR STATES,
sion of any material fact, may subject LOCAL GOVERNMENTS AND INDIAN
me to criminal, civil or administrative TRIBES
penalties for fraud, false statements,
false claims or otherwise. (U.S. Code 200.416 Cost allocation plans and in-
direct cost proposals.
Title 18, Section 1001 and Title 31, Sec-
tions 37293730 and 38013812). (a) For states, local governments and
(b) Certification of cost allocation Indian tribes, certain services, such as
plan or indirect (F&A) cost rate pro- motor pools, computer centers, pur-
posal. Each cost allocation plan or in- chasing, accounting, etc., are provided
direct (F&A) cost rate proposal must to operating agencies on a centralized
comply with the following: basis. Since Federal awards are per-
(1) A proposal to establish a cost allo- formed within the individual operating
cation plan or an indirect (F&A) cost agencies, there needs to be a process
rate, whether submitted to a Federal whereby these central service costs can
cognizant agency for indirect costs or be identified and assigned to benefitted
maintained on file by the non-Federal activities on a reasonable and con-
entity, must be certified by the non- sistent basis. The central service cost
Federal entity using the Certificate of allocation plan provides that process.
Cost Allocation Plan or Certificate of (b) Individual operating agencies
Indirect Costs as set forth in Appen- (governmental department or agency),
dices III through VII. The certificate normally charge Federal awards for in-
must be signed on behalf of the non- direct costs through an indirect cost
Federal entity by an individual at a rate. A separate indirect cost rate(s)
level no lower than vice president or proposal for each operating agency is
chief financial officer of the non-Fed- usually necessary to claim indirect
eral entity that submits the proposal. costs under Federal awards. Indirect
(2) Unless the non-Federal entity has costs include:
elected the option under 200.414 Indi- (1) The indirect costs originating in
rect (F&A) costs, paragraph (f), the each department or agency of the gov-
Federal government may either dis- ernmental unit carrying out Federal
allow all indirect (F&A) costs or uni- awards and
laterally establish such a plan or rate (2) The costs of central governmental
when the non-Federal entity fails to services distributed through the cen-
submit a certified proposal for estab- tral service cost allocation plan and
lishing such a plan or rate in accord- not otherwise treated as direct costs.
138
(c) The requirements for development 200.419 Cost accounting standards

and submission of cost allocation plans and disclosure statement.
(for central service costs and public as- (a) An IHE that receives aggregate
sistance programs) and indirect cost Federal awards totaling $50 million or
rate proposals are contained in appen- more in Federal awards subject to this
dices IV, V and VI to this part. part in its most recently completed fis-
cal year must comply with the Cost
200.417 Interagency service.
Accounting Standards Boards cost ac-
The cost of services provided by one counting standards located at 48 CFR
agency to another within the govern- 9905.501, 9905.502, 9905.505, and 9905.506.
mental unit may include allowable di- CAS-covered contracts awarded to the
rect costs of the service plus a pro- IHEs are subject to the CAS require-
rated share of indirect costs. A stand- ments at 48 CFR 9900 through 9999 and
ard indirect cost allowance equal to 48 CFR part 30 (FAR Part 30).
ten percent of the direct salary and (b) Disclosure statement. An IHE that
wage cost of providing the service (ex- receives aggregate Federal awards to-
cluding overtime, shift premiums, and taling $50 million or more subject to
fringe benefits) may be used in lieu of this part during its most recently com-
determining the actual indirect costs pleted fiscal year must disclose their
of the service. These services do not in- cost accounting practices by filing a
clude centralized services included in Disclosure Statement (DS2), which is
central service cost allocation plans as reproduced in Appendix III to Part
described in Appendix V to Part 200 200Indirect (F&A) Costs Identifica-
State/Local Government and Indian tion and Assignment, and Rate Deter-
Tribe-Wide Central Service Cost Allo- mination for Institutions of Higher
cation Plans. Education (IHEs). With the approval of
the cognizant agency for indirect costs,
SPECIAL CONSIDERATIONS FOR an IHE may meet the DS2 submission
INSTITUTIONS OF HIGHER EDUCATION by submitting the DS2 for each busi-
ness unit that received $50 million or
200.418 Costs incurred by states and more in Federal awards.
local governments. (1) The DS2 must be submitted to
Costs incurred or paid by a state or the cognizant agency for indirect costs
local government on behalf of its IHEs with a copy to the IHEs cognizant
for fringe benefit programs, such as agency for audit.
pension costs and FICA and any other (2) An IHE is responsible for main-
costs specifically incurred on behalf of, taining an accurate DS2 and com-
and in direct benefit to, the IHEs, are plying with disclosed cost accounting
allowable costs of such IHEs whether practices. An IHE must file amend-
or not these costs are recorded in the ments to the DS2 to the cognizant
accounting records of the institutions, agency for indirect costs six months in
subject to the following: advance of a disclosed practices being
(a) The costs meet the requirements changed to comply with a new or modi-
of 200.402 Composition of costs fied standard, or when practices are
through 200.411 Adjustment of pre- changed for other reasons. An IHE may
viously negotiated indirect (F&A) cost proceed with implementing the change
rates containing unallowable costs, of only if it has not been notified by the
this subpart; Federal cognizant agency for indirect
(b) The costs are properly supported costs that either a longer period will be
by approved cost allocation plans in ac- needed for review or there are concerns
cordance with applicable Federal cost with the potential change within the
accounting principles in this part; and six months period. Amendments of a
DS2 may be submitted at any time.
(c) The costs are not otherwise borne
Resubmission of a complete, updated

directly or indirectly by the Federal
DS2 is discouraged except when there
government.
are extensive changes to disclosed
practices.
139
(3) Cost and funding adjustments. Cost ment that a DS2 adequately discloses
adjustments must be made by the cog- the IHEs cost accounting practices
nizant agency for indirect costs if an and that the disclosed practices are
IHE fails to comply with the cost poli- compliant with applicable CAS and the
cies in this part or fails to consistently requirements of this part.
follow its established or disclosed cost (iii) Distribute to all affected Federal
accounting practices when estimating, awarding agencies any DS2 determina-
accumulating or reporting the costs of tion of adequacy or noncompliance.
Federal awards, and the aggregate cost
impact on Federal awards is material. GENERAL PROVISIONS FOR SELECTED
The cost adjustment must normally be ITEMS OF COST
made on an aggregate basis for all af-
fected Federal awards through an ad- 200.420 Considerations for selected
justment of the IHEs future F&A costs items of cost.
rates or other means considered appro- This section provides principles to be
priate by the cognizant agency for indi- applied in establishing the allowability
rect costs. Under the terms of CAS cov- of certain items involved in deter-
ered contracts, adjustments in the mining cost, in addition to the require-
amount of funding provided may also ments of Subtitle II. Basic Consider-
be required when the estimated pro- ations of this subpart. These principles
posal costs were not determined in ac- apply whether or not a particular item
cordance with established cost ac- of cost is properly treated as direct
counting practices. cost or indirect (F&A) cost. Failure to
(4) Overpayments. Excess amounts mention a particular item of cost is
paid in the aggregate by the Federal not intended to imply that it is either
government under Federal awards due allowable or unallowable; rather, deter-
to a noncompliant cost accounting mination as to allowability in each
practice used to estimate, accumulate, case should be based on the treatment
or report costs must be credited or re- provided for similar or related items of
funded, as deemed appropriate by the cost, and based on the principles de-
cognizant agency for indirect costs. In- scribed in 200.402 Composition of
terest applicable to the excess amounts costs through 200.411 Adjustment of
paid in the aggregate during the period previously negotiated indirect (F&A)
of noncompliance must also be deter- cost rates containing unallowable
mined and collected in accordance with costs. In case of a discrepancy between
applicable Federal agency regulations.
the provisions of a specific Federal
(5) Compliant cost accounting practice
award and the provisions below, the
changes. Changes from one compliant
Federal award governs. Criteria out-
cost accounting practice to another
lined in 200.403 Factors affecting al-
compliant practice that are approved
lowability of costs must be applied in
by the cognizant agency for indirect
determining allowability. See also
costs may require cost adjustments if
200.102 Exceptions.
the change has a material effect on
Federal awards and the changes are 200.421 Advertising and public rela-
deemed appropriate by the cognizant tions.
agency for indirect costs.
(6) Responsibilities. The cognizant (a) The term advertising costs means
agency for indirect cost must: the costs of advertising media and cor-
(i) Determine cost adjustments for ollary administrative costs. Adver-
all Federal awards in the aggregate on tising media include magazines, news-
behalf of the Federal Government. Ac- papers, radio and television, direct
tions of the cognizant agency for indi- mail, exhibits, electronic or computer
rect cost in making cost adjustment transmittals, and the like.
determinations must be coordinated (b) The only allowable advertising
with all affected Federal awarding costs are those which are solely for:
agencies to the extent necessary. (1) The recruitment of personnel re-

(ii) Prescribe guidelines and establish quired by the non-Federal entity for
internal procedures to promptly deter- performance of a Federal award (See
mine on behalf of the Federal Govern- also 200.463 Recruiting costs);
140
(2) The procurement of goods and exhibits, making demonstrations, and

services for the performance of a Fed- providing briefings;
eral award; (3) Costs of promotional items and
(3) The disposal of scrap or surplus memorabilia, including models, gifts,
materials acquired in the performance and souvenirs;
of a Federal award except when non- (4) Costs of advertising and public re-
Federal entities are reimbursed for dis- lations designed solely to promote the
posal costs at a predetermined amount; non-Federal entity.
or
200.422 Advisory councils.
(4) Program outreach and other spe-
cific purposes necessary to meet the re- Costs incurred by advisory councils
quirements of the Federal award. or committees are unallowable unless
(c) The term public relations in- authorized by statute, the Federal
cludes community relations and means awarding agency or as an indirect cost
those activities dedicated to maintain- where allocable to Federal awards. See
ing the image of the non-Federal entity 200.444 General costs of government,
or maintaining or promoting under- applicable to states, local governments
standing and favorable relations with and Indian tribes.
the community or public at large or 200.423 Alcoholic beverages.
any segment of the public.
(d) The only allowable public rela- Costs of alcoholic beverages are unal-
tions costs are: lowable.
(1) Costs specifically required by the 200.424 Alumni/ae activities.
Federal award;
Costs incurred by IHEs for, or in sup-
(2) Costs of communicating with the
port of, alumni/ae activities are unal-
public and press pertaining to specific
lowable.
activities or accomplishments which
result from performance of the Federal 200.425 Audit services.
award (these costs are considered nec-
essary as part of the outreach effort for (a) A reasonably proportionate share
the Federal award); or of the costs of audits required by, and
performed in accordance with, the Sin-
(3) Costs of conducting general liai-
gle Audit Act Amendments of 1996 (31
son with news media and government
U.S.C. 75017507), as implemented by re-
public relations officers, to the extent
quirements of this part, are allowable.
that such activities are limited to com-
However, the following audit costs are
munication and liaison necessary to
unallowable:
keep the public informed on matters of
(1) Any costs when audits required by
public concern, such as notices of fund-
the Single Audit Act and Subpart F
ing opportunities, financial matters,
Audit Requirements of this part have
etc.
not been conducted or have been con-
(e) Unallowable advertising and pub- ducted but not in accordance there-
lic relations costs include the fol- with; and
lowing: (2) Any costs of auditing a non-Fed-
(1) All advertising and public rela- eral entity that is exempted from hav-
tions costs other than as specified in ing an audit conducted under the Sin-
paragraphs (b) and (d) of this section; gle Audit Act and Subpart FAudit
(2) Costs of meetings, conventions, Requirements of this part because its
convocations, or other events related expenditures under Federal awards are
to other activities of the entity (see less than $750,000 during the non-Fed-
also 200.432 Conferences), including: eral entitys fiscal year.
(i) Costs of displays, demonstrations, (b) The costs of a financial statement
and exhibits; audit of a non-Federal entity that does
(ii) Costs of meeting rooms, hospi- not currently have a Federal award
tality suites, and other special facili- may be included in the indirect cost
ties used in conjunction with shows pool for a cost allocation plan or indi-
and other special events; and rect cost proposal.
(iii) Salaries and wages of employees (c) Pass-through entities may charge
engaged in setting up and displaying Federal awards for the cost of agreed-
141
upon-procedures engagements to mon- 200.428 Collections of improper pay-

itor subrecipients (in accordance with ments.
Subpart DPost Federal Award Re- The costs incurred by a non-Federal
quirements of this part, 200.330 Sub- entity to recover improper payments
recipient and contractor determina- are allowable as either direct or indi-
tions through 200.332 Fixed Amount rect costs, as appropriate. Amounts
Subawards) who are exempted from the collected may be used by the non-Fed-
requirements of the Single Audit Act eral entity in accordance with cash
and Subpart FAudit Requirements of management standards set forth in
this part. This cost is allowable only if 200.305 Payment.
the agreed-upon-procedures engage-
ments are: 200.429 Commencement and convoca-
(1) Conducted in accordance with tion costs.
GAGAS attestation standards; For IHEs, costs incurred for com-
(2) Paid for and arranged by the pass- mencements and convocations are un-
through entity; and allowable, except as provided for in Ap-
(3) Limited in scope to one or more of pendix III to Part 200Indirect (F&A)
the following types of compliance re- Costs Identification and Assignment,
quirements: activities allowed or and Rate Determination for Institu-
unallowed; allowable costs/cost prin- tions of Higher Education (IHEs), para-
ciples; eligibility; and reporting. graph (B)(9) Student Administration
and Services, as student activity costs.
200.426 Bad debts.
200.430 Compensationpersonal
Bad debts (debts which have been de- services.
termined to be uncollectable), includ-
(a) General. Compensation for per-
ing losses (whether actual or esti-
sonal services includes all remunera-
mated) arising from uncollectable ac-
tion, paid currently or accrued, for
counts and other claims, are unallow-
services of employees rendered during
able. Related collection costs, and re-
the period of performance under the
lated legal costs, arising from such
Federal award, including but not nec-
debts after they have been determined
essarily limited to wages and salaries.
to be uncollectable are also unallow-
Compensation for personal services
able. See also 200.428 Collections of
may also include fringe benefits which
improper payments.
are addressed in 200.431 Compensa-
200.427 Bonding costs. tionfringe benefits. Costs of com-
pensation are allowable to the extent
(a) Bonding costs arise when the Fed- that they satisfy the specific require-
eral awarding agency requires assur- ments of this part, and that the total
ance against financial loss to itself or compensation for individual employ-
others by reason of the act or default ees:
of the non-Federal entity. They arise (1) Is reasonable for the services ren-
also in instances where the non-Fed- dered and conforms to the established
eral entity requires similar assurance, written policy of the non-Federal enti-
including: bonds as bid, performance, ty consistently applied to both Federal
payment, advance payment, infringe- and non-Federal activities;
ment, and fidelity bonds for employees (2) Follows an appointment made in
and officials. accordance with a non-Federal entitys
(b) Costs of bonding required pursu- laws and/or rules or written policies
ant to the terms and conditions of the and meets the requirements of Federal
Federal award are allowable. statute, where applicable; and
(c) Costs of bonding required by the (3) Is determined and supported as
non-Federal entity in the general con- provided in paragraph (i) of this sec-
duct of its operations are allowable as tion, Standards for Documentation of
an indirect cost to the extent that such Personnel Expenses, when applicable.
bonding is in accordance with sound (b) Reasonableness. Compensation for

business practice and the rates and pre- employees engaged in work on Federal
miums are reasonable under the cir- awards will be considered reasonable to
cumstances. the extent that it is consistent with
142
that paid for similar work in other ac- of compensation will be given to any
tivities of the non-Federal entity. In change in a non-Federal entitys com-
cases where the kinds of employees re- pensation policy resulting in a substan-
quired for Federal awards are not found tial increase in its employees level of
in the other activities of the non-Fed- compensation (particularly when the
eral entity, compensation will be con- change was concurrent with an in-
sidered reasonable to the extent that it crease in the ratio of Federal awards to
is comparable to that paid for similar other activities) or any change in the
work in the labor market in which the treatment of allowability of specific
non-Federal entity competes for the types of compensation due to changes
kind of employees involved. in Federal policy.
(c) Professional activities outside the (f) Incentive compensation. Incentive
non-Federal entity. Unless an arrange- compensation to employees based on
ment is specifically authorized by a cost reduction, or efficient perform-
Federal awarding agency, a non-Fed- ance, suggestion awards, safety awards,
eral entity must follow its written non- etc., is allowable to the extent that the
Federal entity-wide policies and prac- overall compensation is determined to
tices concerning the permissible extent be reasonable and such costs are paid
of professional services that can be pro- or accrued pursuant to an agreement
vided outside the non-Federal entity entered into in good faith between the
for non-organizational compensation. non-Federal entity and the employees
Where such non-Federal entity-wide before the services were rendered, or
written policies do not exist or do not pursuant to an established plan fol-
adequately define the permissible ex- lowed by the non-Federal entity so
tent of consulting or other non-organi- consistently as to imply, in effect, an
zational activities undertaken for agreement to make such payment.
extra outside pay, the Federal govern-
(g) Nonprofit organizations. For com-
ment may require that the effort of
pensation to members of nonprofit or-
professional staff working on Federal
ganizations, trustees, directors, associ-
awards be allocated between:
ates, officers, or the immediate fami-
(1) Non-Federal entity activities, and
lies thereof, determination should be
(2) Non-organizational professional
made that such compensation is rea-
activities. If the Federal awarding
agency considers the extent of non-or- sonable for the actual personal services
ganizational professional effort exces- rendered rather than a distribution of
sive or inconsistent with the conflicts- earnings in excess of costs. This may
of-interest terms and conditions of the include directors and executive com-
Federal award, appropriate arrange- mittee members fees, incentive
ments governing compensation will be awards, allowances for off-site pay, in-
negotiated on a case-by-case basis. centive pay, location allowances, hard-
(d) Unallowable costs. (1) Costs which ship pay, and cost-of-living differen-
are unallowable under other sections of tials.
these principles must not be allowable (h) Institutions of higher education
under this section solely on the basis (IHEs). (1) Certain conditions require
that they constitute personnel com- special consideration and possible limi-
pensation. tations in determining allowable per-
(2) The allowable compensation for sonnel compensation costs under Fed-
certain employees is subject to a ceil- eral awards. Among such conditions
ing in accordance with statute. For the are the following:
amount of the ceiling for cost-reim- (i) Allowable activities. Charges to
bursement contracts, the covered com- Federal awards may include reasonable
pensation subject to the ceiling, the amounts for activities contributing
covered employees, and other relevant and directly related to work under an
provisions, see 10 U.S.C. 2324(e)(1)(P), agreement, such as delivering special
and 41 U.S.C. 1127 and 4304(a)(16). For lectures about specific aspects of the
other types of Federal awards, other ongoing activity, writing reports and
statutory ceilings may apply. articles, developing and maintaining
(e) Special considerations. Special con- protocols (human, animals, etc.), man-
siderations in determining allowability aging substances/chemicals, managing
143
and securing project-specific data, co- provided for in the Federal award or
ordinating research subjects, partici- approved in writing by the Federal
pating in appropriate seminars, con- awarding agency.
sulting with colleagues and graduate (4) Extra Service Pay normally rep-
students, and attending meetings and resents overload compensation, subject
conferences. to institutional compensation policies
(ii) Incidental activities. Incidental for services above and beyond IBS.
activities for which supplemental com- Where extra service pay is a result of
pensation is allowable under written Intra-IHE consulting, it is subject to
institutional policy (at a rate not to the same requirements of paragraph (b)
exceed institutional base salary) need above. It is allowable if all of the fol-
not be included in the records described lowing conditions are met:
in paragraph (h)(9) of this section to di- (i) The non-Federal entity estab-
rectly charge payments of incidental lishes consistent written policies which
activities, such activities must either apply uniformly to all faculty mem-
be specifically provided for in the Fed- bers, not just those working on Federal
eral award budget or receive prior writ- awards.
ten approval by the Federal awarding (ii) The non-Federal entity estab-
agency. lishes a consistent written definition of
(2) Salary basis. Charges for work per- work covered by IBS which is specific
formed on Federal awards by faculty enough to determine conclusively when
members during the academic year are work beyond that level has occurred.
allowable at the IBS rate. Except as This may be described in appointment
noted in paragraph (h)(1)(ii) of this sec- letters or other documentations.
tion, in no event will charges to Fed- (iii) The supplementation amount
eral awards, irrespective of the basis of paid is commensurate with the IBS
computation, exceed the proportionate rate of pay and the amount of addi-
share of the IBS for that period. This tional work performed. See paragraph
principle applies to all members of fac- (h)(2) of this section.
ulty at an institution. IBS is defined as (iv) The salaries, as supplemented,
the annual compensation paid by an fall within the salary structure and
IHE for an individuals appointment, pay ranges established by and docu-
whether that individuals time is spent mented in writing or otherwise applica-
on research, instruction, administra- ble to the non-Federal entity.
tion, or other activities. IBS excludes (v) The total salaries charged to Fed-
any income that an individual earns eral awards including extra service pay
outside of duties performed for the are subject to the Standards of Docu-
IHE. Unless there is prior approval by mentation as described in paragraph (i)
the Federal awarding agency, charges of this section.
of a faculty members salary to a Fed- (5) Periods outside the academic year.
eral award must not exceed the propor- (i) Except as specified for teaching ac-
tionate share of the IBS for the period tivity in paragraph (h)(5)(ii) of this sec-
during which the faculty member tion, charges for work performed by
worked on the award. faculty members on Federal awards
(3) Intra-Institution of Higher Edu- during periods not included in the base
cation (IHE) consulting. Intra-IHE con- salary period will be at a rate not in
sulting by faculty is assumed to be un- excess of the IBS.
dertaken as an IHE obligation requir- (ii) Charges for teaching activities
ing no compensation in addition to performed by faculty members on Fed-
IBS. However, in unusual cases where eral awards during periods not included
consultation is across departmental in IBS period will be based on the nor-
lines or involves a separate or remote mal written policy of the IHE gov-
operation, and the work performed by erning compensation to faculty mem-
the faculty member is in addition to bers for teaching assignments during
his or her regular responsibilities, any such periods.
charges for such work representing ad- (6) Part-time faculty. Charges for work
ditional compensation above IBS are performed on Federal awards by fac-
allowable provided that such con- ulty members having only part-time
sulting arrangements are specifically appointments will be determined at a
144
rate not in excess of that regularly (h)(1)(ii) above for treatment of inci-
paid for part-time assignments. dental work for IHEs.); and
(7) Sabbatical leave costs. Rules for (vi) [Reserved]
sabbatical leave are as follow: (vii) Support the distribution of the
(i) Costs of leaves of absence by em- employees salary or wages among spe-
ployees for performance of graduate cific activities or cost objectives if the
work or sabbatical study, travel, or re- employee works on more than one Fed-
search are allowable provided the IHE eral award; a Federal award and non-
has a uniform written policy on sab- Federal award; an indirect cost activ-
batical leave for persons engaged in in- ity and a direct cost activity; two or
struction and persons engaged in re- more indirect activities which are allo-
search. Such costs will be allocated on cated using different allocation bases;
an equitable basis among all related or an unallowable activity and a direct
activities of the IHE. or indirect cost activity.
(ii) Where sabbatical leave is in- (viii) Budget estimates (i.e., esti-
cluded in fringe benefits for which a mates determined before the services
cost is determined for assessment as a are performed) alone do not qualify as
direct charge, the aggregate amount of support for charges to Federal awards,
such assessments applicable to all but may be used for interim accounting
work of the institution during the base purposes, provided that:
period must be reasonable in relation (A) The system for establishing the
to the IHEs actual experience under estimates produces reasonable approxi-
its sabbatical leave policy. mations of the activity actually per-
(8) Salary rates for non-faculty mem- formed;
bers. Non-faculty full-time professional (B) Significant changes in the cor-
personnel may also earn extra service responding work activity (as defined by
pay in accordance with the non-Fed- the non-Federal entitys written poli-
eral entitys written policy and con- cies) are identified and entered into the
sistent with paragraph (h)(1)(i) of this records in a timely manner. Short term
section. (such as one or two months) fluctua-
(i) Standards for Documentation of Per- tion between workload categories need
sonnel Expenses (1) Charges to Federal not be considered as long as the dis-
awards for salaries and wages must be tribution of salaries and wages is rea-
based on records that accurately re- sonable over the longer term; and
flect the work performed. These (C) The non-Federal entitys system
records must: of internal controls includes processes
(i) Be supported by a system of inter- to review after-the-fact interim
nal control which provides reasonable charges made to a Federal awards
assurance that the charges are accu- based on budget estimates. All nec-
rate, allowable, and properly allocated; essary adjustment must be made such
(ii) Be incorporated into the official that the final amount charged to the
records of the non-Federal entity; Federal award is accurate, allowable,
(iii) Reasonably reflect the total ac- and properly allocated.
tivity for which the employee is com- (ix) Because practices vary as to the
pensated by the non-Federal entity, activity constituting a full workload
not exceeding 100% of compensated ac- (for IHEs, IBS), records may reflect
tivities (for IHE, this per the IHEs def- categories of activities expressed as a
inition of IBS); percentage distribution of total activi-
(iv) Encompass both federally as- ties.
sisted and all other activities com- (x) It is recognized that teaching, re-
pensated by the non-Federal entity on search, service, and administration are
an integrated basis, but may include often inextricably intermingled in an
the use of subsidiary records as defined academic setting. When recording sala-
in the non-Federal entitys written pol- ries and wages charged to Federal
icy; awards for IHEs, a precise assessment

(v) Comply with the established ac- of factors that contribute to costs is
counting policies and practices of the therefore not always feasible, nor is it
non-Federal entity (See paragraph expected.
145
(2) For records which meet the stand- (iii) Less than full compliance with
ards required in paragraph (i)(1) of this the statistical sampling standards
section, the non-Federal entity will not noted in subsection (5)(i) may be ac-
be required to provide additional sup- cepted by the cognizant agency for in-
port or documentation for the work direct costs if it concludes that the
performed, other than that referenced amounts to be allocated to Federal
in paragraph (i)(3) of this section. awards will be minimal, or if it con-
(3) In accordance with Department of cludes that the system proposed by the
Labor regulations implementing the non-Federal entity will result in lower
Fair Labor Standards Act (FLSA) (29 costs to Federal awards than a system
CFR part 516), charges for the salaries which complies with the standards.
and wages of nonexempt employees, in (6) Cognizant agencies for indirect
addition to the supporting documenta-
costs are encouraged to approve alter-
tion described in this section, must
native proposals based on outcomes
also be supported by records indicating
and milestones for program perform-
the total number of hours worked each
ance where these are clearly docu-
day.
(4) Salaries and wages of employees mented. Where approved by the Federal
used in meeting cost sharing or match- cognizant agency for indirect costs,
ing requirements on Federal awards these plans are acceptable as an alter-
must be supported in the same manner native to the requirements of para-
as salaries and wages claimed for reim- graph (i)(1) of this section.
bursement from Federal awards. (7) For Federal awards of similar pur-
(5) For states, local governments and pose activity or instances of approved
Indian tribes, substitute processes or blended funding, a non-Federal entity
systems for allocating salaries and may submit performance plans that in-
wages to Federal awards may be used corporate funds from multiple Federal
in place of or in addition to the records awards and account for their combined
described in paragraph (1) if approved use based on performance-oriented
by the cognizant agency for indirect metrics, provided that such plans are
cost. Such systems may include, but approved in advance by all involved
are not limited to, random moment Federal awarding agencies. In these in-
sampling, rolling time studies, case stances, the non-Federal entity must
counts, or other quantifiable measures submit a request for waiver of the re-
of work performed. quirements based on documentation
(i) Substitute systems which use that describes the method of charging
sampling methods (primarily for Tem- costs, relates the charging of costs to
porary Assistance for Needy Families the specific activity that is applicable
(TANF), the Supplemental Nutrition to all fund sources, and is based on
Assistance Program (SNAP), Medicaid, quantifiable measures of the activity
and other public assistance programs) in relation to time charged.
must meet acceptable statistical sam-
(8) For a non-Federal entity where
pling standards including:
the records do not meet the standards
(A) The sampling universe must in-
clude all of the employees whose sala- described in this section, the Federal
ries and wages are to be allocated government may require personnel ac-
based on sample results except as pro- tivity reports, including prescribed cer-
vided in paragraph (i)(5)(iii) of this sec- tifications, or equivalent documenta-
tion; tion that support the records as re-
(B) The entire time period involved quired in this section.
must be covered by the sample; and
(C) The results must be statistically 200.431 Compensationfringe bene-
fits.
valid and applied to the period being
sampled. (a) Fringe benefits are allowances
(ii) Allocating charges for the sam- and services provided by employers to
pled employees supervisors, clerical their employees as compensation in ad-

and support staffs, based on the results dition to regular salaries and wages.
of the sampled employees, will be ac- Fringe benefits include, but are not
ceptable. limited to, the costs of leave (vacation,
146
family-related, sick or military), em- attributable to the individuals or

ployee insurance, pensions, and unem- group(s) of employees whose salaries
ployment benefit plans. Except as pro- and wages are chargeable to such Fed-
vided elsewhere in these principles, the eral awards and other activities, and
costs of fringe benefits are allowable charged as direct or indirect costs in
provided that the benefits are reason- accordance with the non-Federal enti-
able and are required by law, non-Fed- tys accounting practices.
eral entity-employee agreement, or an (d) Fringe benefits may be assigned
established policy of the non-Federal to cost objectives by identifying spe-
entity. cific benefits to specific individual em-
(b) Leave. The cost of fringe benefits ployees or by allocating on the basis of
in the form of regular compensation entity-wide salaries and wages of the
paid to employees during periods of au- employees receiving the benefits. When
thorized absences from the job, such as the allocation method is used, separate
for annual leave, family-related leave, allocations must be made to selective
sick leave, holidays, court leave, mili- groupings of employees, unless the
tary leave, administrative leave, and non-Federal entity demonstrates that
other similar benefits, are allowable if costs in relationship to salaries and
all of the following criteria are met: wages do not differ significantly for
(1) They are provided under estab- different groups of employees.
lished written leave policies; (e) Insurance. See also 200.447 Insur-
(2) The costs are equitably allocated ance and indemnification, paragraphs
to all related activities, including Fed- (d)(1) and (2).
eral awards; and,
(1) Provisions for a reserve under a
(3) The accounting basis (cash or ac-
self-insurance program for unemploy-
crual) selected for costing each type of
ment compensation or workers com-
leave is consistently followed by the
pensation are allowable to the extent
non-Federal entity or specified group-
that the provisions represent reason-
ing of employees.
able estimates of the liabilities for
(i) When a non-Federal entity uses
such compensation, and the types of
the cash basis of accounting, the cost
of leave is recognized in the period that coverage, extent of coverage, and rates
the leave is taken and paid for. Pay- and premiums would have been allow-
ments for unused leave when an em- able had insurance been purchased to
ployee retires or terminates employ- cover the risks. However, provisions for
ment are allowable as indirect costs in self-insured liabilities which do not be-
the year of payment. come payable for more than one year
(ii) The accrual basis may be only after the provision is made must not
used for those types of leave for which exceed the present value of the liabil-
a liability as defined by GAAP exists ity.
when the leave is earned. When a non- (2) Costs of insurance on the lives of
Federal entity uses the accrual basis of trustees, officers, or other employees
accounting, allowable leave costs are holding positions of similar responsi-
the lesser of the amount accrued or bility are allowable only to the extent
funded. that the insurance represents addi-
(c) The cost of fringe benefits in the tional compensation. The costs of such
form of employer contributions or ex- insurance when the non-Federal entity
penses for social security; employee is named as beneficiary are unallow-
life, health, unemployment, and work- able.
ers compensation insurance (except as (3) Actual claims paid to or on behalf
indicated in 200.447 Insurance and in- of employees or former employees for
demnification); pension plan costs (see workers compensation, unemployment
paragraph (i) of this section); and other compensation, severance pay, and simi-
similar benefits are allowable, provided lar employee benefits (e.g., post-retire-
such benefits are granted under estab- ment health benefits), are allowable in
lished written policies. Such benefits, the year of payment provided that the
must be allocated to Federal awards non-Federal entity follows a consistent
and all other activities in a manner costing policy and they are allocated
consistent with the pattern of benefits as indirect costs.
147
(f) Automobiles. That portion of auto- month period (or a later period agreed
mobile costs furnished by the entity to by the cognizant agency for indirect
that relates to personal use by employ- costs) are allowable in the year funded.
ees (including transportation to and The cognizant agency for indirect costs
from work) is unallowable as fringe may agree to an extension of the six
benefit or indirect (F&A) costs regard- month period if an appropriate adjust-
less of whether the cost is reported as ment is made to compensate for the
taxable income to the employees. timing of the charges to the Federal
(g) Pension Plan Costs. Pension plan government and related Federal reim-
costs which are incurred in accordance bursement and the non-Federal enti-
with the established policies of the tys contribution to the pension fund.
non-Federal entity are allowable, pro- Adjustments may be made by cash re-
vided that: fund or other equitable procedures to
(1) Such policies meet the test of rea- compensate the Federal government
sonableness. for the time value of Federal reim-
(2) The methods of cost allocation are bursements in excess of contributions
not discriminatory. to the pension fund.
(3) For entities using accrual based (iii) Amounts funded by the non-Fed-
accounting, the cost assigned to each eral entity in excess of the actuarially
fiscal year is determined in accordance determined amount for a fiscal year
with GAAP. may be used as the non-Federal enti-
(4) The costs assigned to a given fis- tys contribution in future periods.
cal year are funded for all plan partici- (iv) When a non-Federal entity con-
pants within six months after the end verts to an acceptable actuarial cost
of that year. However, increases to nor- method, as defined by GAAP, and funds
mal and past service pension costs pension costs in accordance with this
caused by a delay in funding the actu- method, the unfunded liability at the
arial liability beyond 30 calendar days time of conversion is allowable if am-
after each quarter of the year to which ortized over a period of years in accord-
such costs are assignable are unallow- ance with GAAP.
able. Non-Federal entity may elect to (v) The Federal government must re-
follow the Cost Accounting Standard ceive an equitable share of any pre-
for Composition and Measurement of viously allowed pension costs (includ-
Pension Costs (48 CFR 9904.412). ing earnings thereon) which revert or
(5) Pension plan termination insur- inure to the non-Federal entity in the
ance premiums paid pursuant to the form of a refund, withdrawal, or other
Employee Retirement Income Security credit.
Act (ERISA) of 1974 (29 U.S.C. 13011461) (h) Post-Retirement Health. Post-re-
are allowable. Late payment charges tirement health plans (PRHP) refers to
on such premiums are unallowable. Ex- costs of health insurance or health
cise taxes on accumulated funding defi- services not included in a pension plan
ciencies and other penalties imposed covered by paragraph (g) of this section
under ERISA are unallowable. for retirees and their spouses, depend-
(6) Pension plan costs may be com- ents, and survivors. PRHP costs may
puted using a pay-as-you-go method or be computed using a pay-as-you-go
an acceptable actuarial cost method in method or an acceptable actuarial cost
accordance with established written method in accordance with established
policies of the non-Federal entity. written policies of the non-Federal en-
(i) For pension plans financed on a tity.
pay-as-you-go method, allowable costs (1) For PRHP financed on a pay-as-
will be limited to those representing you-go method, allowable costs will be
actual payments to retirees or their limited to those representing actual
beneficiaries. payments to retirees or their bene-
(ii) Pension costs calculated using an ficiaries.
actuarial cost-based method recognized (2) PRHP costs calculated using an
by GAAP are allowable for a given fis- actuarial cost method recognized by
cal year if they are funded for that GAAP are allowable if they are funded
year within six months after the end of for that year within six months after
that year. Costs funded after the six the end of that year. Costs funded after
148
the six month period (or a later period (c) established policy that constitutes,
agreed to by the cognizant agency) are in effect, an implied agreement on the
allowable in the year funded. The Fed- non-Federal entitys part, or (d) cir-
eral cognizant agency for indirect costs cumstances of the particular employ-
may agree to an extension of the six ment.
month period if an appropriate adjust- (2) Costs of severance payments are
ment is made to compensate for the divided into two categories as follows:
timing of the charges to the Federal (i) Actual normal turnover severance
government and related Federal reim- payments must be allocated to all ac-
bursements and the non-Federal enti- tivities; or, where the non-Federal en-
tys contributions to the PRHP fund. tity provides for a reserve for normal
Adjustments may be made by cash re- severances, such method will be ac-
fund, reduction in current years PRHP ceptable if the charge to current oper-
costs, or other equitable procedures to ations is reasonable in light of pay-
compensate the Federal government ments actually made for normal
for the time value of Federal reim- severances over a representative past
bursements in excess of contributions period, and if amounts charged are al-
to the PRHP fund. located to all activities of the non-Fed-
(3) Amounts funded in excess of the eral entity.
actuarially determined amount for a (ii) Measurement of costs of abnor-
fiscal year may be used as the Federal mal or mass severance pay by means of
governments contribution in a future an accrual will not achieve equity to
period. both parties. Thus, accruals for this
(4) When a non-Federal entity con- purpose are not allowable. However,
verts to an acceptable actuarial cost the Federal government recognizes its
method and funds PRHP costs in ac- obligation to participate, to the extent
cordance with this method, the initial of its fair share, in any specific pay-
unfunded liability attributable to prior ment. Prior approval by the Federal
years is allowable if amortized over a awarding agency or cognizant agency
period of years in accordance with for indirect cost, as appropriate, is re-
GAAP, or, if no such GAAP period ex- quired.
ists, over a period negotiated with the (3) Costs incurred in certain sever-
cognizant agency for indirect costs. ance pay packages which are in an
(5) To be allowable in the current amount in excess of the normal sever-
year, the PRHP costs must be paid ei- ance pay paid by the non-Federal enti-
ther to: ty to an employee upon termination of
(i) An insurer or other benefit pro- employment and are paid to the em-
vider as current year costs or pre- ployee contingent upon a change in
miums, or management control over, or owner-
(ii) An insurer or trustee to maintain ship of, the non-Federal entitys assets,
a trust fund or reserve for the sole pur- are unallowable.
pose of providing post-retirement bene- (4) Severance payments to foreign na-
fits to retirees and other beneficiaries. tionals employed by the non-Federal
(6) The Federal government must re- entity outside the United States, to
ceive an equitable share of any the extent that the amount exceeds the
amounts of previously allowed post-re- customary or prevailing practices for
tirement benefit costs (including earn- the non-Federal entity in the United
ings thereon) which revert or inure to States, are unallowable, unless they
the entity in the form of a refund, are necessary for the performance of
withdrawal, or other credit. Federal programs and approved by the
(i) Severance Pay. (1) Severance pay, Federal awarding agency.
also commonly referred to as dismissal (5) Severance payments to foreign na-
wages, is a payment in addition to reg- tionals employed by the non-Federal
ular salaries and wages, by non-Federal entity outside the United States due to
entities to workers whose employment the termination of the foreign national
is being terminated. Costs of severance as a result of the closing of, or curtail-

pay are allowable only to the extent ment of activities by, the non-Federal
that in each case, it is required by (a) entity in that country, are unallow-
law, (b) employer-employee agreement, able, unless they are necessary for the
149
performance of Federal programs and shop or event whose primary purpose is

approved by the Federal awarding the dissemination of technical infor-
agency. mation beyond the non-Federal entity
(j)(1) For IHEs only. Fringe benefits in and is necessary and reasonable for
the form of tuition or remission of tui- successful performance under the Fed-
tion for individual employees are al- eral award. Allowable conference costs
lowable, provided such benefits are paid by the non-Federal entity as a
granted in accordance with established sponsor or host of the conference may
non-Federal entity policies, and are include rental of facilities, speakers
distributed to all non-Federal entity fees, costs of meals and refreshments,
activities on an equitable basis. Tui- local transportation, and other items
tion benefits for family members other incidental to such conferences unless
than the employee are unallowable. further restricted by the terms and
(2) Fringe benefits in the form of tui- conditions of the Federal award. As
tion or remission of tuition for indi- needed, the costs of identifying, but
vidual employees not employed by not providing, locally available depend-
IHEs are limited to the tax-free ent-care resources are allowable. Con-
amount allowed per section 127 of the ference hosts/sponsors must exercise
Internal Revenue Code as amended. discretion and judgment in ensuring
(3) IHEs may offer employees tuition that conference costs are appropriate,
waivers or tuition reductions for unnecessary and managed in a manner
dergraduate education under IRC Sec- that minimizes costs to the Federal
tion 117(d) as amended, provided that award. The Federal awarding agency
the benefit does not discriminate in may authorize exceptions where appro-
favor of highly compensated employ- priate for programs including Indian
ees. Federal reimbursement of tuition tribes, children, and the elderly. See
or remission of tuition is also limited also 200.438 Entertainment costs,
to the institution for which the em- 200.456 Participant support costs,
ployee works. See 200.466 Scholarships 200.474 Travel costs, and 200.475 Trust-
and student aid costs, for treatment of ees.
tuition remission provided to students.
(k) For IHEs whose costs are paid by 200.433 Contingency provisions.
state or local governments, fringe ben- (a) Contingency is that part of a
efit programs (such as pension costs budget estimate of future costs (typi-
and FICA) and any other benefits costs cally of large construction projects, IT
specifically incurred on behalf of, and systems, or other items as approved by
in direct benefit to, the non-Federal the Federal awarding agency) which is
entity, are allowable costs of such non- associated with possible events or con-
Federal entities whether or not these ditions arising from causes the precise
costs are recorded in the accounting outcome of which is indeterminable at
records of the non-Federal entities, the time of estimate, and that experi-
subject to the following: ence shows will likely result, in aggre-
(1) The costs meet the requirements gate, in additional costs for the ap-
of Basic Considerations in 200.402 proved activity or project. Amounts for
Composition of costs through 200.411 major project scope changes, unfore-
Adjustment of previously negotiated seen risks, or extraordinary events
indirect (F&A) cost rates containing may not be included.
unallowable costs of this subpart; (b) It is permissible for contingency
(2) The costs are properly supported amounts other than those excluded in
by approved cost allocation plans in ac- paragraph (b)(1) of this section to be
cordance with applicable Federal cost explicitly included in budget esti-
accounting principles; and mates, to the extent they are necessary
(3) The costs are not otherwise borne to improve the precision of those esti-
directly or indirectly by the Federal mates. Amounts must be estimated
government. using broadly-accepted cost estimating
methodologies, specified in the budget

200.432 Conferences. documentation of the Federal award,
A conference is defined as a meeting, and accepted by the Federal awarding
retreat, seminar, symposium, work- agency. As such, contingency amounts
150
are to be included in the Federal (d) To the extent feasible, services

award. In order for actual costs in- donated to the non-Federal entity will
curred to be allowable, they must com- be supported by the same methods used
ply with the cost principles and other to support the allocability of regular
requirements in this part (see also personnel services.
200.300 Statutory and national policy (e) The following provisions apply to
requirements through 200.309 Period of nonprofit organizations. The value of
performance of Subpart D of this part services donated to the nonprofit orga-
and 200.403 Factors affecting allow- nization utilized in the performance of
ability of costs); be necessary and rea- a direct cost activity must be consid-
sonable for proper and efficient accom- ered in the determination of the non-
plishment of project or program objec- Federal entitys indirect cost rate(s)
tives, and be verifiable from the non- and, accordingly, must be allocated a
Federal entitys records. proportionate share of applicable indi-
(c) Payments made by the Federal rect costs when the following cir-
awarding agency to the non-Federal cumstances exist:
entitys contingency reserve or any (1) The aggregate value of the serv-
similar payment made for events the ices is material;
occurrence of which cannot be foretold (2) The services are supported by a
with certainty as to the time or inten- significant amount of the indirect
sity, or with an assurance of their hap- costs incurred by the non-Federal enti-
pening, are unallowable, except as ty;
noted in 200.431 Compensation (i) In those instances where there is
fringe benefits regarding self-insur- no basis for determining the fair mar-
ance, pensions, severance and post-re- ket value of the services rendered, the
tirement health costs and 200.447 Insur- non-Federal entity and the cognizant
ance and indemnification. agency for indirect costs must nego-
tiate an appropriate allocation of indi-
200.434 Contributions and donations. rect cost to the services.
(ii) Where donated services directly
(a) Costs of contributions and dona- benefit a project supported by the Fed-
tions, including cash, property, and eral award, the indirect costs allocated
services, from the non-Federal entity to the services will be considered as a
to other entities, are unallowable. part of the total costs of the project.
(b) The value of services and property Such indirect costs may be reimbursed
donated to the non-Federal entity may under the Federal award or used to
not be charged to the Federal award ei- meet cost sharing or matching require-
ther as a direct or indirect (F&A) cost. ments.
The value of donated services and prop- (f) Fair market value of donated
erty may be used to meet cost sharing services must be computed as described
or matching requirements (see 200.306 in 200.306 Cost sharing or matching.
Cost sharing or matching). Deprecia- (g) Personal Property and Use of
tion on donated assets is permitted in Space.
accordance with 200.436 Depreciation, (1) Donated personal property and
as long as the donated property is not use of space may be furnished to a non-
counted towards cost sharing or Federal entity. The value of the per-
matching requirements. sonal property and space is not reim-
(c) Services donated or volunteered bursable either as a direct or indirect
to the non-Federal entity may be fur- cost.
nished to a non-Federal entity by pro- (2) The value of the donations may be
fessional and technical personnel, con- used to meet cost sharing or matching
sultants, and other skilled and un- share requirements under the condi-
skilled labor. The value of these serv- tions described in 200.300 Statutory
ices is not allowable either as a direct and national policy requirements
or indirect cost. However, the value of through 200.309 Period of performance
donated services may be used to meet of subpart D of this part. The value of
cost sharing or matching requirements the donations must be determined in
in accordance with the provisions of accordance with 200.300 Statutory
200.306 Cost sharing or matching. and national policy requirements
151
through 200.309 Period of performance. (i) Relates to a violation of, or failure

Where donations are treated as indirect to comply with, a Federal, state, local
costs, indirect cost rates will separate or foreign statute, regulation or the
the value of the donations so that re- terms and conditions of the Federal
imbursement will not be made. award, by the non-Federal entity (in-
cluding its agents and employees); and
200.435 Defense and prosecution of (ii) Results in any of the following
criminal and civil proceedings,
claims, appeals and patent infringe- dispositions:
ments. (A) In a criminal proceeding, a con-
viction.
(a) Definitions for the purposes of
(B) In a civil or administrative pro-
this section.
ceeding involving an allegation of
(1) Conviction means a judgment or
fraud or similar misconduct, a deter-
conviction of a criminal offense by any
mination of non-Federal entity liabil-
court of competent jurisdiction, wheth-
ity.
er entered upon verdict or a plea, in-
cluding a conviction due to a plea of (C) In the case of any civil or admin-
nolo contendere. istrative proceeding, the disallowance
(2) Costs include the services of in- of costs or the imposition of a mone-
house or private counsel, accountants, tary penalty, or an order issued by the
consultants, or others engaged to as- Federal awarding agency head or dele-
sist the non-Federal entity before, dur- gate to the non-Federal entity to take
ing, and after commencement of a judi- corrective action under 10 U.S.C. 2409
cial or administrative proceeding, that or 41 U.S.C. 4712.
bear a direct relationship to the pro- (D) A final decision by an appropriate
ceeding. Federal official to debar or suspend the
(3) Fraud means: non-Federal entity, to rescind or void a
(i) Acts of fraud or corruption or at- Federal award, or to terminate a Fed-
tempts to defraud the Federal govern- eral award for default by reason of a
ment or to corrupt its agents, violation or failure to comply with a
(ii) Acts that constitute a cause for statute, regulation, or the terms and
debarment or suspension (as specified conditions of the Federal award.
in agency regulations), and (E) A disposition by consent or com-
(iii) Acts which violate the False promise, if the action could have re-
Claims Act (31 U.S.C. 37293732) or the sulted in any of the dispositions de-
Anti-kickback Act (41 U.S.C. 1320a scribed in paragraphs (b)(1)(ii)(A)
7b(b)). through (D) of this section.
(4) Penalty does not include restitu- (2) If more than one proceeding in-
tion, reimbursement, or compensatory volves the same alleged misconduct,
damages. the costs of all such proceedings are
(5) Proceeding includes an investiga- unallowable if any results in one of the
tion. dispositions shown in paragraph (b) of
(b) Costs. (1) Except as otherwise de- this section.
scribed herein, costs incurred in con- (c) If a proceeding referred to in para-
nection with any criminal, civil or ad- graph (b) of this section is commenced
ministrative proceeding (including fil- by the Federal government and is re-
ing of a false certification) commenced solved by consent or compromise pur-
by the Federal government, a state, suant to an agreement by the non-Fed-
local government, or foreign govern- eral entity and the Federal govern-
ment, or joined by the Federal government, then the costs incurred may be
ment (including a proceeding under the allowed to the extent specifically pro-
False Claims Act), against the non- vided in such agreement.
Federal entity, (or commenced by third (d) If a proceeding referred to in para-
parties or a current or former em- graph (b) of this section is commenced
ployee of the non-Federal entity who by a state, local or foreign government,
submits a whistleblower complaint of the authorized Federal official may

reprisal in accordance with 10 U.S.C. allow the costs incurred if such author-
2409 or 41 U.S.C. 4712), are not allowable ized official determines that the costs
if the proceeding: were incurred as a result of:
152
(1) A specific term or condition of the (i) Costs which may be unallowable
Federal award, or under this section, including directly
(2) Specific written direction of an associated costs, must be segregated
authorized official of the Federal and accounted for separately. During
awarding agency. the pendency of any proceeding covered
(e) Costs incurred in connection with by paragraphs (b) and (f) of this sec-
proceedings described in paragraph (b) tion, the Federal government must
of this section, which are not made un- generally withhold payment of such
allowable by that subsection, may be costs. However, if in its best interests,
allowed but only to the extent that: the Federal government may provide
(1) The costs are reasonable and nec- for conditional payment upon provision
essary in relation to the administra- of adequate security, or other adequate
tion of the Federal award and activi- assurance, and agreement to repay all
ties required to deal with the pro- unallowable costs, plus interest, if the
ceeding and the underlying cause of ac- costs are subsequently determined to
tion; be unallowable.
(2) Payment of the reasonable, nec-
essary, allocable and otherwise allow- 200.436 Depreciation.
able costs incurred is not prohibited by (a) Depreciation is the method for al-
any other provision(s) of the Federal locating the cost of fixed assets to peri-
award; ods benefitting from asset use. The
(3) The costs are not recovered from non-Federal entity may be com-
the Federal Government or a third pensated for the use of its buildings,
party, either directly as a result of the capital improvements, equipment, and
proceeding or otherwise; and, software projects capitalized in accord-
(4) An authorized Federal official ance with GAAP, provided that they
must determine the percentage of costs are used, needed in the non-Federal en-
allowed considering the complexity of titys activities, and properly allocated
litigation, generally accepted prin- to Federal awards. Such compensation
ciples governing the award of legal fees must be made by computing deprecia-
in civil actions involving the United tion.
States, and such other factors as may (b) The allocation for depreciation
be appropriate. Such percentage must must be made in accordance with Ap-
not exceed 80 percent. However, if an pendices IV through VIII.
agreement reached under paragraph (c) (c) Depreciation is computed apply-
of this section has explicitly consid- ing the following rules. The computa-
ered this 80 percent limitation and per- tion of depreciation must be based on
mitted a higher percentage, then the the acquisition cost of the assets in-
full amount of costs resulting from volved. For an asset donated to the
that agreement are allowable. non-Federal entity by a third party, its
(f) Costs incurred by the non-Federal fair market value at the time of the do-
entity in connection with the defense nation must be considered as the acqui-
of suits brought by its employees or ex- sition cost. Such assets may be depre-
employees under section 2 of the Major ciated or claimed as matching but not
Fraud Act of 1988 (18 U.S.C. 1031), in- both. For this purpose, the acquisition
cluding the cost of all relief necessary cost will exclude:
to make such employee whole, where (1) The cost of land;
the non-Federal entity was found liable (2) Any portion of the cost of build-
or settled, are unallowable. ings and equipment borne by or do-
(g) Costs of prosecution of claims nated by the Federal government, irre-
against the Federal government, in- spective of where title was originally
cluding appeals of final Federal agency vested or where it is presently located;
decisions, are unallowable. (3) Any portion of the cost of build-
(h) Costs of legal, accounting, and ings and equipment contributed by or
consultant services, and related costs, for the non-Federal entity, or where
incurred in connection with patent in- law or agreement prohibits recovery;

fringement litigation, are unallowable and
unless otherwise provided for in the (4) Any asset acquired solely for the
Federal award. performance of a non-Federal award.
153
(d) When computing depreciation poses, as described in paragraphs (d)(1)

charges, the following must be ob- and (2) of this section.
served: (4) No depreciation may be allowed
(1) The period of useful service or on any assets that have outlived their
useful life established in each case for depreciable lives.
usable capital assets must take into (5) Where the depreciation method is
consideration such factors as type of introduced to replace the use allow-
construction, nature of the equipment, ance method, depreciation must be
technological developments in the par- computed as if the asset had been de-
ticular area, historical data, and the preciated over its entire life (i.e., from
renewal and replacement policies fol- the date the asset was acquired and
lowed for the individual items or class- ready for use to the date of disposal or
es of assets involved. withdrawal from service). The total
(2) The depreciation method used to amount of use allowance and deprecia-
charge the cost of an asset (or group of tion for an asset (including imputed de-
preciation applicable to periods prior
assets) to accounting periods must re-
to the conversion from the use allow-
flect the pattern of consumption of the
ance method as well as depreciation
asset during its useful life. In the ab-
after the conversion) may not exceed
sence of clear evidence indicating that
the total acquisition cost of the asset.
the expected consumption of the asset
(e) Charges for depreciation must be
will be significantly greater in the
supported by adequate property
early portions than in the later por-
records, and physical inventories must
tions of its useful life, the straight-line
be taken at least once every two years
method must be presumed to be the ap-
to ensure that the assets exist and are
propriate method. Depreciation meth-
usable, used, and needed. Statistical
ods once used may not be changed un- sampling techniques may be used in
less approved in advance by the cog- taking these inventories. In addition,
nizant agency. The depreciation meth- adequate depreciation records showing
ods used to calculate the depreciation the amount of depreciation taken each
amounts for indirect (F&A) rate pur- period must also be maintained.
poses must be the same methods used
by the non-Federal entity for its finan- 200.437 Employee health and welfare
cial statements. costs.
(3) The entire building, including the (a) Costs incurred in accordance with
shell and all components, may be treat- the non-Federal entitys documented
ed as a single asset and depreciated policies for the improvement of work-
over a single useful life. A building ing conditions, employer-employee re-
may also be divided into multiple com- lations, employee health, and employee
ponents. Each component item may performance are allowable.
then be depreciated over its estimated (b) Such costs will be equitably ap-
useful life. The building components portioned to all activities of the non-
must be grouped into three general Federal entity. Income generated from
components of a building: building any of these activities will be credited
shell (including construction and de- to the cost thereof unless such income
sign costs), building services systems has been irrevocably sent to employee
(e.g., elevators, HVAC, plumbing sys- welfare organizations.
tem and heating and air-conditioning (c) Losses resulting from operating
system) and fixed equipment (e.g., food services are allowable only if the
sterilizers, casework, fume hoods, cold non-Federal entitys objective is to op-
rooms and glassware/washers). In ex- erate such services on a break-even
ceptional cases, a cognizant agency basis. Losses sustained because of oper-
may authorize a non-Federal entity to ating objectives other than the above
use more than these three groupings. are allowable only:
When a non-Federal entity elects to de- (1) Where the non-Federal entity can
preciate its buildings by its compo- demonstrate unusual circumstances;

nents, the same depreciation methods and
must be used for indirect (F&A) pur- (2) With the approval of the cog-
poses and financial statements pur- nizant agency for indirect costs.
154
200.438 Entertainment costs. otherwise allowable depreciation on

Costs of entertainment, including the equipment, or by amortizing the
amusement, diversion, and social ac- amount to be written off over a period
tivities and any associated costs are of years negotiated with the Federal
unallowable, except where specific cognizant agency for indirect cost.
costs that might otherwise be consid- (6) Cost of equipment disposal. If the
ered entertainment have a pro- non-Federal entity is instructed by the
grammatic purpose and are authorized Federal awarding agency to otherwise
either in the approved budget for the dispose of or transfer the equipment
Federal award or with prior written ap- the costs of such disposal or transfer
proval of the Federal awarding agency. are allowable.
200.439 Equipment and other capital 200.440 Exchange rates.

expenditures. (a) Cost increases for fluctuations in
(a) See 200.13 Capital expenditures, exchange rates are allowable costs sub-
200.33 Equipment, 200.89 Special pur- ject to the availability of funding, and
pose equipment, 200.48 General purpose prior approval by the Federal awarding
equipment, 200.2 Acquisition cost, and agency. The Federal awarding agency
200.12 Capital assets. must however ensure that adequate
(b) The following rules of allow- funds are available to cover currency
ability must apply to equipment and fluctuations in order to avoid a viola-
other capital expenditures: tion of the Anti-Deficiency Act.
(1) Capital expenditures for general (b) The non-Federal entity is re-
purpose equipment, buildings, and land quired to make reviews of local cur-
are unallowable as direct charges, ex- rency gains to determine the need for
cept with the prior written approval of additional federal funding before the
the Federal awarding agency or pass- expiration date of the Federal award.
through entity. Subsequent adjustments for currency
(2) Capital expenditures for special increases may be allowable only when
purpose equipment are allowable as di- the non-Federal entity provides the
rect costs, provided that items with a Federal awarding agency with ade-
unit cost of $5,000 or more have the quate source documentation from a
prior written approval of the Federal commonly used source in effect at the
awarding agency or pass-through enti- time the expense was made, and to the
ty. extent that sufficient Federal funds are
(3) Capital expenditures for improve- available.
ments to land, buildings, or equipment
which materially increase their value 200.441 Fines, penalties, damages
or useful life are unallowable as a di- and other settlements.
rect cost except with the prior written Costs resulting from non-Federal en-
approval of the Federal awarding agen- tity violations of, alleged violations of,
cy, or pass-through entity. See 200.436 or failure to comply with, Federal,
Depreciation, for rules on the allow- state, tribal, local or foreign laws and
ability of depreciation on buildings, regulations are unallowable, except
capital improvements, and equipment. when incurred as a result of compli-
See also 200.465 Rental costs of real ance with specific provisions of the
property and equipment. Federal award, or with prior written
(4) When approved as a direct charge approval of the Federal awarding agen-
pursuant to paragraphs (b)(1) through cy. See also 200.435 Defense and pros-
(3) of this section, capital expenditures ecution of criminal and civil pro-
will be charged in the period in which ceedings, claims, appeals and patent
the expenditure is incurred, or as oth- infringements.
erwise determined appropriate and ne-
gotiated with the Federal awarding 200.442 Fund raising and investment
agency. management costs.
(5) The unamortized portion of any (a) Costs of organized fund raising,
equipment written off as a result of a including financial campaigns, endow-
change in capitalization levels may be ment drives, solicitation of gifts and
recovered by continuing to claim the bequests, and similar expenses incurred
155
to raise capital or obtain contributions (4) Compensation for the use of the
are unallowable. Fund raising costs for property was provided through use al-
the purposes of meeting the Federal lowances in lieu of depreciation.
program objectives are allowable with (5) Gains and losses arising from
prior written approval from the Fed- mass or extraordinary sales, retire-
eral awarding agency. Proposal costs ments, or other dispositions must be
are covered in 200.460 Proposal costs. considered on a case-by-case basis.
(b) Costs of investment counsel and (c) Gains or losses of any nature aris-
staff and similar expenses incurred to ing from the sale or exchange of prop-
enhance income from investments are erty other than the property covered in
unallowable except when associated paragraph (a) of this section, e.g., land,
must be excluded in computing Federal
with investments covering pension,
award costs.
self-insurance, or other funds which in-
(d) When assets acquired with Fed-
clude Federal participation allowed by
eral funds, in part or wholly, are dis-
this part. posed of, the distribution of the pro-
(c) Costs related to the physical cus- ceeds must be made in accordance with
tody and control of monies and securi- 200.310 Insurance Coverage through
ties are allowable. 200.316 Property trust relationship.
(d) Both allowable and unallowable
fund raising and investment activities 200.444 General costs of government.
must be allocated as an appropriate (a) For states, local governments,
share of indirect costs under the condi- and Indian Tribes, the general costs of
tions described in 200.413 Direct costs. government are unallowable (except as
provided in 200.474 Travel costs). Unal-
200.443 Gains and losses on disposi- lowable costs include:
tion of depreciable assets. (1) Salaries and expenses of the Office
(a) Gains and losses on the sale, re- of the Governor of a state or the chief
tirement, or other disposition of depre- executive of a local government or the
ciable property must be included in the chief executive of an Indian tribe;
year in which they occur as credits or (2) Salaries and other expenses of a
charges to the asset cost grouping(s) in state legislature, tribal council, or
which the property was included. The similar local governmental body, such
amount of the gain or loss to be in- as a county supervisor, city council,
cluded as a credit or charge to the ap- school board, etc., whether incurred for
propriate asset cost grouping(s) is the purposes of legislation or executive di-
difference between the amount realized rection;
on the property and the undepreciated (3) Costs of the judicial branch of a
basis of the property. government;
(b) Gains and losses from the disposi- (4) Costs of prosecutorial activities
tion of depreciable property must not unless treated as a direct cost to a spe-
be recognized as a separate credit or cific program if authorized by statute
or regulation (however, this does not
charge under the following conditions:
preclude the allowability of other legal
(1) The gain or loss is processed
activities of the Attorney General as
through a depreciation account and is described in 200.435 Defense and pros-
reflected in the depreciation allowable ecution of criminal and civil pro-
under 200.436 Depreciation and 200.439 ceedings, claims, appeals and patent
Equipment and other capital expendi- infringements); and
tures. (5) Costs of other general types of
(2) The property is given in exchange government services normally provided
as part of the purchase price of a simi- to the general public, such as fire and
lar item and the gain or loss is taken police, unless provided for as a direct
into account in determining the depre- cost under a program statute or regula-
ciation cost basis of the new item. tion.
(3) A loss results from the failure to (b) For Indian tribes and Councils Of
maintain permissible insurance, except Governments (COGs) (see 200.64 Local
as otherwise provided in 46*200.447 In- government), the portion of salaries
surance and indemnification. and expenses directly attributable to
156
managing and operating Federal pro- clude the costs of idle public safety
grams by the chief executive and his or emergency facilities, telecommuni-
her staff is allowable. Up to 50% of cations, or information technology sys-
these costs can be included in the indi- tem capacity that is built to withstand
rect cost calculation without docu- major fluctuations in load, e.g., con-
mentation. solidated data centers.
(b) The costs of idle facilities are un-
200.445 Goods or services for per- allowable except to the extent that:
sonal use. (1) They are necessary to meet work-
(a) Costs of goods or services for per- load requirements which may fluctuate
sonal use of the non-Federal entitys and are allocated appropriately to all
employees are unallowable regardless benefiting programs; or
of whether the cost is reported as tax- (2) Although not necessary to meet
able income to the employees. fluctuations in workload, they were
(b) Costs of housing (e.g., deprecia- necessary when acquired and are now
tion, maintenance, utilities, fur- idle because of changes in program re-
nishings, rent), housing allowances and quirements, efforts to achieve more ec-
personal living expenses are only al- onomical operations, reorganization,
lowable as direct costs regardless of termination, or other causes which
whether reported as taxable income to could not have been reasonably fore-
the employees. In addition, to be allow- seen. Under the exception stated in
able direct costs must be approved in this subsection, costs of idle facilities
advance by a Federal awarding agency. are allowable for a reasonable period of
time, ordinarily not to exceed one
200.446 Idle facilities and idle capac- year, depending on the initiative taken
ity. to use, lease, or dispose of such facili-
(a) As used in this section the fol- ties.
lowing terms have the meanings set (c) The costs of idle capacity are nor-
forth in this section: mal costs of doing business and are a
(1) Facilities means land and build- factor in the normal fluctuations of
ings or any portion thereof, equipment usage or indirect cost rates from period
individually or collectively, or any to period. Such costs are allowable,
other tangible capital asset, wherever provided that the capacity is reason-
located, and whether owned or leased ably anticipated to be necessary to
by the non-Federal entity. carry out the purpose of the Federal
(2) Idle facilities means completely award or was originally reasonable and
unused facilities that are excess to the is not subject to reduction or elimi-
non-Federal entitys current needs. nation by use on other Federal awards,
(3) Idle capacity means the unused subletting, renting, or sale, in accord-
capacity of partially used facilities. It ance with sound business, economic, or
is the difference between: security practices. Widespread idle ca-
(i) That which a facility could pacity throughout an entire facility or
achieve under 100 percent operating among a group of assets having sub-
time on a one-shift basis less operating stantially the same function may be
interruptions resulting from time lost considered idle facilities.
for repairs, setups, unsatisfactory ma-
terials, and other normal delays and; 200.447 Insurance and indemnifica-
(ii) The extent to which the facility tion.
was actually used to meet demands (a) Costs of insurance required or ap-
during the accounting period. A multi- proved and maintained, pursuant to
shift basis should be used if it can be the Federal award, are allowable.
shown that this amount of usage would (b) Costs of other insurance in con-
normally be expected for the type of fa- nection with the general conduct of ac-
cility involved. tivities are allowable subject to the
(4) Cost of idle facilities or idle ca- following limitations:
pacity means costs such as mainte- (1) Types and extent and cost of cov-
nance, repair, housing, rent, and other erage are in accordance with the non-
related costs, e.g., insurance, interest, Federal entitys policy and sound busi-
and depreciation. These costs could in- ness practice.
157
(2) Costs of insurance or of contribu- (1) The type of coverage and the ex-
tions to any reserve covering the risk tent of coverage and the rates and pre-
of loss of, or damage to, Federal gov- miums would have been allowed had in-
ernment property are unallowable ex- surance (including reinsurance) been
cept to the extent that the Federal purchased to cover the risks. However,
awarding agency has specifically re- provision for known or reasonably esti-
quired or approved such costs. mated self-insured liabilities, which do
(3) Costs allowed for business inter- not become payable for more than one
ruption or other similar insurance year after the provision is made, must
must exclude coverage of management not exceed the discounted present
fees. value of the liability. The rate used for
(4) Costs of insurance on the lives of discounting the liability must be deter-
trustees, officers, or other employees mined by giving consideration to such
holding positions of similar respon- factors as the non-Federal entitys set-
sibilities are allowable only to the ex- tlement rate for those liabilities and
tent that the insurance represents ad- its investment rate of return.
ditional compensation (see 200.431 (2) Earnings or investment income on
Compensationfringe benefits). The reserves must be credited to those re-
cost of such insurance when the non- serves.
Federal entity is identified as the bene- (3)(i) Contributions to reserves must
ficiary is unallowable. be based on sound actuarial principles
(5) Insurance against defects. Costs of using historical experience and reason-
insurance with respect to any costs in- able assumptions. Reserve levels must
curred to correct defects in the non- be analyzed and updated at least bien-
Federal entitys materials or work- nially for each major risk being in-
manship are unallowable. sured and take into account any rein-
(6) Medical liability (malpractice) insurance, coinsurance, etc. Reserve lev-
surance. Medical liability insurance is els related to employee-related cov-
an allowable cost of Federal research erages will normally be limited to the
programs only to the extent that the value of claims:
Federal research programs involve (A) Submitted and adjudicated but
human subjects or training of partici- not paid;
pants in research techniques. Medical (B) Submitted but not adjudicated;
liability insurance costs must be treat- and
ed as a direct cost and must be as- (C) Incurred but not submitted.
signed to individual projects based on (ii) Reserve levels in excess of the
the manner in which the insurer allo- amounts based on the above must be
cates the risk to the population cov- identified and justified in the cost allo-
ered by the insurance. cation plan or indirect cost rate pro-
(c) Actual losses which could have posal.
been covered by permissible insurance (4) Accounting records, actuarial
(through a self-insurance program or studies, and cost allocations (or bil-
otherwise) are unallowable, unless ex- lings) must recognize any significant
pressly provided for in the Federal differences due to types of insured risk
award. However, costs incurred because and losses generated by the various in-
of losses not covered under nominal de- sured activities or agencies of the non-
ductible insurance coverage provided Federal entity. If individual depart-
in keeping with sound management ments or agencies of the non-Federal
practice, and minor losses not covered entity experience significantly dif-
by insurance, such as spoilage, break- ferent levels of claims for a particular
age, and disappearance of small hand risk, those differences are to be recog-
tools, which occur in the ordinary nized by the use of separate allocations
course of operations, are allowable. or other techniques resulting in an eq-
(d) Contributions to a reserve for cer- uitable allocation.
tain self-insurance programs including (5) Whenever funds are transferred
workers compensation, unemployment from a self-insurance reserve to other

compensation, and severance pay are accounts (e.g., general fund or unre-
allowable subject to the following pro- stricted account), refunds must be
visions: made to the Federal government for its
158
share of funds transferred, including (b) Royalties and other costs for use of
earned or imputed interest from the patents and copyrights. (1) Royalties on
date of transfer and debt interest, if ap- a patent or copyright or amortization
plicable, chargeable in accordance with of the cost of acquiring by purchase a
applicable Federal cognizant agency copyright, patent, or rights thereto,
for indirect cost, claims collection reg- necessary for the proper performance
ulations. of the Federal award are allowable un-
(e) Insurance refunds must be cred- less:
ited against insurance costs in the year (i) The Federal government already
the refund is received. has a license or the right to free use of
(f) Indemnification includes securing the patent or copyright.
the non-Federal entity against liabil- (ii) The patent or copyright has been
ities to third persons and other losses adjudicated to be invalid, or has been
not compensated by insurance or oth- administratively determined to be in-
erwise. The Federal government is ob- valid.
ligated to indemnify the non-Federal (iii) The patent or copyright is con-
entity only to the extent expressly pro- sidered to be unenforceable.
vided for in the Federal award, except (iv) The patent or copyright is ex-
as provided in paragraph (c) of this sec- pired.
tion. (2) Special care should be exercised in
determining reasonableness where the
200.448 Intellectual property. royalties may have been arrived at as a
result of less-than-arms-length bar-
(a) Patent costs. (1) The following
gaining, such as:
costs related to securing patents and
(i) Royalties paid to persons, includ-
copyrights are allowable:
ing corporations, affiliated with the
(i) Costs of preparing disclosures, re- non-Federal entity.
ports, and other documents required by (ii) Royalties paid to unaffiliated
the Federal award, and of searching the parties, including corporations, under
art to the extent necessary to make an agreement entered into in con-
such disclosures; templation that a Federal award would
(ii) Costs of preparing documents and be made.
any other patent costs in connection (iii) Royalties paid under an agree-
with the filing and prosecution of a ment entered into after a Federal
United States patent application where award is made to a non-Federal entity.
title or royalty-free license is required (3) In any case involving a patent or
by the Federal government to be con- copyright formerly owned by the non-
veyed to the Federal government; and Federal entity, the amount of royalty
(iii) General counseling services re- allowed should not exceed the cost
lating to patent and copyright matters, which would have been allowed had the
such as advice on patent and copyright non-Federal entity retained title there-
laws, regulations, clauses, and em- to.
ployee intellectual property agree-
ments (See also 200.459 Professional 200.449 Interest.
service costs). (a) General. Costs incurred for inter-
(2) The following costs related to se- est on borrowed capital, temporary use
curing patents and copyrights are unal- of endowment funds, or the use of the
lowable: non-Federal entitys own funds, how-
(i) Costs of preparing disclosures, re- ever represented, are unallowable. Fi-
ports, and other documents, and of nancing costs (including interest) to
searching the art to make disclosures acquire, construct, or replace capital
not required by the Federal award; assets are allowable, subject to the
(ii) Costs in connection with filing conditions in this section.
and prosecuting any foreign patent ap- (b)(1) Capital assets is defined as
plication, or any United States patent noted in 200.12 Capital assets. An
application, where the Federal award asset cost includes (as applicable) ac-
does not require conveying title or a quisition costs, construction costs, and
royalty-free license to the Federal gov- other costs capitalized in accordance
ernment. with GAAP.
159
(2) For non-Federal entity fiscal puted interest earnings on excess cash
years beginning on or after January 1, flow attributable to the portion of the
2016, intangible assets include patents facility used for Federal awards.
and computer software. For software (ii) The non-Federal entity must im-
development projects, only interest at- pute interest on excess cash flow as fol-
tributable to the portion of the project lows:
costs capitalized in accordance with (A) Annually, the non-Federal entity
GAAP is allowable. must prepare a cumulative (from the
(c) Conditions for all non-Federal enti- inception of the project) report of
ties. (1) The non-Federal entity uses the monthly cash inflows and outflows, re-
capital assets in support of Federal gardless of the funding source. For this
awards; purpose, inflows consist of Federal re-
(2) The allowable asset costs to ac- imbursement for depreciation, amorti-
quire facilities and equipment are lim- zation of capitalized construction in-
ited to a fair market value available to terest, and annual interest cost. Out-
the non-Federal entity from an unre- flows consist of initial equity contribu-
lated (arms length) third party. tions, debt principal payments (less the
(3) The non-Federal entity obtains pro-rata share attributable to the cost
the financing via an arms-length of land), and interest payments.
transaction (that is, a transaction with (B) To compute monthly cash inflows
an unrelated third party); or claims re-
and outflows, the non-Federal entity
imbursement of actual interest cost at
must divide the annual amounts deter-
a rate available via such a transaction.
mined in step (i) by the number of
(4) The non-Federal entity limits
months in the year (usually 12) that
claims for Federal reimbursement of
the building is in service.
interest costs to the least expensive al-
ternative. For example, a capital lease (C) For any month in which cumu-
may be determined less costly than lative cash inflows exceed cumulative
purchasing through debt financing, in outflows, interest must be calculated
which case reimbursement must be on the excess inflows for that month
limited to the amount of interest de- and be treated as a reduction to allow-
termined if leasing had been used. able interest cost. The rate of interest
(5) The non-Federal entity expenses to be used must be the three-month
or capitalizes allowable interest cost in Treasury bill closing rate as of the last
accordance with GAAP. business day of that month.
(6) Earnings generated by the invest- (8) Interest attributable to a fully de-
ment of borrowed funds pending their preciated asset is unallowable.
disbursement for the asset costs are (d) Additional conditions for states,
used to offset the current periods al- local governments and Indian tribes.
lowable interest cost, whether that For costs to be allowable, the non-Fed-
cost is expensed or capitalized. Earn- eral entity must have incurred the in-
ings subject to being reported to the terest costs for buildings after October
Federal Internal Revenue Service 1, 1980, or for land and equipment after
under arbitrage requirements are ex- September 1, 1995.
cludable. (1) The requirement to offset interest
(7) The following conditions must earned on borrowed funds against cur-
apply to debt arrangements over $1 rent allowable interest cost (paragraph
million to purchase or construct facili- (c)(5), above) also applies to earnings
ties, unless the non-Federal entity on debt service reserve funds.
makes an initial equity contribution to (2) The non-Federal entity will nego-
the purchase of 25 percent or more. For tiate the amount of allowable interest
this purpose, initial equity contribu- cost related to the acquisition of facili-
tion means the amount or value of ties with asset costs of $1 million or
contributions made by the non-Federal more, as outlined in paragraph (c)(7) of
entity for the acquisition of facilities this section. For this purpose, a non-
prior to occupancy. Federal entity must consider only cash

(i) The non-Federal entity must re- inflows and outflows attributable to
duce claims for reimbursement of in- that portion of the real property used
terest cost by an amount equal to im- for Federal awards.
160
(e) Additional conditions for IHEs. latory matter on any basis other than
For costs to be allowable, the IHE the merits of the matter.
must have incurred the interest costs (c) In addition to the above, the fol-
after September 23, 1982, in connection lowing restrictions are applicable to
with acquisitions of capital assets that nonprofit organizations and IHEs:
occurred after that date. (1) Costs associated with the fol-
(f) Additional condition for nonprofit lowing activities are unallowable:
organizations. For costs to be allow- (i) Attempts to influence the out-
able, the nonprofit organization in- comes of any Federal, state, or local
curred the interest costs after Sep- election, referendum, initiative, or
tember 29, 1995, in connection with ac- similar procedure, through in-kind or
quisitions of capital assets that oc- cash contributions, endorsements, pub-
curred after that date. licity, or similar activity;
(g) The interest allowability provi- (ii) Establishing, administering, con-
sions of this section do not apply to a tributing to, or paying the expenses of
nonprofit organization subject to full a political party, campaign, political
coverage under the Cost Accounting action committee, or other organiza-
Standards (CAS), as defined at 48 CFR tion established for the purpose of in-
9903.2012(a). The non-Federal entitys fluencing the outcomes of elections in
Federal awards are instead subject to the United States;
CAS 414 (48 CFR 9904.414), Cost of (iii) Any attempt to influence:
Money as an Element of the Cost of Fa- (A)The introduction of Federal or
cilities Capital, and CAS 417 (48 CFR state legislation;
9904.417), Cost of Money as an Element (B) The enactment or modification of
of the Cost of Capital Assets Under any pending Federal or state legisla-
Construction. tion through communication with any
member or employee of the Congress or
200.450 Lobbying. state legislature (including efforts to
(a) The cost of certain influencing ac- influence state or local officials to en-
tivities associated with obtaining gage in similar lobbying activity);
grants, contracts, cooperative agree- (C) The enactment or modification of
ments, or loans is an unallowable cost. any pending Federal or state legisla-
Lobbying with respect to certain tion by preparing, distributing, or
grants, contracts, cooperative agree- using publicity or propaganda, or by
ments, and loans is governed by rel- urging members of the general public,
evant statutes, including among oth- or any segment thereof, to contribute
ers, the provisions of 31 U.S.C. 1352, as to or participate in any mass dem-
well as the common rule, New Re- onstration, march, rally, fund raising
strictions on Lobbying published at 55 drive, lobbying campaign or letter
FR 6736 (February 26, 1990), including writing or telephone campaign; or
definitions, and the Office of Manage- (D) Any government official or em-
ment and Budget Governmentwide ployee in connection with a decision to
Guidance for New Restrictions on Lob- sign or veto enrolled legislation;
bying and notices published at 54 FR (iv) Legislative liaison activities, in-
52306 (December 20, 1989), 55 FR 24540 cluding attendance at legislative ses-
(June 15, 1990), 57 FR 1772 (January 15, sions or committee hearings, gathering
1992), and 61 FR 1412 (January 19, 1996). information regarding legislation, and
(b) Executive lobbying costs. Costs analyzing the effect of legislation,
incurred in attempting to improperly when such activities are carried on in
influence either directly or indirectly, support of or in knowing preparation
an employee or officer of the executive for an effort to engage in unallowable
branch of the Federal government to lobbying.
give consideration or to act regarding a (2) The following activities are ex-
Federal award or a regulatory matter cepted from the coverage of paragraph
are unallowable. Improper influence (c)(1) of this section:
means any influence that induces or (i) Technical and factual presen-
tends to induce a Federal employee or tations on topics directly related to
officer to give consideration or to act the performance of a grant, contract,
regarding a Federal award or regu- or other agreement (through hearing
161
testimony, statements, or letters to treated as other unallowable activity

the Congress or a state legislature, or costs in accordance with the proce-
subdivision, member, or cognizant staff dures of 200.413 Direct costs.
member thereof), in response to a docu- (vi) The non-Federal entity must sub-
mented request (including a Congres- mit as part of its annual indirect
sional Record notice requesting testi- (F&A) cost rate proposal a certification
mony or statements for the record at a that the requirements and standards of
regularly scheduled hearing) made by this section have been complied with.
the non-Federal entitys member of (See also 200.415 Required certifi-
congress, legislative body or a subdivi- cations.)
sion, or a cognizant staff member (vii)(A) Time logs, calendars, or simi-
thereof, provided such information is
lar records are not required to be cre-
readily obtainable and can be readily
ated for purposes of complying with
put in deliverable form, and further
the record keeping requirements in
provided that costs under this section
for travel, lodging or meals are unal- 200.302 Financial management with
lowable unless incurred to offer testi- respect to lobbying costs during any
mony at a regularly scheduled Congres- particular calendar month when:
sional hearing pursuant to a written (1) The employee engages in lobbying
request for such presentation made by (as defined in paragraphs (c)(1) and
the Chairman or Ranking Minority (c)(2) of this section) 25 percent or less
Member of the Committee or Sub- of the employees compensated hours of
committee conducting such hearings; employment during that calendar
(ii) Any lobbying made unallowable month; and
by paragraph (c)(1)(iii) of this section (2) Within the preceding five-year pe-
to influence state legislation in order riod, the non-Federal entity has not
to directly reduce the cost, or to avoid materially misstated allowable or un-
material impairment of the non-Fed- allowable costs of any nature, includ-
eral entitys authority to perform the ing legislative lobbying costs.
grant, contract, or other agreement; or (B) When conditions in paragraph
(iii) Any activity specifically author- (c)(2)(vii)(A)(1) and (2) of this section
ized by statute to be undertaken with are met, non-Federal entities are not
funds from the Federal award. required to establish records to support
(iv) Any activity excepted from the the allowability of claimed costs in ad-
definitions of lobbying or influ- dition to records already required or
encing legislation by the Internal maintained. Also, when conditions in
Revenue Code provisions that require
paragraphs (c)(2)(vii)(A)(1) and (2) of
nonprofit organizations to limit their
this section are met, the absence of
participation in direct and grass
time logs, calendars, or similar records
roots lobbying activities in order to
will not serve as a basis for disallowing
retain their charitable deduction sta-
tus and avoid punitive excise taxes, costs by contesting estimates of lob-
I.R.C. 501(c)(3), 501(h), 4911(a), includ- bying time spent by employees during
ing: a calendar month.
(A) Nonpartisan analysis, study, or (viii) The Federal awarding agency
research reports; must establish procedures for resolving
(B) Examinations and discussions of in advance, in consultation with OMB,
broad social, economic, and similar any significant questions or disagree-
problems; and ments concerning the interpretation or
(C) Information provided upon re- application of this section. Any such
quest by a legislator for technical ad- advance resolutions must be binding in
vice and assistance, as defined by I.R.C. any subsequent settlements, audits, or
4911(d)(2) and 26 CFR 56.49112(c)(1) investigations with respect to that
(c)(3). grant or contract for purposes of inter-
(v) When a non-Federal entity seeks pretation of this part, provided, how-
reimbursement for indirect (F&A) ever, that this must not be construed
costs, total lobbying costs must be sep- to prevent a contractor or non-Federal
arately identified in the indirect (F&A) entity from contesting the lawfulness
cost rate proposal, and thereafter of such a determination.
162
200.451 Losses on other awards or (c) Materials and supplies used for
contracts. the performance of a Federal award
may be charged as direct costs. In the
Any excess of costs over income
specific case of computing devices,
under any other award or contract of
charging as direct costs is allowable for
any nature is unallowable. This in-
devices that are essential and allo-
cludes, but is not limited to, the non-
cable, but not solely dedicated, to the
Federal entitys contributed portion by
performance of a Federal award.
reason of cost-sharing agreements or (d) Where federally-donated or fur-
any under-recoveries through negotia- nished materials are used in per-
tion of flat amounts for indirect (F&A) forming the Federal award, such mate-
costs. Also, any excess of costs over au- rials will be used without charge.
thorized funding levels transferred
from any award or contract to another 200.454 Memberships, subscriptions,
award or contract is unallowable. All and professional activity costs.
losses are not allowable indirect (F&A) (a) Costs of the non-Federal entitys
costs and are required to be included in membership in business, technical, and
the appropriate indirect cost rate base professional organizations are allow-
for allocation of indirect costs. able.
(b) Costs of the non-Federal entitys
200.452 Maintenance and repair subscriptions to business, professional,
costs.
and technical periodicals are allowable.
Costs incurred for utilities, insur- (c) Costs of membership in any civic
ance, security, necessary maintenance, or community organization are allow-
janitorial services, repair, or upkeep of able with prior approval by the Federal
buildings and equipment (including awarding agency or pass-through enti-
Federal property unless otherwise pro- ty.
vided for) which neither add to the per- (d) Costs of membership in any coun-
manent value of the property nor ap- try club or social or dining club or or-
preciably prolong its intended life, but ganization are unallowable.
keep it in an efficient operating condi- (e) Costs of membership in organiza-
tion, are allowable. Costs incurred for tions whose primary purpose is lob-
improvements which add to the perma- bying are unallowable. See also 200.450
nent value of the buildings and equip- Lobbying.
ment or appreciably prolong their in-
tended life must be treated as capital 200.455 Organization costs.
expenditures (see 200.439 Equipment Costs such as incorporation fees, bro-
and other capital expenditures). These kers fees, fees to promoters, organizers
costs are only allowable to the extent or management consultants, attorneys,
not paid through rental or other agree- accountants, or investment counselor,
ments. whether or not employees of the non-
Federal entity in connection with es-
200.453 Materials and supplies costs, tablishment or reorganization of an or-
including costs of computing de- ganization, are unallowable except
vices. with prior approval of the Federal
(a) Costs incurred for materials, sup- awarding agency.
plies, and fabricated parts necessary to
carry out a Federal award are allow- 200.456 Participant support costs.
able. Participant support costs as defined
(b) Purchased materials and supplies in 200.75 Participant support costs are
must be charged at their actual prices, allowable with the prior approval of
net of applicable credits. Withdrawals the Federal awarding agency.
from general stores or stockrooms
should be charged at their actual net 200.457 Plant and security costs.
cost under any recognized method of Necessary and reasonable expenses
pricing inventory withdrawals, consist- incurred for routine and security to

ently applied. Incoming transportation protect facilities, personnel, and work
charges are a proper part of materials products are allowable. Such costs in-
and supplies costs. clude, but are not limited to, wages
163
and uniforms of personnel engaged in business is such as to influence the

security activities; equipment; bar- non-Federal entity in favor of incur-
riers; protective (non-military) gear, ring the cost, particularly where the
devices, and equipment; contractual se- services rendered are not of a con-
curity services; and consultants. Cap- tinuing nature and have little relation-
ital expenditures for plant security ship to work under Federal awards.
purposes are subject to 200.439 Equip- (6) Whether the service can be per-
ment and other capital expenditures. formed more economically by direct
employment rather than contracting.
200.458 Pre-award costs.
(7) The qualifications of the indi-
Pre-award costs are those incurred vidual or concern rendering the service
prior to the effective date of the Fed- and the customary fees charged, espe-
eral award directly pursuant to the ne- cially on non-federally funded activi-
gotiation and in anticipation of the ties.
Federal award where such costs are
(8) Adequacy of the contractual
necessary for efficient and timely per-
agreement for the service (e.g., descrip-
formance of the scope of work. Such
tion of the service, estimate of time re-
costs are allowable only to the extent
quired, rate of compensation, and ter-
that they would have been allowable if
incurred after the date of the Federal mination provisions).
award and only with the written ap- (c) In addition to the factors in para-
proval of the Federal awarding agency. graph (b) of this section, to be allow-
able, retainer fees must be supported
200.459 Professional service costs. by evidence of bona fide services avail-
(a) Costs of professional and consult- able or rendered.
ant services rendered by persons who
200.460 Proposal costs.
are members of a particular profession
or possess a special skill, and who are Proposal costs are the costs of pre-
not officers or employees of the non- paring bids, proposals, or applications
Federal entity, are allowable, subject on potential Federal and non-Federal
to paragraphs (b) and (c) when reason- awards or projects, including the devel-
able in relation to the services ren- opment of data necessary to support
dered and when not contingent upon the non-Federal entitys bids or pro-
recovery of the costs from the Federal posals. Proposal costs of the current
government. In addition, legal and re- accounting period of both successful
lated services are limited under and unsuccessful bids and proposals
200.435 Defense and prosecution of normally should be treated as indirect
criminal and civil proceedings, claims, (F&A) costs and allocated currently to
appeals and patent infringements. all activities of the non-Federal entity.
(b) In determining the allowability of No proposal costs of past accounting
costs in a particular case, no single fac- periods will be allocable to the current
tor or any special combination of fac- period.
tors is necessarily determinative. How-
ever, the following factors are relevant: 200.461 Publication and printing
(1) The nature and scope of the serv- costs.
ice rendered in relation to the service
(a) Publication costs for electronic
required.
and print media, including distribu-
(2) The necessity of contracting for
the service, considering the non-Fed- tion, promotion, and general handling
eral entitys capability in the par- are allowable. If these costs are not
ticular area. identifiable with a particular cost ob-
(3) The past pattern of such costs, jective, they should be allocated as in-
particularly in the years prior to Fed- direct costs to all benefiting activities
eral awards. of the non-Federal entity.
(4) The impact of Federal awards on (b) Page charges for professional
the non-Federal entitys business (i.e., journal publications are allowable

what new problems have arisen). where:
(5) Whether the proportion of Federal (1) The publications report work sup-
work to the non-Federal entitys total ported by the Federal government; and
164
(2) The charges are levied impartially practices of the non-Federal entity, are
on all items published by the journal, unallowable.
whether or not under a Federal award. (c) Where relocation costs incurred
(3) The non-Federal entity may incident to recruitment of a new em-
charge the Federal award before close- ployee have been funded in whole or in
out for the costs of publication or shar- part as a direct cost to a Federal
ing of research results if the costs are award, and the newly hired employee
not incurred during the period of per- resigns for reasons within the employ-
formance of the Federal award. ees control within 12 months after
hire, the non-Federal entity will be re-
200.462 Rearrangement and recon- quired to refund or credit the Federal
version costs. share of such relocation costs to the
(a) Costs incurred for ordinary and Federal government. See also 200.464
normal rearrangement and alteration Relocation costs of employees.
of facilities are allowable as indirect (d) Short-term, travel visa costs (as
costs. Special arrangements and alter- opposed to longer-term, immigration
ations costs incurred specifically for a visas) are generally allowable expenses
Federal award are allowable as a direct that may be proposed as a direct cost.
cost with the prior approval of the Fed- Since short-term visas are issued for a
eral awarding agency or pass-through specific period and purpose, they can be
entity. clearly identified as directly connected
to work performed on a Federal award.
(b) Costs incurred in the restoration
For these costs to be directly charged
or rehabilitation of the non-Federal en-
to a Federal award, they must:
titys facilities to approximately the
(1) Be critical and necessary for the
same condition existing immediately conduct of the project;
prior to commencement of Federal (2) Be allowable under the applicable
awards, less costs related to normal cost principles;
wear and tear, are allowable. (3) Be consistent with the non-Fed-
eral entitys cost accounting practices
200.463 Recruiting costs.
and non-Federal entity policy; and
(a) Subject to paragraphs (b) and (c) (4) Meet the definition of direct
of this section, and provided that the cost as described in the applicable
size of the staff recruited and main- cost principles.
tained is in keeping with workload re-
quirements, costs of help wanted ad- 200.464 Relocation costs of employ-
vertising, operating costs of an em- ees.
ployment office necessary to secure (a) Relocation costs are costs inci-
and maintain an adequate staff, costs dent to the permanent change of duty
of operating an aptitude and edu- assignment (for an indefinite period or
cational testing program, travel costs for a stated period of not less than 12
of employees while engaged in recruit- months) of an existing employee or
ing personnel, travel costs of appli- upon recruitment of a new employee.
cants for interviews for prospective Relocation costs are allowable, subject
employment, and relocation costs in- to the limitations described in para-
curred incident to recruitment of new graphs (b), (c), and (d) of this section,
employees, are allowable to the extent provided that:
that such costs are incurred pursuant (1) The move is for the benefit of the
to the non-Federal entitys standard employer.
recruitment program. Where the non- (2) Reimbursement to the employee
Federal entity uses employment agen- is in accordance with an established
cies, costs not in excess of standard written policy consistently followed by
commercial rates for such services are the employer.
allowable. (3) The reimbursement does not ex-
(b) Special emoluments, fringe bene- ceed the employees actual (or reason-
fits, and salary allowances incurred to ably estimated) expenses.

attract professional personnel that do (b) Allowable relocation costs for
not meet the test of reasonableness or current employees are limited to the
do not conform with the established following:
165
(1) The costs of transportation of the (2) A loss on the sale of a former
employee, members of his or her imme- home.
diate family and his household, and (3) Continuing mortgage principal
personal effects to the new location. and interest payments on a home being
(2) The costs of finding a new home, sold.
such as advance trips by employees and (4) Income taxes paid by an employee
spouses to locate living quarters and related to reimbursed relocation costs.
temporary lodging during the transi-
tion period, up to maximum period of 200.465 Rental costs of real property
30 calendar days. and equipment.
(3) Closing costs, such as brokerage,
(a) Subject to the limitations de-
legal, and appraisal fees, incident to
scribed in paragraphs (b) through (d) of
the disposition of the employees
former home. These costs, together this section, rental costs are allowable
with those described in (4), are limited to the extent that the rates are reason-
to 8 per cent of the sales price of the able in light of such factors as: rental
employees former home. costs of comparable property, if any;
(4) The continuing costs of ownership market conditions in the area; alter-
(for up to six months) of the vacant natives available; and the type, life ex-
former home after the settlement or pectancy, condition, and value of the
lease date of the employees new per- property leased. Rental arrangements
manent home, such as maintenance of should be reviewed periodically to de-
buildings and grounds (exclusive of fix- termine if circumstances have changed
ing-up expenses), utilities, taxes, and and other options are available.
property insurance. (b) Rental costs under sale and lease
(5) Other necessary and reasonable back arrangements are allowable only
expenses normally incident to reloca- up to the amount that would be al-
tion, such as the costs of canceling an lowed had the non-Federal entity con-
unexpired lease, transportation of per- tinued to own the property. This
sonal property, and purchasing insur- amount would include expenses such as
ance against loss of or damages to per- depreciation, maintenance, taxes, and
sonal property. The cost of canceling insurance.
an unexpired lease is limited to three (c) Rental costs under less-than-
times the monthly rental. arms-length leases are allowable only
(c) Allowable relocation costs for new up to the amount (as explained in para-
employees are limited to those de- graph (b) of this section). For this pur-
scribed in paragraphs (b)(1) and (2) of pose, a less-than-arms-length lease is
this section. When relocation costs in- one under which one party to the lease
curred incident to the recruitment of agreement is able to control or sub-
new employees have been allowed ei- stantially influence the actions of the
ther as a direct or indirect cost and the other. Such leases include, but are not
employee resigns for reasons within limited to those between:
the employees control within 12
(1) Divisions of the non-Federal enti-
months after hire, the non-Federal en-
ty;
tity must refund or credit the Federal
government for its share of the cost. (2) The non-Federal entity under
However, the costs of travel to an over- common control through common offi-
seas location must be considered travel cers, directors, or members; and
costs in accordance with 200.474 Trav- (3) The non-Federal entity and a di-
el costs, and not this 200.464 Reloca- rector, trustee, officer, or key em-
tion costs of employees, for the purpose ployee of the non-Federal entity or an
of this paragraph if dependents are not immediate family member, either di-
permitted at the location for any rea- rectly or through corporations, trusts,
son and the costs do not include costs or similar arrangements in which they
of transporting household goods. hold a controlling interest. For exam-
(d) The following costs related to re- ple, the non-Federal entity may estab-
location are unallowable: lish a separate corporation for the sole
(1) Fees and other costs associated purpose of owning property and leasing
with acquiring a new home. it back to the non-Federal entity.
166
(4) Family members include one (2) Tuition remission and other sup-
party with any of the following rela- port are provided in accordance with
tionships to another party: established policy of the IHE and con-
(i) Spouse, and parents thereof; sistently provided in a like manner to
(ii) Children, and spouses thereof; students in return for similar activities
(iii) Parents, and spouses thereof; conducted under Federal awards as
(iv) Siblings, and spouses thereof; well as other activities; and
(v) Grandparents and grandchildren, (3) During the academic period, the
and spouses thereof; student is enrolled in an advanced de-
(vi) Domestic partner and parents gree program at a non-Federal entity
thereof, including domestic partners of or affiliated institution and the activi-
any individual in 2 through 5 of this ties of the student in relation to the
definition; and Federal award are related to the degree
program;
(vii) Any individual related by blood
or affinity whose close association with (4) The tuition or other payments are
the employee is the equivalent of a reasonable compensation for the work
family relationship. performed and are conditioned explic-
(5) Rental costs under leases which itly upon the performance of necessary
are required to be treated as capital work; and
leases under GAAP are allowable only (5) It is the IHEs practice to simi-
up to the amount (as explained in para- larly compensate students under Fed-
graph (b) of this section) that would be eral awards as well as other activities.
allowed had the non-Federal entity (b) Charges for tuition remission and
purchased the property on the date the other forms of compensation paid to
lease agreement was executed. The pro- students as, or in lieu of, salaries and
visions of GAAP must be used to deter- wages must be subject to the reporting
mine whether a lease is a capital lease. requirements in 200.430 Compensa-
Interest costs related to capital leases tionpersonal services, and must be
are allowable to the extent they meet treated as direct or indirect cost in ac-
the criteria in 200.449 Interest. Unal- cordance with the actual work being
lowable costs include amounts paid for performed. Tuition remission may be
profit, management fees, and taxes charged on an average rate basis. See
that would not have been incurred had also 200.431 Compensationfringe ben-
the non-Federal entity purchased the efits.
property.
200.467 Selling and marketing costs.
(6) The rental of any property owned
by any individuals or entities affiliated Costs of selling and marketing any
with the non-Federal entity, to include products or services of the non-Federal
commercial or residential real estate, entity (unless allowed under 200.421
for purposes such as the home office Advertising and public relations.) are
workspace is unallowable. unallowable, except as direct costs,
with prior approval by the Federal
200.466 Scholarships and student aid awarding agency when necessary for
costs. the performance of the Federal award.
(a) Costs of scholarships, fellowships,
and other programs of student aid at 200.468 Specialized service facilities.
IHEs are allowable only when the pur- (a) The costs of services provided by
pose of the Federal award is to provide highly complex or specialized facilities
training to selected participants and operated by the non-Federal entity,
the charge is approved by the Federal such as computing facilities, wind tun-
awarding agency. However, tuition re- nels, and reactors are allowable, pro-
mission and other forms of compensa- vided the charges for the services meet
tion paid as, or in lieu of, wages to stu- the conditions of either paragraphs (b)
dents performing necessary work are or (c) of this section, and, in addition,
allowable provided that: take into account any items of income

(1) The individual is conducting ac- or Federal financing that qualify as ap-
tivities necessary to the Federal plicable credits under 200.406 Applica-
award; ble credits.
167
(b) The costs of such services, when allowable taxes would require an inor-
material, must be charged directly to dinate amount of effort, the cognizant
applicable awards based on actual agency for indirect costs may accept a
usage of the services on the basis of a reasonable approximation thereof.
schedule of rates or established meth- (b) For nonprofit organizations and
odology that: IHEs:
(1) Does not discriminate between ac- (1) In general, taxes which the non-
tivities under Federal awards and other Federal entity is required to pay and
activities of the non-Federal entity, in- which are paid or accrued in accord-
cluding usage by the non-Federal enti- ance with GAAP, and payments made
ty for internal purposes, and to local governments in lieu of taxes
(2) Is designed to recover only the ag- which are commensurate with the local
gregate costs of the services. The costs government services received are al-
of each service must consist normally lowable, except for:
of both its direct costs and its allocable (i) Taxes from which exemptions are
share of all indirect (F&A) costs. Rates available to the non-Federal entity di-
must be adjusted at least biennially, rectly or which are available to the
and must take into consideration over/ non-Federal entity based on an exemp-
under applied costs of the previous pe- tion afforded the Federal government
riod(s). and, in the latter case, when the Fed-
(c) Where the costs incurred for a eral awarding agency makes available
service are not material, they may be the necessary exemption certificates,
allocated as indirect (F&A) costs. (ii) Special assessments on land
(d) Under some extraordinary cir- which represent capital improvements,
cumstances, where it is in the best in- and
terest of the Federal government and (iii) Federal income taxes.
the non-Federal entity to establish al- (2) Any refund of taxes, and any pay-
ternative costing arrangements, such ment to the non-Federal entity of in-
arrangements may be worked out with terest thereon, which were allowed as
the Federal cognizant agency for indi- Federal award costs, will be credited
rect costs. either as a cost reduction or cash re-
fund, as appropriate, to the Federal
200.469 Student activity costs. government. However, any interest ac-
Costs incurred for intramural activi- tually paid or credited to an non-Fed-
ties, student publications, student eral entity incident to a refund of tax,
clubs, and other student activities, are interest, and penalty will be paid or
unallowable, unless specifically pro- credited to the Federal government
vided for in the Federal award. only to the extent that such interest
accrued over the period during which
200.470 Taxes (including Value the non-Federal entity has been reim-
Added Tax). bursed by the Federal government for
(a) For states, local governments and the taxes, interest, and penalties.
Indian tribes: (c) Value Added Tax (VAT) Foreign
(1) Taxes that a governmental unit is taxes charged for the purchase of goods
legally required to pay are allowable, or services that a non-Federal entity is
except for self-assessed taxes that dis- legally required to pay in country is an
proportionately affect Federal pro- allowable expense under Federal
grams or changes in tax policies that awards. Foreign tax refunds or applica-
disproportionately affect Federal pro- ble credits under Federal awards refer
grams. to receipts, or reduction of expendi-
(2) Gasoline taxes, motor vehicle tures, which operate to offset or reduce
fees, and other taxes that are in effect expense items that are allocable to
user fees for benefits provided to the Federal awards as direct or indirect
Federal government are allowable. costs. To the extent that such credits
(3) This provision does not restrict accrued or received by the non-Federal
the authority of the Federal awarding entity relate to allowable cost, these
agency to identify taxes where Federal costs must be credited to the Federal
participation is inappropriate. Where awarding agency either as costs or cash
the identification of the amount of un- refunds. If the costs are credited back
168
to the Federal award, the non-Federal (c) Loss of useful value of special
entity may reduce the Federal share of tooling, machinery, and equipment is
costs by the amount of the foreign tax generally allowable if:
reimbursement, or where Federal (1) Such special tooling, special ma-
award has not expired, use the foreign chinery, or equipment is not reason-
government tax refund for approved ac- ably capable of use in the other work of
tivities under the Federal award with the non-Federal entity,
prior approval of the Federal awarding (2) The interest of the Federal gov-
agency. ernment is protected by transfer of
title or by other means deemed appro-
200.471 Termination costs. priate by the Federal awarding agency
(see also 200.313 Equipment, paragraph
Termination of a Federal award gen-
(d), and
erally gives rise to the incurrence of (3) The loss of useful value for any
costs, or the need for special treatment one terminated Federal award is lim-
of costs, which would not have arisen ited to that portion of the acquisition
had the Federal award not been termi- cost which bears the same ratio to the
nated. Cost principles covering these total acquisition cost as the termi-
items are set forth in this section. nated portion of the Federal award
They are to be used in conjunction bears to the entire terminated Federal
with the other provisions of this part award and other Federal awards for
in termination situations. which the special tooling, machinery,
(a) The cost of items reasonably usa- or equipment was acquired.
ble on the non-Federal entitys other (d) Rental costs under unexpired
work must not be allowable unless the leases are generally allowable where
non-Federal entity submits evidence clearly shown to have been reasonably
that it would not retain such items at necessary for the performance of the
cost without sustaining a loss. In de- terminated Federal award less the re-
ciding whether such items are reason- sidual value of such leases, if:
ably usable on other work of the non- (1) The amount of such rental
Federal entity, the Federal awarding claimed does not exceed the reasonable
agency should consider the non-Federal use value of the property leased for the
entitys plans and orders for current period of the Federal award and such
and scheduled activity. Contempora- further period as may be reasonable,
neous purchases of common items by and
the non-Federal entity must be re- (2) The non-Federal entity makes all
garded as evidence that such items are reasonable efforts to terminate, assign,
settle, or otherwise reduce the cost of
reasonably usable on the non-Federal
such lease. There also may be included
entitys other work. Any acceptance of
the cost of alterations of such leased
common items as allocable to the ter-
property, provided such alterations
minated portion of the Federal award
were necessary for the performance of
must be limited to the extent that the the Federal award, and of reasonable
quantities of such items on hand, in restoration required by the provisions
transit, and on order are in excess of of the lease.
the reasonable quantitative require- (e) Settlement expenses including the
ments of other work. following are generally allowable:
(b) If in a particular case, despite all (1) Accounting, legal, clerical, and
reasonable efforts by the non-Federal similar costs reasonably necessary for:
entity, certain costs cannot be discon- (i) The preparation and presentation
tinued immediately after the effective to the Federal awarding agency of set-
date of termination, such costs are tlement claims and supporting data
generally allowable within the limita- with respect to the terminated portion
tions set forth in this part, except that of the Federal award, unless the termi-
any such costs continuing after termination is for cause (see Subpart D
nation due to the negligent or willful Post Federal Award Requirements of

failure of the non-Federal entity to dis- this part, 200.338 Remedies for Non-
continue such costs must be unallow- compliance through 200.342 Effects of
able. Suspension and termination); and
169
(ii) The termination and settlement curred, or on a combination of the two,

of subawards. provided the method used is applied to
(2) Reasonable costs for the storage, an entire trip and not to selected days
transportation, protection, and disposi- of the trip, and results in charges con-
tion of property provided by the Fed- sistent with those normally allowed in
eral government or acquired or pro- like circumstances in the non-Federal
duced for the Federal award. entitys non-federally-funded activities
(f) Claims under subawards, including and in accordance with non-Federal en-
the allocable portion of claims which titys written travel reimbursement
are common to the Federal award and policies. Notwithstanding the provi-
to other work of the non-Federal enti- sions of 200.444 General costs of gov-
ty, are generally allowable. An appro- ernment, travel costs of officials cov-
priate share of the non-Federal entitys ered by that section are allowable with
indirect costs may be allocated to the the prior written approval of the Fed-
amount of settlements with contrac- eral awarding agency or pass-through
tors and/or subrecipients, provided that entity when they are specifically re-
the amount allocated is otherwise con- lated to the Federal award.
sistent with the basic guidelines con- (b) Lodging and subsistence. Costs in-
tained in 200.414 Indirect (F&A) costs. curred by employees and officers for
The indirect costs so allocated must travel, including costs of lodging, other
exclude the same and similar costs subsistence, and incidental expenses,
claimed directly or indirectly as settle- must be considered reasonable and oth-
ment expenses. erwise allowable only to the extent
such costs do not exceed charges nor-
200.472 Training and education costs.
mally allowed by the non-Federal enti-
The cost of training and education ty in its regular operations as the re-
provided for employee development is sult of the non-Federal entitys written
allowable. travel policy. In addition, if these costs
are charged directly to the Federal
200.473 Transportation costs. award documentation must justify
Costs incurred for freight, express, that:
cartage, postage, and other transpor- (1) Participation of the individual is
tation services relating either to goods necessary to the Federal award; and
purchased, in process, or delivered, are (2) The costs are reasonable and con-
allowable. When such costs can readily sistent with non-Federal entitys es-
be identified with the items involved, tablished travel policy.
they may be charged directly as trans- (c)(1) Temporary dependent care
portation costs or added to the cost of costs (as dependent is defined in 26
such items. Where identification with U.S.C. 152) above and beyond regular
the materials received cannot readily dependent care that directly results
be made, inbound transportation cost from travel to conferences is allowable
may be charged to the appropriate in- provided that:
direct (F&A) cost accounts if the non- (i) The costs are a direct result of the
Federal entity follows a consistent, eq- individuals travel for the Federal
uitable procedure in this respect. Out- award;
bound freight, if reimbursable under (ii) The costs are consistent with the
the terms and conditions of the Federal non-Federal entitys documented trav-
award, should be treated as a direct el policy for all entity travel; and
cost. (iii) Are only temporary during the
travel period.
200.474 Travel costs. (2) Travel costs for dependents are
(a) General. Travel costs are the ex- unallowable, except for travel of dura-
penses for transportation, lodging, sub- tion of six months or more with prior
sistence, and related items incurred by approval of the Federal awarding agen-
employees who are in travel status on cy. See also 200.432 Conferences.
official business of the non-Federal en- (3) In the absence of an acceptable,

tity. Such costs may be charged on an written non-Federal entity policy re-
actual cost basis, on a per diem or garding travel costs, the rates and
mileage basis in lieu of actual costs in- amounts established under 5 U.S.C.
170
570111, (Travel and Subsistence Ex- Subpart FAudit Requirements

penses; Mileage Allowances), or by
the Administrator of General Services, GENERAL
or by the President (or his or her des-
ignee) pursuant to any provisions of 200.500 Purpose.
such subchapter must apply to travel This part sets forth standards for ob-
under Federal awards (48 CFR 31.205 taining consistency and uniformity
46(a)). among Federal agencies for the audit
(d) Commercial air travel. (1) Airfare of non-Federal entities expending Fed-
costs in excess of the basic least expen- eral awards.
sive unrestricted accommodations
class offered by commercial airlines AUDITS
are unallowable except when such ac-
200.501 Audit requirements.
commodations would:
(i) Require circuitous routing; (a) Audit required. A non-Federal enti-
(ii) Require travel during unreason- ty that expends $750,000 or more during
able hours; the non-Federal entitys fiscal year in
(iii) Excessively prolong travel; Federal awards must have a single or
(iv) Result in additional costs that program-specific audit conducted for
would offset the transportation sav- that year in accordance with the provi-
sions of this part.
ings; or
(b) Single audit. A non-Federal entity
(v) Offer accommodations not reason-
that expends $750,000 or more during
ably adequate for the travelers med-
the non-Federal entitys fiscal year in
ical needs. The non-Federal entity
Federal awards must have a single
must justify and document these condi- audit conducted in accordance with
tions on a case-by-case basis in order 200.514 Scope of audit except when it
for the use of first-class or business- elects to have a program-specific audit
class airfare to be allowable in such conducted in accordance with para-
cases. graph (c) of this section.
(2) Unless a pattern of avoidance is (c) Program-specific audit election.
detected, the Federal government will When an auditee expends Federal
generally not question a non-Federal awards under only one Federal pro-
entitys determinations that cus- gram (excluding R&D) and the Federal
tomary standard airfare or other dis- programs statutes, regulations, or the
count airfare is unavailable for specific terms and conditions of the Federal
trips if the non-Federal entity can award do not require a financial state-
demonstrate that such airfare was not ment audit of the auditee, the auditee
available in the specific case. may elect to have a program-specific
(e) Air travel by other than commercial audit conducted in accordance with
carrier. Costs of travel by non-Federal 200.507 Program-specific audits. A pro-
entity-owned, -leased, or -chartered gram-specific audit may not be elected
aircraft include the cost of lease, char- for R&D unless all of the Federal
ter, operation (including personnel awards expended were received from
costs), maintenance, depreciation, in- the same Federal agency, or the same
surance, and other related costs. The Federal agency and the same pass-
portion of such costs that exceeds the through entity, and that Federal agen-
cy, or pass-through entity in the case
cost of airfare as provided for in para-
of a subrecipient, approves in advance
graph (d) of this section, is unallow-
a program-specific audit.
able.
(d) Exemption when Federal awards ex-
200.475 Trustees. pended are less than $750,000. A non-Fed-
eral entity that expends less than
Travel and subsistence costs of trust- $750,000 during the non-Federal entitys
ees (or directors) at IHEs and nonprofit fiscal year in Federal awards is exempt
organizations are allowable. See also from Federal audit requirements for
200.474 Travel costs. that year, except as noted in 200.503
Relation to other audit requirements,
171
but records must be available for responsibility. Methods to ensure compli-
view or audit by appropriate officials ance for Federal awards made to for-
of the Federal agency, pass-through en- profit subrecipients may include pre-
tity, and Government Accountability award audits, monitoring during the
Office (GAO). agreement, and post-award audits. See
(e) Federally Funded Research and De- also 200.331 Requirements for pass-
velopment Centers (FFRDC). Manage- through entities.
ment of an auditee that owns or oper-
ates a FFRDC may elect to treat the 200.502 Basis for determining Fed-
FFRDC as a separate entity for pur- eral awards expended.
poses of this part. (a) Determining Federal awards ex-
(f) Subrecipients and Contractors. An pended. The determination of when a
auditee may simultaneously be a re- Federal award is expended should be
cipient, a subrecipient, and a con- based on when the activity related to
tractor. Federal awards expended as a the Federal award occurs. Generally,
recipient or a subrecipient are subject the activity pertains to events that re-
to audit under this part. The payments quire the non-Federal entity to comply
received for goods or services provided with Federal statutes, regulations, and
as a contractor are not Federal awards. the terms and conditions of Federal
Section 200.330 Subrecipient and con- awards, such as: expenditure/expense
tractor determinations should be con- transactions associated with awards in-
sidered in determining whether pay- cluding grants, cost-reimbursement
ments constitute a Federal award or a contracts under the FAR, compacts
payment for goods or services provided with Indian Tribes, cooperative agree-
as a contractor. ments, and direct appropriations; the
(g) Compliance responsibility for con- disbursement of funds to subrecipients;
tractors. In most cases, the auditees the use of loan proceeds under loan and
compliance responsibility for contrac- loan guarantee programs; the receipt of
tors is only to ensure that the procure- property; the receipt of surplus prop-
ment, receipt, and payment for goods erty; the receipt or use of program in-
and services comply with Federal stat- come; the distribution or use of food
utes, regulations, and the terms and commodities; the disbursement of
conditions of Federal awards. Federal amounts entitling the non-Federal en-
award compliance requirements nor- tity to an interest subsidy; and the pe-
mally do not pass through to contrac- riod when insurance is in force.
tors. However, the auditee is respon- (b) Loan and loan guarantees (loans).
sible for ensuring compliance for pro- Since the Federal government is at
curement transactions which are struc- risk for loans until the debt is repaid,
tured such that the contractor is re- the following guidelines must be used
sponsible for program compliance or to calculate the value of Federal
the contractors records must be re- awards expended under loan programs,
viewed to determine program compli- except as noted in paragraphs (c) and
ance. Also, when these procurement (d) of this section:
transactions relate to a major pro- (1) Value of new loans made or re-
gram, the scope of the audit must in- ceived during the audit period; plus
clude determining whether these trans- (2) Beginning of the audit period bal-
actions are in compliance with Federal ance of loans from previous years for
statutes, regulations, and the terms which the Federal government imposes
and conditions of Federal awards. continuing compliance requirements;
(h) For-profit subrecipient. Since this plus
part does not apply to for-profit sub- (3) Any interest subsidy, cash, or ad-
recipients, the pass-through entity is ministrative cost allowance received.
responsible for establishing require- (c) Loan and loan guarantees (loans) at
ments, as necessary, to ensure compli- IHEs. When loans are made to students
ance by for-profit subrecipients. The of an IHE but the IHE does not make
agreement with the for-profit sub- the loans, then only the value of loans
recipient should describe applicable made during the audit period must be
compliance requirements and the for- considered Federal awards expended in
profit subrecipients compliance re- that audit period. The balance of loans
172
for previous audit periods is not in- 200.503 Relation to other audit re-
cluded as Federal awards expended be- quirements.
cause the lender accounts for the prior (a) An audit conducted in accordance
balances.
with this part must be in lieu of any fi-
(d) Prior loan and loan guarantees nancial audit of Federal awards which
(loans). Loans, the proceeds of which a non-Federal entity is required to un-
were received and expended in prior
dergo under any other Federal statute
years, are not considered Federal
or regulation. To the extent that such
awards expended under this part when
audit provides a Federal agency with
the Federal statutes, regulations, and
the information it requires to carry
the terms and conditions of Federal
out its responsibilities under Federal
awards pertaining to such loans impose
statute or regulation, a Federal agency
no continuing compliance require-
ments other than to repay the loans. must rely upon and use that informa-
tion.
(e) Endowment funds. The cumulative
balance of Federal awards for endow- (b) Notwithstanding subsection (a), a
ment funds that are federally re- Federal agency, Inspectors General, or
stricted are considered Federal awards GAO may conduct or arrange for addi-
expended in each audit period in which tional audits which are necessary to
the funds are still restricted. carry out its responsibilities under
(f) Free rent. Free rent received by Federal statute or regulation. The pro-
itself is not considered a Federal award visions of this part do not authorize
expended under this part. However, free any non-Federal entity to constrain, in
rent received as part of a Federal any manner, such Federal agency from
award to carry out a Federal program carrying out or arranging for such ad-
must be included in determining Fed- ditional audits, except that the Federal
eral awards expended and subject to agency must plan such audits to not be
audit under this part. duplicative of other audits of Federal
(g) Valuing non-cash assistance. Fed- awards. Prior to commencing such an
eral non-cash assistance, such as free audit, the Federal agency or pass-
rent, food commodities, donated prop- through entity must review the FAC
erty, or donated surplus property, must for recent audits submitted by the non-
be valued at fair market value at the Federal entity, and to the extent such
time of receipt or the assessed value audits meet a Federal agency or pass-
provided by the Federal agency. through entitys needs, the Federal
(h) Medicare. Medicare payments to a agency or pass-through entity must
non-Federal entity for providing pa- rely upon and use such audits. Any ad-
tient care services to Medicare-eligible ditional audits must be planned and
individuals are not considered Federal performed in such a way as to build
awards expended under this part. upon work performed, including the
(i) Medicaid. Medicaid payments to a audit documentation, sampling, and
subrecipient for providing patient care testing already performed, by other
services to Medicaid-eligible individ- auditors.
uals are not considered Federal awards (c) The provisions of this part do not
expended under this part unless a state limit the authority of Federal agencies
requires the funds to be treated as Fed- to conduct, or arrange for the conduct
eral awards expended because reim- of, audits and evaluations of Federal
bursement is on a cost-reimbursement awards, nor limit the authority of any
basis. Federal agency Inspector General or
(j) Certain loans provided by the Na- other Federal official. For example, re-
tional Credit Union Administration. For quirements that may be applicable
purposes of this part, loans made from under the FAR or CAS and the terms
the National Credit Union Share Insur- and conditions of a cost-reimbursement
ance Fund and the Central Liquidity contract may include additional appli-
Facility that are funded by contribu- cable audits to be conducted or ar-

tions from insured non-Federal entities ranged for by Federal agencies.
are not considered Federal awards ex- (d) Federal agency to pay for addi-
pended. tional audits. A Federal agency that
173
conducts or arranges for additional au- go its audits pursuant to this part bi-
dits must, consistent with other appli- ennially.
cable Federal statutes and regulations,
arrange for funding the full cost of 200.505 Sanctions.
such additional audits. In cases of continued inability or un-
(e) Request for a program to be au- willingness to have an audit conducted
dited as a major program. A Federal in accordance with this part, Federal
awarding agency may request that an agencies and pass-through entities
auditee have a particular Federal pro- must take appropriate action as pro-
gram audited as a major program in vided in 200.338 Remedies for non-
lieu of the Federal awarding agency compliance.
conducting or arranging for the addi-
tional audits. To allow for planning, 200.506 Audit costs.
such requests should be made at least
See 200.425 Audit services.
180 calendar days prior to the end of
the fiscal year to be audited. The 200.507 Program-specific audits.
auditee, after consultation with its
auditor, should promptly respond to (a) Program-specific audit guide avail-
such a request by informing the Fed- able. In many cases, a program-specific
eral awarding agency whether the pro- audit guide will be available to provide
gram would otherwise be audited as a specific guidance to the auditor with
major program using the risk-based respect to internal controls, compli-
audit approach described in 200.518 ance requirements, suggested audit
Major program determination and, if procedures, and audit reporting re-
not, the estimated incremental cost. quirements. A listing of current pro-
The Federal awarding agency must gram-specific audit guides can be found
then promptly confirm to the auditee in the compliance supplement begin-
whether it wants the program audited ning with the 2014 supplement includ-
as a major program. If the program is ing Federal awarding agency contact
to be audited as a major program based information and a Web site where a
upon this Federal awarding agency re- copy of the guide can be obtained.
quest, and the Federal awarding agen- When a current program-specific audit
cy agrees to pay the full incremental guide is available, the auditor must
costs, then the auditee must have the follow GAGAS and the guide when per-
program audited as a major program. A forming a program-specific audit.
pass-through entity may use the provi- (b) Program-specific audit guide not
sions of this paragraph for a sub- available. (1) When a program-specific
recipient. audit guide is not available, the
auditee and auditor must have basi-
200.504 Frequency of audits. cally the same responsibilities for the
Except for the provisions for biennial Federal program as they would have
audits provided in paragraphs (a) and for an audit of a major program in a
(b) of this section, audits required by single audit.
this part must be performed annually. (2) The auditee must prepare the fi-
Any biennial audit must cover both nancial statement(s) for the Federal
years within the biennial period. program that includes, at a minimum,
(a) A state, local government, or In- a schedule of expenditures of Federal
dian tribe that is required by constitu- awards for the program and notes that
tion or statute, in effect on January 1, describe the significant accounting
1987, to undergo its audits less fre- policies used in preparing the schedule,
quently than annually, is permitted to a summary schedule of prior audit find-
undergo its audits pursuant to this ings consistent with the requirements
part biennially. This requirement must of 200.511 Audit findings follow-up,
still be in effect for the biennial period. paragraph (b), and a corrective action
(b) Any nonprofit organization that plan consistent with the requirements
had biennial audits for all biennial pe- of 200.511 Audit findings follow-up,
riods ending between July 1, 1992, and paragraph (c).
January 1, 1995, is permitted to under- (3) The auditor must:
174
(i) Perform an audit of the financial material effect on the Federal pro-
statement(s) for the Federal program gram; and
in accordance with GAGAS; (iv) A schedule of findings and ques-
(ii) Obtain an understanding of inter- tioned costs for the Federal program
nal controls and perform tests of inter- that includes a summary of the audi-
nal controls over the Federal program tors results relative to the Federal
consistent with the requirements of program in a format consistent with
200.514 Scope of audit, paragraph (c) 200.515 Audit reporting, paragraph
for a major program; (d)(1) and findings and questioned costs
(iii) Perform procedures to determine consistent with the requirements of
whether the auditee has complied with 200.515 Audit reporting, paragraph
Federal statutes, regulations, and the (d)(3).
terms and conditions of Federal awards (c) Report submission for program-spe-
that could have a direct and material cific audits. (1) The audit must be com-
effect on the Federal program con- pleted and the reporting required by
sistent with the requirements of paragraph (c)(2) or (c)(3) of this section
200.514 Scope of audit, paragraph (d) submitted within the earlier of 30 cal-
for a major program; endar days after receipt of the audi-
(iv) Follow up on prior audit findings, tors report(s), or nine months after
perform procedures to assess the rea- the end of the audit period, unless a
sonableness of the summary schedule different period is specified in a pro-
of prior audit findings prepared by the gram-specific audit guide. Unless re-
auditee in accordance with the require- stricted by Federal law or regulation,
ments of 200.511 Audit findings follow- the auditee must make report copies
up, and report, as a current year audit available for public inspection.
finding, when the auditor concludes Auditees and auditors must ensure
that the summary schedule of prior that their respective parts of the re-
audit findings materially misrepre- porting package do not include pro-
sents the status of any prior audit find- tected personally identifiable informa-
ing; and tion.
(v) Report any audit findings con- (2) When a program-specific audit
sistent with the requirements of guide is available, the auditee must
200.516 Audit findings. electronically submit to the FAC the
(4) The auditors report(s) may be in data collection form prepared in ac-
the form of either combined or sepa- cordance with 200.512 Report submis-
rate reports and may be organized dif- sion, paragraph (b), as applicable to a
ferently from the manner presented in program-specific audit, and the report-
this section. The auditors report(s) ing required by the program-specific
must state that the audit was con- audit guide.
ducted in accordance with this part (3) When a program-specific audit
and include the following: guide is not available, the reporting
(i) An opinion (or disclaimer of opin- package for a program-specific audit
ion) as to whether the financial state- must consist of the financial state-
ment(s) of the Federal program is pre- ment(s) of the Federal program, a sum-
sented fairly in all material respects in mary schedule of prior audit findings,
accordance with the stated accounting and a corrective action plan as de-
policies; scribed in paragraph (b)(2) of this sec-
(ii) A report on internal control re- tion, and the auditors report(s) de-
lated to the Federal program, which scribed in paragraph (b)(4) of this sec-
must describe the scope of testing of tion. The data collection form prepared
internal control and the results of the in accordance with 200.512 Report sub-
tests; mission, paragraph (b), as applicable to
(iii) A report on compliance which in- a program-specific audit, and one copy
cludes an opinion (or disclaimer of of this reporting package must be elec-
opinion) as to whether the auditee tronically submitted to the FAC.

complied with laws, regulations, and (d) Other sections of this part may
the terms and conditions of Federal apply. Program-specific audits are sub-
awards which could have a direct and ject to:
175
(1) 200.500 Purpose through 200.503 Re- Subpart D- Post Federal Award Re-
lation to other audit requirements, quirements of this part or the FAR (48
paragraph (d); CFR part 42), as applicable. When pro-
(2) 200.504 Frequency of audits curing audit services, the objective is
through 200.506 Audit costs; to obtain high-quality audits. In re-
(3) 200.508 Auditee responsibilities questing proposals for audit services,
through 200.509 Auditor selection; the objectives and scope of the audit
(4) 200.511 Audit findings follow-up; must be made clear and the non-Fed-
(5) 200.512 Report submission, para- eral entity must request a copy of the
graphs (e) through (h); audit organizations peer review report
(6) 200.513 Responsibilities; which the auditor is required to pro-
(7) 200.516 Audit findings through vide under GAGAS. Factors to be con-
200.517 Audit documentation; sidered in evaluating each proposal for
(8) 200.521 Management decision, and audit services include the responsive-
(9) Other referenced provisions of this ness to the request for proposal, rel-
part unless contrary to the provisions evant experience, availability of staff
of this section, a program-specific with professional qualifications and
audit guide, or program statutes and technical abilities, the results of peer
regulations. and external quality control reviews,
and price. Whenever possible, the
AUDITEES auditee must make positive efforts to
utilize small businesses, minority-
200.508 Auditee responsibilities. owned firms, and womens business en-
The auditee must: terprises, in procuring audit services as
(a) Procure or otherwise arrange for stated in 200.321 Contracting with
the audit required by this part in ac- small and minority businesses, wom-
cordance with 200.509 Auditor selec- ens business enterprises, and labor
tion, and ensure it is properly per- surplus area firms, or the FAR (48 CFR
formed and submitted when due in ac- part 42), as applicable.
cordance with 200.512 Report submis- (b) Restriction on auditor preparing in-
sion. direct cost proposals. An auditor who
(b) Prepare appropriate financial prepares the indirect cost proposal or
statements, including the schedule of cost allocation plan may not also be se-
expenditures of Federal awards in ac- lected to perform the audit required by
cordance with 200.510 Financial state- this part when the indirect costs recov-
ments. ered by the auditee during the prior
(c) Promptly follow up and take cor- year exceeded $1 million. This restric-
rective action on audit findings, in- tion applies to the base year used in
cluding preparation of a summary the preparation of the indirect cost
schedule of prior audit findings and a proposal or cost allocation plan and
corrective action plan in accordance any subsequent years in which the re-
with 200.511 Audit findings follow-up, sulting indirect cost agreement or cost
paragraph (b) and 200.511 Audit find- allocation plan is used to recover costs.
ings follow-up, paragraph (c), respec- (c) Use of Federal auditors. Federal
tively. auditors may perform all or part of the
(d) Provide the auditor with access to work required under this part if they
personnel, accounts, books, records, comply fully with the requirements of
supporting documentation, and other this part.
information as needed for the auditor
to perform the audit required by this 200.510 Financial statements.
part. (a) Financial statements. The auditee
must prepare financial statements that
200.509 Auditor selection. reflect its financial position, results of
(a) Auditor procurement. In procuring operations or changes in net assets,
audit services, the auditee must follow and, where appropriate, cash flows for
the procurement standards prescribed the fiscal year audited. The financial
by the Procurement Standards in statements must be for the same orga-
200.317 Procurement by states nizational unit and fiscal year that is
through 20.326 Contract provisions of chosen to meet the requirements of
176
this part. However, non-Federal entity- the schedule the balances outstanding
wide financial statements may also in- at the end of the audit period. This is
clude departments, agencies, and other in addition to including the total Fed-
organizational units that have separate eral awards expended for loan or loan
audits in accordance with 200.514 guarantee programs in the schedule.
Scope of audit, paragraph (a) and pre- (6) Include notes that describe that
pare separate financial statements. significant accounting policies used in
(b) Schedule of expenditures of Federal preparing the schedule, and note
awards. The auditee must also prepare whether or not the non-Federal entity
a schedule of expenditures of Federal elected to use the 10% de minimis cost
awards for the period covered by the rate as covered in 200.414 Indirect
auditees financial statements which (F&A) costs.
must include the total Federal awards
expended as determined in accordance 200.511 Audit findings follow-up.
with 200.502 Basis for determining (a) General. The auditee is responsible
Federal awards expended. While not re- for follow-up and corrective action on
quired, the auditee may choose to pro- all audit findings. As part of this re-
vide information requested by Federal sponsibility, the auditee must prepare
awarding agencies and pass-through a summary schedule of prior audit find-
entities to make the schedule easier to ings. The auditee must also prepare a
use. For example, when a Federal pro- corrective action plan for current year
gram has multiple Federal award audit findings. The summary schedule
years, the auditee may list the amount of prior audit findings and the correc-
of Federal awards expended for each tive action plan must include the ref-
Federal award year separately. At a erence numbers the auditor assigns to
minimum, the schedule must: audit findings under 200.516 Audit
(1) List individual Federal programs findings, paragraph (c). Since the sum-
by Federal agency. For a cluster of pro- mary schedule may include audit find-
grams, provide the cluster name, list ings from multiple years, it must in-
individual Federal programs within the clude the fiscal year in which the find-
cluster of programs, and provide the ing initially occurred. The corrective
applicable Federal agency name. For action plan and summary schedule of
R&D, total Federal awards expended prior audit findings must include find-
must be shown either by individual ings relating to the financial state-
Federal award or by Federal agency ments which are required to be re-
and major subdivision within the Fed- ported in accordance with GAGAS.
eral agency. For example, the National (b) Summary schedule of prior audit
Institutes of Health is a major subdivi- findings. The summary schedule of
sion in the Department of Health and prior audit findings must report the
Human Services. status of all audit findings included in
(2) For Federal awards received as a the prior audits schedule of findings
subrecipient, the name of the pass- and questioned costs. The summary
through entity and identifying number schedule must also include audit find-
assigned by the pass-through entity ings reported in the prior audits sum-
must be included. mary schedule of prior audit findings
(3) Provide total Federal awards ex- except audit findings listed as cor-
pended for each individual Federal pro- rected in accordance with paragraph
gram and the CFDA number or other (b)(1) of this section, or no longer valid
identifying number when the CFDA in- or not warranting further action in ac-
formation is not available. For a clus- cordance with paragraph (b)(3) of this
ter of programs also provide the total section.
for the cluster. (1) When audit findings were fully
(4) Include the total amount provided corrected, the summary schedule need
to subrecipients from each Federal pro- only list the audit findings and state
gram. that corrective action was taken.
(5) For loan or loan guarantee pro- (2) When audit findings were not cor-
grams described in 200.502 Basis for rected or were only partially corrected,
determining Federal awards expended, the summary schedule must describe
paragraph (b), identify in the notes to the reasons for the findings recurrence
177
and planned corrective action, and any make copies available for public in-
partial corrective action taken. When spection. Auditees and auditors must
corrective action taken is significantly ensure that their respective parts of
different from corrective action pre- the reporting package do not include
viously reported in a corrective action protected personally identifiable infor-
plan or in the Federal agencys or pass- mation.
through entitys management decision, (b) Data Collection. The FAC is the re-
the summary schedule must provide an pository of record for Subpart FAudit
explanation. Requirements of this part reporting
(3) When the auditee believes the packages and the data collection form.
audit findings are no longer valid or do All Federal agencies, pass-through en-
not warrant further action, the reasons tities and others interested in a report-
for this position must be described in ing package and data collection form
the summary schedule. A valid reason must obtain it by accessing the FAC.
for considering an audit finding as not (1) The auditee must submit required
warranting further action is that all of data elements described in Appendix X
the following have occurred: to Part 200Data Collection Form
(i) Two years have passed since the (Form SFSAC), which state whether
audit report in which the finding oc- the audit was completed in accordance
curred was submitted to the FAC; with this part and provides informa-
(ii) The Federal agency or pass- tion about the auditee, its Federal pro-
through entity is not currently fol- grams, and the results of the audit.
lowing up with the auditee on the audit The data must include information
finding; and available from the audit required by
(iii) A management decision was not this part that is necessary for Federal
issued. agencies to use the audit to ensure in-
(c) Corrective action plan. At the com- tegrity for Federal programs. The data
pletion of the audit, the auditee must elements and format must be approved
prepare, in a document separate from by OMB, available from the FAC, and
the auditors findings described in include collections of information from
200.516 Audit findings, a corrective ac- the reporting package described in
tion plan to address each audit finding paragraph (c) of this section. A senior
included in the current year auditors level representative of the auditee
reports. The corrective action plan (e.g., state controller, director of fi-
must provide the name(s) of the con- nance, chief executive officer, or chief
tact person(s) responsible for correc- financial officer) must sign a state-
tive action, the corrective action ment to be included as part of the data
planned, and the anticipated comple- collection that says that the auditee
tion date. If the auditee does not agree complied with the requirements of this
with the audit findings or believes cor- part, the data were prepared in accord-
rective action is not required, then the ance with this part (and the instruc-
corrective action plan must include an tions accompanying the form), the re-
explanation and specific reasons. porting package does not include pro-
tected personally identifiable informa-
200.512 Report submission. tion, the information included in its
(a) General. (1) The audit must be entirety is accurate and complete, and
completed and the data collection form that the FAC is authorized to make the
described in paragraph (b) of this sec- reporting package and the form pub-
tion and reporting package described in licly available on a Web site.
paragraph (c) of this section must be (2) Exception for Indian Tribes. An
submitted within the earlier of 30 cal- auditee that is an Indian tribe may opt
endar days after receipt of the audi- not to authorize the FAC to make the
tors report(s), or nine months after reporting package publicly available
the end of the audit period. If the due on a Web site, by excluding the author-
date falls on a Saturday, Sunday, or ization for the FAC publication in the
Federal holiday, the reporting package statement described in paragraph (b)(1)

is due the next business day. of this section. If this option is exer-
(2) Unless restricted by Federal stat- cised, the auditee becomes responsible
utes or regulations, the auditee must for submitting the reporting package
178
directly to any pass-through entities graph (b) of this section and one copy
through which it has received a Fed- of the reporting package described in
eral award and to pass-through entities paragraph (c) of this section on file for
for which the summary schedule of three years from the date of submis-
prior audit findings reported the status sion to the FAC.
of any findings related to Federal (g) FAC responsibilities. The FAC must
awards that the pass-through entity make available the reporting packages
provided. Unless restricted by Federal received in accordance with paragraph
statute or regulation, if the auditee (c) of this section and 200.507 Pro-
opts not to authorize publication, it gram-specific audits, paragraph (c) to
must make copies of the reporting the public, except for Indian tribes ex-
package available for public inspec- ercising the option in (b)(2) of this sec-
tion. tion, and maintain a data base of com-
(3) Using the information included in pleted audits, provide appropriate in-
the reporting package described in formation to Federal agencies, and fol-
paragraph (c) of this section, the audi- low up with known auditees that have
tor must complete the applicable data not submitted the required data collec-
elements of the data collection form. tion forms and reporting packages.
The auditor must sign a statement to (h) Electronic filing. Nothing in this
be included as part of the data collec- part must preclude electronic submis-
tion form that indicates, at a min- sions to the FAC in such manner as
imum, the source of the information may be approved by OMB.
included in the form, the auditors re-
sponsibility for the information, that FEDERAL AGENCIES
the form is not a substitute for the re-
porting package described in paragraph 200.513 Responsibilities.
(c) of this section, and that the content (a)(1) Cognizant agency for audit re-
of the form is limited to the collection sponsibilities. A non-Federal entity ex-
of information prescribed by OMB. pending more than $50 million a year in
(c) Reporting package. The reporting Federal awards must have a cognizant
package must include the: agency for audit. The designated cog-
(1) Financial statements and sched- nizant agency for audit must be the
ule of expenditures of Federal awards Federal awarding agency that provides
discussed in 200.510 Financial state- the predominant amount of direct
ments, paragraphs (a) and (b), respec- funding to a non-Federal entity unless
tively; OMB designates a specific cognizant
(2) Summary schedule of prior audit agency for audit.
findings discussed in 200.511 Audit (2) To provide for continuity of cog-
findings follow-up, paragraph (b); nizance, the determination of the pre-
(3) Auditors report(s) discussed in dominant amount of direct funding
200.515 Audit reporting; and must be based upon direct Federal
(4) Corrective action plan discussed awards expended in the non-Federal en-
in 200.511 Audit findings follow-up, titys fiscal years ending in 2009, 2014,
paragraph (c). 2019 and every fifth year thereafter.
(d) Submission to FAC. The auditee For example, audit cognizance for peri-
must electronically submit to the FAC ods ending in 2011 through 2015 will be
the data collection form described in determined based on Federal awards
paragraph (b) of this section and the expended in 2009.
reporting package described in para- (3) Notwithstanding the manner in
graph (c) of this section. which audit cognizance is determined,
(e) Requests for management letters a Federal awarding agency with cog-
issued by the auditor. In response to re- nizance for an auditee may reassign
quests by a Federal agency or pass- cognizance to another Federal award-
through entity, auditees must submit a ing agency that provides substantial
copy of any management letters issued funding and agrees to be the cognizant
by the auditor. agency for audit. Within 30 calendar

(f) Report retention requirements. days after any reassignment, both the
Auditees must keep one copy of the old and the new cognizant agency for
data collection form described in para- audit must provide notice of the
179
change to the FAC, the auditee, and, if standard performance by auditors must
known, the auditor. The cognizant be referred to appropriate state licens-
agency for audit must: ing agencies and professional bodies for
(i) Provide technical audit advice and disciplinary action.
liaison assistance to auditees and audi- (vi) Coordinate, to the extent prac-
tors. tical, audits or reviews made by or for
(ii) Obtain or conduct quality control Federal agencies that are in addition
reviews on selected audits made by to the audits made pursuant to this
non-Federal auditors, and provide the part, so that the additional audits or
results to other interested organiza- reviews build upon rather than dupli-
tions. Cooperate and provide support to cate audits performed in accordance
the Federal agency designated by OMB with this part.
to lead a governmentwide project to (vii) Coordinate a management deci-
determine the quality of single audits sion for cross-cutting audit findings (as
by providing a statistically reliable es- defined in 200.30 Cross-cutting audit
timate of the extent that single audits finding) that affect the Federal pro-
conform to applicable requirements, grams of more than one agency when
standards, and procedures; and to make requested by any Federal awarding
recommendations to address noted agency whose awards are included in
audit quality issues, including rec- the audit finding of the auditee.
ommendations for any changes to ap-
(viii) Coordinate the audit work and
plicable requirements, standards and
reporting responsibilities among audi-
procedures indicated by the results of
tors to achieve the most cost-effective
the project. This governmentwide audit
audit.
quality project must be performed once
(ix) Provide advice to auditees as to
every 6 years beginning in 2018 or at
how to handle changes in fiscal years.
such other interval as determined by
OMB, and the results must be public. (b) Oversight agency for audit re-
(iii) Promptly inform other affected sponsibilities. An auditee who does not
Federal agencies and appropriate Fed- have a designated cognizant agency for
eral law enforcement officials of any audit will be under the general over-
direct reporting by the auditee or its sight of the Federal agency determined
auditor required by GAGAS or statutes in accordance with 200.73 Oversight
and regulations. agency for audit. A Federal agency
(iv) Advise the community of inde- with oversight for an auditee may reas-
pendent auditors of any noteworthy or sign oversight to another Federal agen-
important factual trends related to the cy that agrees to be the oversight
quality of audits stemming from qual- agency for audit. Within 30 calendar
ity control reviews. Significant prob- days after any reassignment, both the
lems or quality issues consistently old and the new oversight agency for
identified through quality control re- audit must provide notice of the
views of audit reports must be referred change to the FAC, the auditee, and, if
to appropriate state licensing agencies known, the auditor. The oversight
and professional bodies. agency for audit:
(v) Advise the auditor, Federal (1) Must provide technical advice to
awarding agencies, and, where appro- auditees and auditors as requested.
priate, the auditee of any deficiencies (2) May assume all or some of the re-
found in the audits when the defi- sponsibilities normally performed by a
ciencies require corrective action by cognizant agency for audit.
the auditor. When advised of defi- (c) Federal awarding agency respon-
ciencies, the auditee must work with sibilities. The Federal awarding agency
the auditor to take corrective action. must perform the following for the
If corrective action is not taken, the Federal awards it makes (See also the
cognizant agency for audit must notify requirements of 200.210 Information
the auditor, the auditee, and applicable contained in a Federal award):
Federal awarding agencies and pass- (1) Ensure that audits are completed
through entities of the facts and make and reports are received in a timely
recommendations for follow-up action. manner and in accordance with the re-
Major inadequacies or repetitive sub- quirements of this part.
180
(2) Provide technical advice and for the single audit process both within
counsel to auditees and auditors as re- and outside the Federal government.
quested. (ii) Promote interagency coordina-
(3) Follow-up on audit findings to en- tion, consistency, and sharing in areas
sure that the recipient takes appro- such as coordinating audit follow-up;
priate and timely corrective action. As identifying higher-risk non-Federal en-
part of audit follow-up, the Federal tities; providing input on single audit
awarding agency must: and follow-up policy; enhancing the
(i) Issue a management decision as utility of the FAC; and studying ways
prescribed in 200.521 Management de- to use single audit results to improve
cision; Federal award accountability and best
(ii) Monitor the recipient taking ap- practices.
propriate and timely corrective action; (iii) Oversee training for the Federal
(iii) Use cooperative audit resolution awarding agencys program manage-
mechanisms (see 200.25 Cooperative ment personnel related to the single
audit resolution) to improve Federal audit process.
program outcomes through better (iv) Promote the Federal awarding
audit resolution, follow-up, and correc- agencys use of cooperative audit reso-
tive action; and lution mechanisms.
(iv) Develop a baseline, metrics, and (v) Coordinate the Federal awarding
targets to track, over time, the effec- agencys activities to ensure appro-
tiveness of the Federal agencys proc- priate and timely follow-up and correc-
ess to follow-up on audit findings and tive action on audit findings.
on the effectiveness of Single Audits in (vi) Organize the Federal cognizant
improving non-Federal entity account- agency for audits follow-up on cross-
ability and their use by Federal award- cutting audit findings that affect the
ing agencies in making award deci- Federal programs of more than one
sions. Federal awarding agency.
(4) Provide OMB annual updates to (vii) Ensure the Federal awarding
the compliance supplement and work agency provides annual updates of the
with OMB to ensure that the compli- compliance supplement to OMB.
ance supplement focuses the auditor to (viii) Support the Federal awarding
test the compliance requirements most agencys single audit accountable offi-
likely to cause improper payments, cials mission.
fraud, waste, abuse or generate audit
finding for which the Federal awarding AUDITORS
agency will take sanctions.
(5) Provide OMB with the name of a 200.514 Scope of audit.
single audit accountable official from (a) General. The audit must be con-
among the senior policy officials of the ducted in accordance with GAGAS. The
Federal awarding agency who must be: audit must cover the entire operations
(i) Responsible for ensuring that the of the auditee, or, at the option of the
agency fulfills all the requirement of auditee, such audit must include a se-
200.513 Responsibilities and effectively ries of audits that cover departments,
uses the single audit process to reduce agencies, and other organizational
improper payments and improve Fed- units that expended or otherwise ad-
eral program outcomes. ministered Federal awards during such
(ii) Held accountable to improve the audit period, provided that each such
effectiveness of the single audit process audit must encompass the financial
based upon metrics as described in statements and schedule of expendi-
paragraph (c)(3)(iv) of this section. tures of Federal awards for each such
(iii) Responsible for designating the department, agency, and other organi-
Federal agencys key management sin- zational unit, which must be consid-
gle audit liaison. ered to be a non-Federal entity. The fi-
(6) Provide OMB with the name of a nancial statements and schedule of ex-
key management single audit liaison penditures of Federal awards must be

who must: for the same audit period.
(i) Serve as the Federal awarding (b) Financial statements. The auditor
agencys management point of contact must determine whether the financial
181
statements of the auditee are presented tions of Federal awards that may have
fairly in all material respects in ac- a direct and material effect on each of
cordance with generally accepted ac- its major programs.
counting principles. The auditor must (2) The principal compliance require-
also determine whether the schedule of ments applicable to most Federal pro-
expenditures of Federal awards is stat- grams and the compliance require-
ed fairly in all material respects in re- ments of the largest Federal programs
lation to the auditees financial state- are included in the compliance supple-
ments as a whole. ment.
(c) Internal control. (1) The compli- (3) For the compliance requirements
ance supplement provides guidance on related to Federal programs contained
internal controls over Federal pro- in the compliance supplement, an audit
grams based upon the guidance in of these compliance requirements will
Standards for Internal Control in the meet the requirements of this part.
Federal Government issued by the Where there have been changes to the
Comptroller General of the United compliance requirements and the
States and the Internal ControlInte- changes are not reflected in the com-
grated Framework, issued by the Com- pliance supplement, the auditor must
mittee of Sponsoring Organizations of determine the current compliance re-
the Treadway Commission (COSO). quirements and modify the audit proce-
(2) In addition to the requirements of dures accordingly. For those Federal
GAGAS, the auditor must perform pro- programs not covered in the compli-
cedures to obtain an understanding of ance supplement, the auditor should
internal control over Federal programs follow the compliance supplements
sufficient to plan the audit to support guidance for programs not included in
a low assessed level of control risk of the supplement.
noncompliance for major programs.
(4) The compliance testing must in-
(3) Except as provided in paragraph
clude tests of transactions and such
(c)(4) of this section, the auditor must:
other auditing procedures necessary to
(i) Plan the testing of internal con-
provide the auditor sufficient appro-
trol over compliance for major pro-
priate audit evidence to support an
grams to support a low assessed level
opinion on compliance.
of control risk for the assertions rel-
evant to the compliance requirements (e) Audit follow-up. The auditor must
for each major program; and follow-up on prior audit findings, per-
(ii) Perform testing of internal conform procedures to assess the reason-
trol as planned in paragraph (c)(3)(i) of ableness of the summary schedule of
this section. prior audit findings prepared by the
(4) When internal control over some auditee in accordance with 200.511
or all of the compliance requirements Audit findings follow-up paragraph (b),
for a major program are likely to be in- and report, as a current year audit
effective in preventing or detecting finding, when the auditor concludes
noncompliance, the planning and per- that the summary schedule of prior
forming of testing described in para- audit findings materially misrepre-
graph (c)(3) of this section are not resents the status of any prior audit find-
quired for those compliance require- ing. The auditor must perform audit
ments. However, the auditor must re- follow-up procedures regardless of
port a significant deficiency or mate- whether a prior audit finding relates to
rial weakness in accordance with a major program in the current year.
200.516 Audit findings, assess the re- (f) Data Collection Form. As required
lated control risk at the maximum, in 200.512 Report submission para-
and consider whether additional com- graph (b)(3), the auditor must complete
pliance tests are required because of and sign specified sections of the data
ineffective internal control. collection form.
(d) Compliance. (1) In addition to the
requirements of GAGAS, the auditor 200.515 Audit reporting.

must determine whether the auditee The auditors report(s) may be in the
has complied with Federal statutes, form of either combined or separate re-
regulations, and the terms and condi- ports and may be organized differently
182
from the manner presented in this sec- (iii) A statement as to whether the
tion. The auditors report(s) must state audit disclosed any noncompliance
that the audit was conducted in ac- that is material to the financial state-
cordance with this part and include the ments of the auditee;
following: (iv) Where applicable, a statement
(a) An opinion (or disclaimer of opin- about whether significant deficiencies
ion) as to whether the financial state- or material weaknesses in internal con-
ments are presented fairly in all mate- trol over major programs were dis-
rial respects in accordance with gen- closed by the audit;
erally accepted accounting principles (v) The type of report the auditor
and an opinion (or disclaimer of opin- issued on compliance for major pro-
ion) as to whether the schedule of ex- grams (i.e., unmodified opinion, quali-
penditures of Federal awards is fairly fied opinion, adverse opinion, or dis-
stated in all material respects in rela- claimer of opinion);
tion to the financial statements as a (vi) A statement as to whether the
whole. audit disclosed any audit findings that
(b) A report on internal control over the auditor is required to report under
financial reporting and compliance 200.516 Audit findings paragraph (a);
with Federal statutes, regulations, and
(vii) An identification of major pro-
the terms and conditions of the Federal
grams by listing each individual major
award, noncompliance with which
program; however in the case of a clus-
could have a material effect on the fi-
ter of programs only the cluster name
nancial statements. This report must
as shown on the Schedule of Expendi-
describe the scope of testing of internal
tures of Federal Awards is required;
control and compliance and the results
(viii) The dollar threshold used to
of the tests, and, where applicable, it
distinguish between Type A and Type B
will refer to the separate schedule of
programs, as described in 200.518
findings and questioned costs described
Major program determination para-
in paragraph (d) of this section.
graph (b)(1), or (b)(3) when a recalcula-
(c) A report on compliance for each
tion of the Type A threshold is re-
major program and report and internal
quired for large loan or loan guaran-
control over compliance. This report
tees; and
must describe the scope of testing of
internal control over compliance, in- (ix) A statement as to whether the
clude an opinion or modified opinion as auditee qualified as a low-risk auditee
to whether the auditee complied with under 200.520 Criteria for a low-risk
Federal statutes, regulations, and the auditee.
terms and conditions of Federal awards (2) Findings relating to the financial
which could have a direct and material statements which are required to be re-
effect on each major program and refer ported in accordance with GAGAS.
to the separate schedule of findings and (3) Findings and questioned costs for
questioned costs described in para- Federal awards which must include
graph (d) of this section. audit findings as defined in 200.516
(d) A schedule of findings and ques- Audit findings, paragraph (a).
tioned costs which must include the (i) Audit findings (e.g., internal con-
following three components: trol findings, compliance findings,
(1) A summary of the auditors re- questioned costs, or fraud) that relate
sults, which must include: to the same issue should be presented
(i) The type of report the auditor as a single audit finding. Where prac-
issued on whether the financial state- tical, audit findings should be orga-
ments audited were prepared in accord- nized by Federal agency or pass-
ance with GAAP (i.e., unmodified opin- through entity.
ion, qualified opinion, adverse opinion, (ii) Audit findings that relate to both
or disclaimer of opinion); the financial statements and Federal
(ii) Where applicable, a statement awards, as reported under paragraphs
about whether significant deficiencies (d)(2) and (d)(3) of this section, respec-
or material weaknesses in internal con- tively, should be reported in both sec-
trol were disclosed by the audit of the tions of the schedule. However, the re-
financial statements; porting in one section of the schedule
183
may be in summary form with a ref- the auditor must include information
erence to a detailed reporting in the to provide proper perspective for judg-
other section of the schedule. ing the prevalence and consequences of
(e) Nothing in this part precludes the questioned costs.
combining of the audit reporting re- (4) Known questioned costs that are
quired by this section with the report- greater than $25,000 for a Federal pro-
ing required by 200.512 Report submis- gram which is not audited as a major
sion, paragraph (b) Data Collection program. Except for audit follow-up,
when allowed by GAGAS and Appendix the auditor is not required under this
X to Part 200Data Collection Form part to perform audit procedures for
(Form SFSAC). such a Federal program; therefore, the
200.516 Audit findings. auditor will normally not find ques-
tioned costs for a program that is not
(a) Audit findings reported. The audi- audited as a major program. However,
tor must report the following as audit
if the auditor does become aware of
findings in a schedule of findings and
questioned costs for a Federal program
questioned costs:
(1) Significant deficiencies and mate- that is not audited as a major program
rial weaknesses in internal control (e.g., as part of audit follow-up or other
over major programs and significant audit procedures) and the known ques-
instances of abuse relating to major tioned costs are greater than $25,000,
programs. The auditors determination then the auditor must report this as an
of whether a deficiency in internal con- audit finding.
trol is a significant deficiency or mate- (5) The circumstances concerning
rial weakness for the purpose of report- why the auditors report on compliance
ing an audit finding is in relation to a for each major program is other than
type of compliance requirement for a an unmodified opinion, unless such cir-
major program identified in the Com- cumstances are otherwise reported as
pliance Supplement. audit findings in the schedule of find-
(2) Material noncompliance with the ings and questioned costs for Federal
provisions of Federal statutes, regula- awards.
tions, or the terms and conditions of (6) Known or likely fraud affecting a
Federal awards related to a major pro- Federal award, unless such fraud is
gram. The auditors determination of otherwise reported as an audit finding
whether a noncompliance with the pro- in the schedule of findings and ques-
visions of Federal statutes, regula- tioned costs for Federal awards. This
tions, or the terms and conditions of paragraph does not require the auditor
Federal awards is material for the pur- to report publicly information which
pose of reporting an audit finding is in could compromise investigative or
relation to a type of compliance re- legal proceedings or to make an addi-
quirement for a major program identi-
tional reporting when the auditor con-
fied in the compliance supplement.
firms that the fraud was reported out-
(3) Known questioned costs that are
side the auditors reports under the di-
greater than $25,000 for a type of com-
pliance requirement for a major pro- rect reporting requirements of GAGAS.
gram. Known questioned costs are (7) Instances where the results of
those specifically identified by the audit follow-up procedures disclosed
auditor. In evaluating the effect of that the summary schedule of prior
questioned costs on the opinion on audit findings prepared by the auditee
compliance, the auditor considers the in accordance with 200.511 Audit find-
best estimate of total costs questioned ings follow-up, paragraph (b) materi-
(likely questioned costs), not just the ally misrepresents the status of any
questioned costs specifically identified prior audit finding.
(known questioned costs). The auditor (b) Audit finding detail and clarity.
must also report known questioned Audit findings must be presented in
costs when likely questioned costs are sufficient detail and clarity for the
greater than $25,000 for a type of com- auditee to prepare a corrective action
pliance requirement for a major pro- plan and take corrective action, and
gram. In reporting questioned costs, for Federal agencies and pass-through
184
entities to arrive at a management de- resent an isolated instance or a sys-

cision. The following specific informa- temic problem. Where appropriate, in-
tion must be included, as applicable, in stances identified must be related to
audit findings: the universe and the number of cases
(1) Federal program and specific Fed- examined and be quantified in terms of
eral award identification including the dollar value. The auditor should report
CFDA title and number, Federal award whether the sampling was a statis-
identification number and year, name tically valid sample.
of Federal agency, and name of the ap- (8) Identification of whether the
plicable pass-through entity. When in- audit finding was a repeat of a finding
formation, such as the CFDA title and in the immediately prior audit and if
number or Federal award identification so any applicable prior year audit find-
number, is not available, the auditor ing numbers.
must provide the best information (9) Recommendations to prevent fu-
available to describe the Federal ture occurrences of the deficiency iden-
award. tified in the audit finding.
(2) The criteria or specific require- (10) Views of responsible officials of
ment upon which the audit finding is the auditee.
based, including the Federal statutes, (c) Reference numbers. Each audit
regulations, or the terms and condi- finding in the schedule of findings and
tions of the Federal awards. Criteria questioned costs must include a ref-
generally identify the required or de- erence number in the format meeting
sired state or expectation with respect the requirements of the data collection
to the program or operation. Criteria form submission required by 200.512
provide a context for evaluating evi- Report submission, paragraph (b) to
dence and understanding findings. allow for easy referencing of the audit
(3) The condition found, including findings during follow-up.
facts that support the deficiency iden-
tified in the audit finding. 200.517 Audit documentation.
(4) A statement of cause that identi- (a) Retention of audit documentation.
fies the reason or explanation for the The auditor must retain audit docu-
condition or the factors responsible for mentation and reports for a minimum
the difference between the situation of three years after the date of
that exists (condition) and the required issuance of the auditors report(s) to
or desired state (criteria), which may the auditee, unless the auditor is noti-
also serve as a basis for recommenda- fied in writing by the cognizant agency
tions for corrective action. for audit, oversight agency for audit,
(5) The possible asserted effect to cognizant agency for indirect costs, or
provide sufficient information to the pass-through entity to extend the re-
auditee and Federal agency, or pass- tention period. When the auditor is
through entity in the case of a sub- aware that the Federal agency, pass-
recipient, to permit them to determine through entity, or auditee is con-
the cause and effect to facilitate testing an audit finding, the auditor
prompt and proper corrective action. A must contact the parties contesting
statement of the effect or potential ef- the audit finding for guidance prior to
fect should provide a clear, logical link destruction of the audit documentation
to establish the impact or potential and reports.
impact of the difference between the (b) Access to audit documentation.
condition and the criteria. Audit documentation must be made
(6) Identification of questioned costs available upon request to the cognizant
and how they were computed. Known or oversight agency for audit or its des-
questioned costs must be identified by ignee, cognizant agency for indirect
applicable CFDA number(s) and appli- cost, a Federal agency, or GAO at the
cable Federal award identification completion of the audit, as part of a
number(s). quality review, to resolve audit find-
(7) Information to provide proper per- ings, or to carry out oversight respon-
spective for judging the prevalence and sibilities consistent with the purposes
consequences of the audit findings, of this part. Access to audit docu-
such as whether the audit findings rep- mentation includes the right of Federal
185
agencies to obtain copies of audit docu- loans if the value of Federal awards ex-
mentation, as is reasonable and nec- pended for loans within the program
essary. comprises fifty percent or more of the
total Federal awards expended for the
200.518 Major program determina- program. A cluster of programs is
tion. treated as one program and the value
(a) General. The auditor must use a of Federal awards expended under a
risk-based approach to determine loan program is determined as de-
which Federal programs are major pro- scribed in 200.502 Basis for deter-
grams. This risk-based approach must mining Federal awards expended.
include consideration of: current and (4) For biennial audits permitted
prior audit experience, oversight by under 200.504 Frequency of audits, the
Federal agencies and pass-through en- determination of Type A and Type B
tities, and the inherent risk of the Fed- programs must be based upon the Fed-
eral program. The process in para- eral awards expended during the two-
graphs (b) through (i) of this section year period.
must be followed. (c) Step two. (1) The auditor must
(b) Step one.(1) The auditor must identify Type A programs which are
identify the larger Federal programs, low-risk. In making this determina-
which must be labeled Type A pro- tion, the auditor must consider wheth-
grams. Type A programs are defined as er the requirements in 200.519 Criteria
Federal programs with Federal awards for Federal program risk paragraph (c),
expended during the audit period ex- the results of audit follow-up, or any
ceeding the levels outlined in the table changes in personnel or systems affect-
in this paragraph (b)(1): ing the program indicate significantly
increased risk and preclude the pro-
Total Federal awards ex-
pended Type A/B threshold gram from being low risk. For a Type
A program to be considered low-risk, it
Equal to $750,000 but less $750,000. must have been audited as a major pro-
than or equal to $25 million.
Exceed $25 million but less Total Federal awards ex- gram in at least one of the two most
than or equal to $100 mil- pended times .03. recent audit periods (in the most re-
lion. cent audit period in the case of a bien-
Exceed $100 million but less $3 million.
than or equal to $1 billion.
nial audit), and, in the most recent
Exceed $1 billion but less Total Federal awards ex- audit period, the program must have
than or equal to $10 billion. pended times .003. not had:
Exceed $10 billion but less $30 million. (i) Internal control deficiencies
than or equal to $20 billion.
Exceed $20 billion ................. Total Federal awards ex- which were identified as material
pended times .0015. weaknesses in the auditors report on
internal control for major programs as
(2) Federal programs not labeled required under 200.515 Audit report-
Type A under paragraph (b)(1) of this ing, paragraph (c);
section must be labeled Type B pro- (ii) A modified opinion on the pro-
grams. gram in the auditors report on major
(3) The inclusion of large loan and programs as required under 200.515
loan guarantees (loans) should not re- Audit reporting, paragraph (c); or
sult in the exclusion of other programs (iii) Known or likely questioned costs
as Type A programs. When a Federal that exceed five percent of the total
program providing loans exceeds four Federal awards expended for the pro-
times the largest non-loan program it gram.
is considered a large loan program, and (2) Notwithstanding paragraph (c)(1)
the auditor must consider this Federal of this section, OMB may approve a
program as a Type A program and ex- Federal awarding agencys request that
clude its values in determining other a Type A program may not be consid-
Type A programs. This recalculation of ered low risk for a certain recipient.
the Type A program is performed after For example, it may be necessary for a
removing the total of all large loan large Type A program to be audited as
programs. For the purposes of this a major program each year at a par-
paragraph a program is only considered ticular recipient to allow the Federal
to be a Federal program providing awarding agency to comply with 31
186
U.S.C. 3515. The Federal awarding additional Federal programs with Fed-
agency must notify the recipient and, eral awards expended that, in aggre-
if known, the auditor of OMBs ap- gate, all major programs encompass at
proval at least 180 calendar days prior least 20 percent (0.20) of total Federal
to the end of the fiscal year to be au- awards expended. Otherwise, the audi-
dited. tor must audit the major programs
(d) Step three. (1) The auditor must identified in Step 4 (paragraphs (e)(1)
identify Type B programs which are and (2) of this section) and such addi-
high-risk using professional judgment tional Federal programs with Federal
and the criteria in 200.519 Criteria for awards expended that, in aggregate, all
Federal program risk. However, the major programs encompass at least 40
auditor is not required to identify more percent (0.40) of total Federal awards
high-risk Type B programs than at expended.
least one fourth the number of low-risk (g) Documentation of risk. The auditor
Type A programs identified as low-risk must include in the audit documenta-
under Step 2 (paragraph (c) of this section the risk analysis process used in
tion). Except for known material weak- determining major programs.
ness in internal control or compliance (h) Auditors judgment. When the
problems as discussed in 200.519 Cri- major program determination was per-
teria for Federal program risk para- formed and documented in accordance
graphs (b)(1), (b)(2), and (c)(1), a single with this Subpart, the auditors judg-
criteria in risk would seldom cause a ment in applying the risk-based ap-
Type B program to be considered high- proach to determine major programs
risk. When identifying which Type B must be presumed correct. Challenges
programs to risk assess, the auditor is by Federal agencies and pass-through
encouraged to use an approach which entities must only be for clearly im-
provides an opportunity for different proper use of the requirements in this
high-risk Type B programs to be au-
part. However, Federal agencies and
dited as major over a period of time.
pass-through entities may provide
(2) The auditor is not expected to per-
auditors guidance about the risk of a
form risk assessments on relatively
particular Federal program and the
small Federal programs. Therefore, the
auditor must consider this guidance in
auditor is only required to perform risk
determining major programs in audits
assessments on Type B programs that
not yet completed.
exceed twenty-five percent (0.25) of the
Type A threshold determined in Step 1 200.519 Criteria for Federal program
(paragraph (b) of this section). risk.
(e) Step four. At a minimum, the
auditor must audit all of the following (a) General. The auditors determina-
as major programs: tion should be based on an overall eval-
(1) All Type A programs not identi- uation of the risk of noncompliance oc-
fied as low risk under step two (para- curring that could be material to the
graph (c)(1) of this section). Federal program. The auditor must
(2) All Type B programs identified as consider criteria, such as described in
high-risk under step three (paragraph paragraphs (b), (c), and (d) of this sec-
(d) of this section). tion, to identify risk in Federal pro-
(3) Such additional programs as may grams. Also, as part of the risk anal-
be necessary to comply with the per- ysis, the auditor may wish to discuss a
centage of coverage rule discussed in particular Federal program with
paragraph (f) of this section. This may auditee management and the Federal
require the auditor to audit more pro- agency or pass-through entity.
grams as major programs than the (b) Current and prior audit experience.
number of Type A programs. (1) Weaknesses in internal control over
(f) Percentage of coverage rule. If the Federal programs would indicate high-
auditee meets the criteria in 200.520 er risk. Consideration should be given
Criteria for a low-risk auditee, the to the control environment over Fed-
auditor need only audit the major pro- eral programs and such factors as the
grams identified in Step 4 (paragraph expectation of managements adher-
(e)(1) and (2) of this section) and such ence to Federal statutes, regulations,
187
and the terms and conditions of Fed- personal services, but otherwise be at
eral awards and the competence and low risk.
experience of personnel who administer (2) The phase of a Federal program in
the Federal programs. its life cycle at the Federal agency
(i) A Federal program administered may indicate risk. For example, a new
under multiple internal control struc- Federal program with new or interim
tures may have higher risk. When as- regulations may have higher risk than
sessing risk in a large single audit, the an established program with time-test-
auditor must consider whether weak- ed regulations. Also, significant
nesses are isolated in a single oper- changes in Federal programs, statutes,
ating unit (e.g., one college campus) or regulations, or the terms and condi-
pervasive throughout the entity. tions of Federal awards may increase
(ii) When significant parts of a Fed- risk.
eral program are passed through to (3) The phase of a Federal program in
subrecipients, a weak system for moni- its life cycle at the auditee may indi-
toring subrecipients would indicate cate risk. For example, during the first
higher risk. and last years that an auditee partici-
(2) Prior audit findings would indi- pates in a Federal program, the risk
cate higher risk, particularly when the may be higher due to start-up or close-
situations identified in the audit find- out of program activities and staff.
ings could have a significant impact on (4) Type B programs with larger Fed-
a Federal program or have not been eral awards expended would be of high-
corrected. er risk than programs with substan-
(3) Federal programs not recently au- tially smaller Federal awards ex-
dited as major programs may be of pended.
higher risk than Federal programs re-
cently audited as major programs with- 200.520 Criteria for a low-risk
out audit findings. auditee.
(c) Oversight exercised by Federal agen- An auditee that meets all of the fol-
cies and pass-through entities. (1) Over- lowing conditions for each of the pre-
sight exercised by Federal agencies or ceding two audit periods must qualify
pass-through entities could be used to as a low-risk auditee and be eligible for
assess risk. For example, recent moni- reduced audit coverage in accordance
toring or other reviews performed by with 200.518 Major program deter-
an oversight entity that disclosed no mination.
significant problems would indicate (a) Single audits were performed on
lower risk, whereas monitoring that an annual basis in accordance with the
disclosed significant problems would provisions of this Subpart, including
indicate higher risk. submitting the data collection form
(2) Federal agencies, with the concur- and the reporting package to the FAC
rence of OMB, may identify Federal within the timeframe specified in
programs that are higher risk. OMB 200.512 Report submission. A non-Fed-
will provide this identification in the eral entity that has biennial audits
compliance supplement. does not qualify as a low-risk auditee.
(d) Inherent risk of the Federal pro- (b) The auditors opinion on whether
gram. (1) The nature of a Federal pro- the financial statements were prepared
gram may indicate risk. Consideration in accordance with GAAP, or a basis of
should be given to the complexity of accounting required by state law, and
the program and the extent to which the auditors in relation to opinion on
the Federal program contracts for the schedule of expenditures of Federal
goods and services. For example, Fed- awards were unmodified.
eral programs that disburse funds (c) There were no deficiencies in in-
through third party contracts or have ternal control which were identified as
eligibility criteria may be of higher material weaknesses under the require-
risk. Federal programs primarily in- ments of GAGAS.

volving staff payroll costs may have (d) The auditor did not report a sub-
high risk for noncompliance with re- stantial doubt about the auditees abil-
quirements of 200.430 Compensation ity to continue as a going concern.
188
OMB Guidance Pt. 200, App. I
(e) None of the Federal programs had cision for findings that relate to Fed-
audit findings from any of the fol- eral awards it makes to non-Federal
lowing in either of the preceding two entities.
audit periods in which they were classi- (c) Pass-through entity. As provided in
fied as Type A programs: 200.331 Requirements for pass-through
(1) Internal control deficiencies that entities, paragraph (d), the pass-
were identified as material weaknesses through entity must be responsible for
in the auditors report on internal con- issuing a management decision for
trol for major programs as required audit findings that relate to Federal
under 200.515 Audit reporting, para- awards it makes to subrecipients.
graph (c); (d) Time requirements. The Federal
(2) A modified opinion on a major awarding agency or pass-through enti-
program in the auditors report on ty responsible for issuing a manage-
major programs as required under ment decision must do so within six
200.515 Audit reporting, paragraph (c); months of acceptance of the audit re-
or port by the FAC. The auditee must ini-
(3) Known or likely questioned costs tiate and proceed with corrective ac-
that exceeded five percent of the total tion as rapidly as possible and correc-
Federal awards expended for a Type A tive action should begin no later than
program during the audit period. upon receipt of the audit report.
(e) Reference numbers. Management
MANAGEMENT DECISIONS decisions must include the reference
numbers the auditor assigned to each
200.521 Management decision. audit finding in accordance with
(a) General. The management deci- 200.516 Audit findings paragraph (c).
sion must clearly state whether or not
APPENDIX I TO PART 200FULL TEXT OF
the audit finding is sustained, the rea-
NOTICE OF FUNDING OPPORTUNITY
sons for the decision, and the expected
auditee action to repay disallowed The full text of the notice of funding op-
costs, make financial adjustments, or portunity is organized in sections. The re-
take other action. If the auditee has quired format outlined in this appendix indi-
not completed corrective action, a cates immediately following the title of each
section whether that section is required in
timetable for follow-up should be every announcement or is a Federal award-
given. Prior to issuing the manage- ing agency option. The format is designed so
ment decision, the Federal agency or that similar types of information will appear
pass-through entity may request addi- in the same sections in announcements of
tional information or documentation different Federal funding opportunities. To-
from the auditee, including a request ward that end, there is text in each of the
for auditor assurance related to the following sections to describe the types of in-
formation that a Federal awarding agency
documentation, as a way of mitigating would include in that section of an actual
disallowed costs. The management de- announcement.
cision should describe any appeal proc- A Federal awarding agency that wishes to
ess available to the auditee. While not include information that the format does not
required, the Federal agency or pass- specifically discuss may address that subject
through entity may also issue a man- in whatever section(s) is most appropriate.
agement decision on findings relating For example, if a Federal awarding agency
chooses to address performance goals in the
to the financial statements which are
announcement, it might do so in the funding
required to be reported in accordance opportunity description, the application con-
with GAGAS. tent, or the reporting requirements.
(b) Federal agency. As provided in Similarly, when this format calls for a
200.513 Responsibilities, paragraph type of information to be in a particular sec-
(a)(7), the cognizant agency for audit tion, a Federal awarding agency wishing to
must be responsible for coordinating a address that subject in other sections may
management decision for audit find- elect to repeat the information in those sec-
tions or use cross references between the sec-
ings that affect the programs of more
tions (there should be hyperlinks for cross-

than one Federal agency. As provided references in any electronic versions of the
in 200.513 Responsibilities, paragraph announcement). For example, a Federal
(c)(3), a Federal awarding agency is re- awarding agency may want to include in
sponsible for issuing a management de- Section I information about the types of
189
Pt. 200, App. I 2 CFR Ch. II (1114 Edition)
non-Federal entities who are eligible to quired or Federal award administration in-
apply. The format specifies a standard loca- formation in section D. Application and Sub-
tion for that information in Section III.1 but mission Information). If procurement con-
that does not preclude repeating the infor- tracts also may be awarded, this must be
mation in Section I or creating a cross ref- stated.
erence between Sections I and III.1, as long
as a potential applicant can find the infor- C. ELIGIBILITY INFORMATION
mation quickly and easily from the standard This section addresses the considerations
location. or factors that determine applicant or appli-
The sections of the full text of the an- cation eligibility. This includes the eligi-
nouncement are described in the following bility of particular types of applicant organi-
paragraphs. zations, any factors affecting the eligibility
A. PROGRAM DESCRIPTIONREQUIRED of the principal investigator or project direc-
tor, and any criteria that make particular
This section contains the full program de- projects ineligible. Federal agencies should
scription of the funding opportunity. It may make clear whether an applicants failure to
be as long as needed to adequately commu- meet an eligibility criterion by the time of
nicate to potential applicants the areas in an application deadline will result in the
which funding may be provided. It describes Federal awarding agency returning the ap-
the Federal awarding agencys funding prior- plication without review or, even though an
ities or the technical or focus areas in which application may be reviewed, will preclude
the Federal awarding agency intends to pro- the Federal awarding agency from making a
vide assistance. As appropriate, it may in- Federal award. Key elements to be addressed
clude any program history (e.g., whether this are:
is a new program or a new or changed area of 1. Eligible ApplicantsRequired. Announce-
program emphasis). This section may comments must clearly identify the types of en-
municate indicators of successful projects tities that are eligible to apply. If there are
(e.g., if the program encourages collabo- no restrictions on eligibility, this section
rative efforts) and may include examples of may simply indicate that all potential appli-
projects that have been funded previously. cants are eligible. If there are restrictions on
This section also may include other informa- eligibility, it is important to be clear about
tion the Federal awarding agency deems nec- the specific types of entities that are eligi-
essary, and must at a minimum include cita- ble, not just the types that are ineligible.
tions for authorizing statutes and regula- For example, if the program is limited to
tions for the funding opportunity. nonprofit organizations subject to 26 U.S.C.
501(c)(3) of the tax code (26 U.S.C. 501(c)(3)),
B. FEDERAL AWARD INFORMATIONREQUIRED
the announcement should say so. Similarly,
This section provides sufficient informa- it is better to state explicitly that Native
tion to help an applicant make an informed American tribal organizations are eligible
decision about whether to submit a proposal. than to assume that they can unambiguously
Relevant information could include the total infer that from a statement that nonprofit
amount of funding that the Federal awarding organizations may apply. Eligibility also can
agency expects to award through the an- be expressed by exception, (e.g., open to all
nouncement; the anticipated number of Fed- types of domestic applicants other than indi-
eral awards; the expected amounts of individuals). This section should refer to any
vidual Federal awards (which may be a portion of Section IV specifying documenta-
range); the amount of funding per Federal tion that must be submitted to support an
award, on average, experienced in previous eligibility determination (e.g., proof of
years; and the anticipated start dates and 501(c)(3) status as determined by the Internal
periods of performance for new Federal Revenue Service or an authorizing tribal res-
awards. This section also should address olution). To the extent that any funding re-
whether applications for renewal or sup- striction in Section IV.5 could affect the eli-
plementation of existing projects are eligible gibility of an applicant or project, the an-
to compete with applications for new Fed- nouncement must either restate that restric-
eral awards. tion in this section or provide a cross-ref-
This section also must indicate the type(s) erence to its description in Section IV.5.
of assistance instrument (e.g., grant, cooper- 2. Cost Sharing or MatchingRequired. An-
ative agreement) that may be awarded if ap- nouncements must state whether there is re-
plications are successful. If cooperative quired cost sharing, matching, or cost par-
agreements may be awarded, this section ei- ticipation without which an application
ther should describe the substantial in- would be ineligible (if cost sharing is not re-
volvement that the Federal awarding agen- quired, the announcement must explicitly
cy expects to have or should reference where say so). Required cost sharing may be a cer-
the potential applicant can find that infor- tain percentage or amount, or may be in the
mation (e.g., in the funding opportunity de- form of contributions of specified items or
scription in A. Program DescriptionRe- activities (e.g., provision of equipment). It is
190
important that the announcement be clear quired forms or formats as part of the an-
about any restrictions on the types of cost nouncement or state where the applicant
(e.g., in-kind contributions) that are accept- may obtain them.
able as cost sharing. Cost sharing as an eligi- This section should specifically address
bility criterion includes requirements based content and form or format requirements
in statute or regulation, as described in for:
200.306 Cost sharing or matching of this i. Pre-applications, letters of intent, or
Part. This section should refer to the appro- white papers required or encouraged (see
priate portion(s) of section D. Application Section IV.3), including any limitations on
and Submission Information stating any pre- the number of pages or other formatting re-
award requirements for submission of letters quirements similar to those for full applica-
or other documentation to verify commit- tions.
ments to meet cost-sharing requirements if a ii. The application as a whole. For all sub-
Federal award is made. missions, this would include any limitations
3. OtherRequired, if applicable. If there are on the number of pages, font size and type-
other eligibility criteria (i.e., criteria that face, margins, paper size, number of copies,
have the effect of making an application or and sequence or assembly requirements. If
project ineligible for Federal awards, wheth- electronic submission is permitted or re-
er referred to as responsiveness criteria, quired, this could include special require-
go-no go criteria, threshold criteria, or ments for formatting or signatures.
in other ways), must be clearly stated and iii. Component pieces of the application
must include a reference to the regulation of (e.g., if all copies of the application must
requirement that describes the restriction, bear original signatures on the face page or
as applicable. For example, if entities that the program narrative may not exceed 10
have been found to be in violation of a par- pages). This includes any pieces that may be
ticular Federal statute are ineligible, it is submitted separately by third parties (e.g.,
important to say so. This section must also references or letters confirming commit-
state any limit on the number of applica- ments from third parties that will be con-
tions an applicant may submit under the an- tributing a portion of any required cost shar-
nouncement and make clear whether the ing).
limitation is on the submitting organization, iv. Information that successful applicants
individual investigator/program director, or must submit after notification of intent to
both. This section should also address any make a Federal award, but prior to a Federal
eligibility criteria for beneficiaries or for award. This could include evidence of com-
program participants other than Federal pliance with requirements relating to human
award recipients. subjects or information needed to comply
with the National Environmental Policy Act
D. APPLICATION AND SUBMISSION INFORMATION
(NEPA) (42 U.S.C. 43214370h).
1. Address to Request Application Package 3. Dun and Bradstreet Universal Numbering
Required. Potential applicants must be told System (DUNS) Number and System for Award
how to get application forms, kits, or other Management (SAM)Required.
materials needed to apply (if this announce- This paragraph must state clearly that
ment contains everything needed, this sec- each applicant (unless the applicant is an in-
tion need only say so). An Internet address dividual or Federal awarding agency that is
where the materials can be accessed is ac- excepted from those requirements under 2
ceptable. However, since high-speed Internet CFR 25.110(b) or (c), or has an exception ap-
access is not yet universally available for proved by the Federal awarding agency
downloading documents, and applicants may under 2 CFR 25.110(d)) is required to: (i) Be
have additional accessibility requirements, registered in SAM before submitting its ap-
there also should be a way for potential application; (ii) provide a valid DUNS number
plicants to request paper copies of materials, in its application; and (iii) continue to main-
such as a U.S. Postal Service mailing ad- tain an active SAM registration with current
dress, telephone or FAX number, Telephone information at all times during which it has
Device for the Deaf (TDD), Text Telephone an active Federal award or an application or
(TTY) number, and/or Federal Information plan under consideration by a Federal award-
Relay Service (FIRS) number. ing agency. It also must state that the Fed-
2. Content and Form of Application Submis- eral awarding agency may not make a Fed-
sionRequired. This section must identify eral award to an applicant until the appli-
the required content of an application and cant has complied with all applicable DUNS
the forms or formats that an applicant must and SAM requirements and, if an applicant
use to submit it. If any requirements are has not fully complied with the requirements
stated elsewhere because they are general re- by the time the Federal awarding agency is
quirements that apply to multiple programs ready to make a Federal award, the Federal
or funding opportunities, this section should awarding agency may determine that the ap-
refer to where those requirements may be plicant is not qualified to receive a Federal
found. This section also should include re- award and use that determination as a basis
191
Pt. 200, App. I 2 CFR Ch. II (1114 Edition)
for making a Federal award to another appli- mental Review of Federal Programs, the
cant. notice must say so. In alerting applicants
4. Submission Dates and TimesRequired. that they must contact their states Single
Announcements must identify due dates and Point of Contact (SPOC) to find out about
times for all submissions. This includes not and comply with the states process under
only the full applications but also any pre- Executive Order 12372, it may be useful to in-
liminary submissions (e.g., letters of intent, form potential applicants that the names
white papers, or pre-applications). It also in- and addresses of the SPOCs are listed in the
cludes any other submissions of information Office of Management and Budgets Web site.
before Federal award that are separate from www.whitehouse.gov/omb/grants/spoc.html.
the full application. If the funding oppor-
6. Funding RestrictionsRequired. Notices
tunity is a general announcement that is
must include information on funding restric-
open for a period of time with no specific due
tions in order to allow an applicant to de-
dates for applications, this section should
say so. Note that the information on dates velop an application and budget consistent
that is included in this section also must ap- with program requirements. Examples are
pear with other overview information in a lo- whether construction is an allowable activ-
cation preceding the full text of the an- ity, if there are any limitations on direct
nouncement (see 200.203 Notices of funding costs such as foreign travel or equipment
opportunities of this Part). purchases, and if there are any limits on in-
Each type of submission should be des- direct costs (or facilities and administrative
ignated as encouraged or required and, if re- costs). Applicants must be advised if Federal
quired, any deadline date (or dates, if the awards will not allow reimbursement of pre-
Federal awarding agency plans more than Federal award costs.
one cycle of application submission, review, 7. Other Submission Requirements Required.
and Federal award under the announcement) This section must address any other submis-
should be specified. The announcement must sion requirements not included in the other
state (or provide a reference to another docu- paragraphs of this section. This might in-
ment that states): clude the format of submission, i.e., paper or
i. Any deadline in terms of a date and local electronic, for each type of required submis-
time. If the due date falls on a Saturday, sion. Applicants should not be required to
Sunday, or Federal holiday, the reporting submit in more than one format and this sec-
package is due the next business day. tion should indicate whether they may
ii. What the deadline means (e.g., whether choose whether to submit applications in
it is the date and time by which the Federal
hard copy or electronically, may submit only
awarding agency must receive the applica-
in hard copy, or may submit only electroni-
tion, the date by which the application must
cally.
be postmarked, or something else) and how
that depends, if at all, on the submission This section also must indicate where ap-
method (e.g., mail, electronic, or personal/ plications (and any pre-applications) must be
courier delivery). submitted if sent by postal mail, electronic
iii. The effect of missing a deadline (e.g., means, or hand-delivery. For postal mail
whether late applications are neither resubmission, this must include the name of an
viewed nor considered or are reviewed and office, official, individual or function (e.g.,
considered under some circumstances). application receipt center) and a complete
iv. How the receiving Federal office deter- mailing address. For electronic submission,
mines whether an application or pre-applica- this must include the URL or email address;
tion has been submitted before the deadline. whether a password(s) is required; whether
This includes the form of acceptable proof of particular software or other electronic capa-
mailing or system-generated documentation bilities are required; what to do in the event
of receipt date and time. of system problems and a point of contact
This section also may indicate whether, who will be available in the event the appli-
when, and in what form the applicant will re- cant experiences technical difficulties.1
ceive an acknowledgement of receipt. This
information should be displayed in ways that E. APPLICATION REVIEW INFORMATION
will be easy to understand and use. It can be 1. CriteriaRequired. This section must ad-
difficult to extract all needed information dress the criteria that the Federal awarding
from narrative paragraphs, even when they agency will use to evaluate applications.
are well written. A tabular form for pro-
viding a summary of the information may
help applicants for some programs and give 1 With respect to electronic methods for
them what effectively could be a checklist to providing information about funding oppor-
tunities or accepting applicants submissions
verify the completeness of their application

package before submission. of information, each Federal awarding agen-
5. Intergovernmental ReviewRequired, if ap- cy is responsible for compliance with Section
plicable. If the funding opportunity is subject 508 of the Rehabilitation Act of 1973 (29
to Executive Order 12372, Intergovern- U.S.C. 794d).
192
This includes the merit and other review cri- people on an evaluation panel and how it op-
teria that evaluators will use to judge appli- erates, the way reviewers are selected, re-
cations, including any statutory, regulatory, viewer qualifications, and the way that con-
or other preferences (e.g., minority status or flicts of interest are avoided. With respect to
Native American tribal preferences) that electronic methods for providing informa-
will be applied in the review process. These tion about funding opportunities or accept-
criteria are distinct from eligibility criteria ing applicants submissions of information,
that are addressed before an application is each Federal awarding agency is responsible
accepted for review and any program policy for compliance with Section 508 of the Reha-
or other factors that are applied during the bilitation Act of 1973 (29 U.S.C. 794d).
selection process, after the review process is In addition, if the Federal awarding agency
completed. The intent is to make the appli- permits applicants to nominate suggested re-
cation process transparent so applicants can viewers of their applications or suggest those
make informed decisions when preparing they feel may be inappropriate due to a con-
their applications to maximize fairness of flict of interest, that information should be
the process. The announcement should clear- included in this section.
ly describe all criteria, including any sub- 3. Anticipated Announcement and Federal
criteria. If criteria vary in importance, the Award DatesOptional. This section is in-
announcement should specify the relative tended to provide applicants with informa-
percentages, weights, or other means used to tion they can use for planning purposes. If
distinguish among them. For statutory, reg- there is a single application deadline fol-
ulatory, or other preferences, the announce- lowed by the simultaneous review of all ap-
ment should provide a detailed explanation plications, the Federal awarding agency can
of those preferences with an explicit indica- include in this section information about the
tion of their effect (e.g., whether they result anticipated dates for announcing or noti-
in additional points being assigned). fying successful and unsuccessful applicants
If an applicants proposed cost sharing will and for having Federal awards in place. If ap-
be considered in the review process (as op- plications are received and evaluated on a
posed to being an eligibility criterion de- rolling basis at different times during an
scribed in Section III.2), the announcement extended period, it may be appropriate to
must specifically address how it will be con- give applicants an estimate of the time need-
sidered (e.g., to assign a certain number of ed to process an application and notify the
additional points to applicants who offer applicant of the Federal awarding agencys
cost sharing, or to break ties among applica- decision.
tions with equivalent scores after evaluation
against all other factors). If cost sharing will F. FEDERAL AWARD ADMINISTRATION
not be considered in the evaluation, the an- INFORMATION
nouncement should say so, so that there is 1. Federal Award NoticesRequired. This
no ambiguity for potential applicants. Vague section must address what a successful appli-
statements that cost sharing is encouraged, cant can expect to receive following selec-
without clarification as to what that means, tion. If the Federal awarding agencys prac-
are unhelpful to applicants. It also is impor- tice is to provide a separate notice stating
tant that the announcement be clear about that an application has been selected before
any restrictions on the types of cost (e.g., in- it actually makes the Federal award, this
kind contributions) that are acceptable as section would be the place to indicate that
cost sharing. the letter is not an authorization to begin
2. Review and Selection ProcessRequired. performance (to the extent that it allows
This section may vary in the level of detail charging to Federal awards of pre-award
provided. The announcement must list any costs at the non-Federal entitys own risk).
program policy or other factors or elements, This section should indicate that the notice
other than merit criteria, that the selecting of Federal award signed by the grants officer
official may use in selecting applications for (or equivalent) is the authorizing document,
Federal award (e.g., geographical dispersion, and whether it is provided through postal
program balance, or diversity). The Federal mail or by electronic means and to whom. It
awarding agency may also include other ap- also may address the timing, form, and con-
propriate details. For example, this section tent of notifications to unsuccessful appli-
may indicate who is responsible for evalua- cants. See also 200.210 Information con-
tion against the merit criteria (e.g., peers ex- tained in a Federal award.
ternal to the Federal awarding agency or 2. Administrative and National Policy Re-
Federal awarding agency personnel) and/or quirementsRequired. This section must iden-
who makes the final selections for Federal tify the usual administrative and national
awards. If there is a multi-phase review proc- policy requirements the Federal awarding
ess (e.g., an external panel advising internal agencys Federal awards may include. Pro-
Federal awarding agency personnel who viding this information lets a potential ap-
make final recommendations to the deciding plicant identify any requirements with
official), the announcement may describe the which it would have difficulty complying if
phases. It also may include: the number of its application is successful. In those cases,
193
Pt. 200, App. II 2 CFR Ch. II (1114 Edition)
early notification about the requirements al- H. OTHER INFORMATIONOPTIONAL
lows the potential applicant to decide not to This section may include any additional
apply or to take needed actions before re- information that will assist a potential ap-
ceiving the Federal award. The announce- plicant. For example, the section might:
ment need not include all of the terms and i. Indicate whether this is a new program
conditions of the Federal award, but may or a one-time initiative.
refer to a document (with information about ii. Mention related programs or other up-
how to obtain it) or Internet site where ap- coming or ongoing Federal awarding agency
plicants can see the terms and conditions. If funding opportunities for similar activities.
this funding opportunity will lead to Federal iii. Include current Internet addresses for
awards with some special terms and condi- Federal awarding agency Web sites that may
tions that differ from the Federal awarding be useful to an applicant in understanding
agencys usual (sometimes called general) the program.
terms and conditions, this section should iv. Alert applicants to the need to identify
highlight those special terms and conditions. proprietary information and inform them
Doing so will alert applicants that have re- about the way the Federal awarding agency
ceived Federal awards from the Federal will handle it.
v. Include certain routine notices to appli-
awarding agency previously and might not
cants (e.g., that the Federal government is
otherwise expect different terms and condi-
not obligated to make any Federal award as
tions. For the same reason, the announce- a result of the announcement or that only
ment should inform potential applicants grants officers can bind the Federal govern-
about special requirements that could apply ment to the expenditure of funds).
to particular Federal awards after the review
of applications and other information, based APPENDIX II TO PART 200CONTRACT
on the particular circumstances of the effort PROVISIONS FOR NON-FEDERAL ENTI-
to be supported (e.g., if human subjects were TY CONTRACTS UNDER FEDERAL
to be involved or if some situations may jus- AWARDS
tify special terms on intellectual property,
data sharing or security requirements). In addition to other provisions required by
3. ReportingRequired. This section must the Federal agency or non-Federal entity, all
include general information about the type contracts made by the non-Federal entity
(e.g., financial or performance), frequency, under the Federal award must contain provi-
and means of submission (paper or elec- sions covering the following, as applicable.
tronic) of post-Federal award reporting re- (A) Contracts for more than the simplified
quirements. Highlight any special reporting acquisition threshold currently set at
requirements for Federal awards under this $150,000, which is the inflation adjusted
amount determined by the Civilian Agency
funding opportunity that differ (e.g., by re-
Acquisition Council and the Defense Acquisi-
port type, frequency, form/format, or cir-
tion Regulations Council (Councils) as au-
cumstances for use) from what the Federal
thorized by 41 U.S.C. 1908, must address ad-
awarding agencys Federal awards usually ministrative, contractual, or legal remedies
require. in instances where contractors violate or
breach contract terms, and provide for such
G. FEDERAL AWARDING AGENCY CONTACT(S)
sanctions and penalties as appropriate.
REQUIRED
(B) All contracts in excess of $10,000 must
The announcement must give potential ap- address termination for cause and for con-
plicants a point(s) of contact for answering venience by the non-Federal entity including
questions or helping with problems while the the manner by which it will be effected and
funding opportunity is open. The intent of the basis for settlement.
this requirement is to be as helpful as pos- (C) Equal Employment Opportunity. Ex-
sible to potential applicants, so the Federal cept as otherwise provided under 41 CFR
awarding agency should consider approaches Part 60, all contracts that meet the defini-
such as giving: tion of federally assisted construction con-
tract in 41 CFR Part 601.3 must include the
i. Points of contact who may be reached in
equal opportunity clause provided under 41
multiple ways (e.g., by telephone, FAX, and/
CFR 601.4(b), in accordance with Executive
or email, as well as regular mail). Order 11246, Equal Employment Oppor-
ii. A fax or email address that multiple tunity (30 FR 12319, 12935, 3 CFR Part, 1964
people access, so that someone will respond 1965 Comp., p. 339), as amended by Executive
even if others are unexpectedly absent dur- Order 11375, Amending Executive Order
ing critical periods.
11246 Relating to Equal Employment Oppor-

iii. Different contacts for distinct kinds of tunity, and implementing regulations at 41
help (e.g., one for questions of programmatic CFR part 60, Office of Federal Contract
content and a second for administrative Compliance Programs, Equal Employment
questions). Opportunity, Department of Labor.
194
OMB Guidance Pt. 200, App. II
(D) Davis-Bacon Act, as amended (40 U.S.C. materials or articles ordinarily available on
31413148). When required by Federal program the open market, or contracts for transpor-
legislation, all prime construction contracts tation or transmission of intelligence.
in excess of $2,000 awarded by non-Federal (F) Rights to Inventions Made Under a
entities must include a provision for compli- Contract or Agreement. If the Federal award
ance with the Davis-Bacon Act (40 U.S.C. meets the definition of funding agreement
31413144, and 31463148) as supplemented by under 37 CFR 401.2 (a) and the recipient or
Department of Labor regulations (29 CFR subrecipient wishes to enter into a contract
Part 5, Labor Standards Provisions Appli- with a small business firm or nonprofit orga-
cable to Contracts Covering Federally Fi- nization regarding the substitution of par-
nanced and Assisted Construction). In ac- ties, assignment or performance of experi-
cordance with the statute, contractors must mental, developmental, or research work
be required to pay wages to laborers and me- under that funding agreement, the recipi-
chanics at a rate not less than the prevailing ent or subrecipient must comply with the re-
wages specified in a wage determination quirements of 37 CFR Part 401, Rights to In-
made by the Secretary of Labor. In addition, ventions Made by Nonprofit Organizations
contractors must be required to pay wages and Small Business Firms Under Govern-
not less than once a week. The non-Federal ment Grants, Contracts and Cooperative
entity must place a copy of the current pre- Agreements, and any implementing regula-
vailing wage determination issued by the De- tions issued by the awarding agency.
partment of Labor in each solicitation. The (G) Clean Air Act (42 U.S.C. 74017671q.) and
decision to award a contract or subcontract the Federal Water Pollution Control Act (33
must be conditioned upon the acceptance of U.S.C. 12511387), as amendedContracts and
the wage determination. The non-Federal en- subgrants of amounts in excess of $150,000
tity must report all suspected or reported must contain a provision that requires the
violations to the Federal awarding agency. non-Federal award to agree to comply with
The contracts must also include a provision all applicable standards, orders or regula-
for compliance with the Copeland Anti- tions issued pursuant to the Clean Air Act
Kickback Act (40 U.S.C. 3145), as supple- (42 U.S.C. 74017671q) and the Federal Water
mented by Department of Labor regulations Pollution Control Act as amended (33 U.S.C.
(29 CFR Part 3, Contractors and Sub- 12511387). Violations must be reported to the
contractors on Public Building or Public Federal awarding agency and the Regional
Work Financed in Whole or in Part by Loans Office of the Environmental Protection
or Grants from the United States). The Act Agency (EPA).
provides that each contractor or sub- (H) Mandatory standards and policies re-
recipient must be prohibited from inducing, lating to energy efficiency which are con-
by any means, any person employed in the tained in the state energy conservation plan
construction, completion, or repair of public issued in compliance with the Energy Policy
work, to give up any part of the compensa- and Conservation Act (42 U.S.C. 6201).
tion to which he or she is otherwise entitled. (I) Debarment and Suspension (Executive
The non-Federal entity must report all sus- Orders 12549 and 12689)A contract award
pected or reported violations to the Federal (see 2 CFR 180.220) must not be made to par-
awarding agency. ties listed on the governmentwide Excluded
(E) Contract Work Hours and Safety Parties List System in the System for Award
Standards Act (40 U.S.C. 37013708). Where Management (SAM), in accordance with the
applicable, all contracts awarded by the non- OMB guidelines at 2 CFR 180 that implement
Federal entity in excess of $100,000 that in- Executive Orders 12549 (3 CFR Part 1986
volve the employment of mechanics or labor- Comp., p. 189) and 12689 (3 CFR Part 1989
ers must include a provision for compliance Comp., p. 235), Debarment and Suspension.
with 40 U.S.C. 3702 and 3704, as supplemented The Excluded Parties List System in SAM
by Department of Labor regulations (29 CFR contains the names of parties debarred, sus-
Part 5). Under 40 U.S.C. 3702 of the Act, each pended, or otherwise excluded by agencies, as
contractor must be required to compute the well as parties declared ineligible under stat-
wages of every mechanic and laborer on the utory or regulatory authority other than Ex-
basis of a standard work week of 40 hours. ecutive Order 12549.
Work in excess of the standard work week is (J) Byrd Anti-Lobbying Amendment (31
permissible provided that the worker is com- U.S.C. 1352)Contractors that apply or bid
pensated at a rate of not less than one and a for an award of $100,000 or more must file the
half times the basic rate of pay for all hours required certification. Each tier certifies to
worked in excess of 40 hours in the work the tier above that it will not and has not
week. The requirements of 40 U.S.C. 3704 are used Federal appropriated funds to pay any
applicable to construction work and provide person or organization for influencing or at-
that no laborer or mechanic must be re- tempting to influence an officer or employee

quired to work in surroundings or under of any agency, a member of Congress, officer
working conditions which are unsanitary, or employee of Congress, or an employee of a
hazardous or dangerous. These requirements member of Congress in connection with ob-
do not apply to the purchases of supplies or taining any Federal contract, grant or any
195
Pt. 200, App. III 2 CFR Ch. II (1114 Edition)
other award covered by 31 U.S.C. 1352. Each (1) Sponsored research means all research
tier must also disclose any lobbying with and development activities that are spon-
non-Federal funds that takes place in con- sored by Federal and non-Federal agencies
nection with obtaining any Federal award. and organizations. This term includes activi-
Such disclosures are forwarded from tier to ties involving the training of individuals in
tier up to the non-Federal award. research techniques (commonly called re-
(K) See 200.322 Procurement of recovered search training) where such activities utilize
materials. the same facilities as other research and de-
velopment activities and where such activi-
APPENDIX III TO PART 200INDIRECT ties are not included in the instruction func-
(F&A) COSTS IDENTIFICATION AND tion.
ASSIGNMENT, AND RATE DETERMINA- (2) University research means all research
TION FOR INSTITUTIONS OF HIGHER and development activities that are sepa-
EDUCATION (IHES) rately budgeted and accounted for by the in-
stitution under an internal application of in-
A. GENERAL stitutional funds. University research, for
purposes of this document, must be com-
This appendix provides criteria for identi-
bined with sponsored research under the
fying and computing indirect (or indirect
function of organized research.
(F&A)) rates at IHEs (institutions). Indirect
(F&A) costs are those that are incurred for c. Other sponsored activities means programs
common or joint objectives and therefore and projects financed by Federal and non-
cannot be identified readily and specifically Federal agencies and organizations which in-
with a particular sponsored project, an involve the performance of work other than in-
structional activity, or any other institu- struction and organized research. Examples
tional activity. See subsection B.1, Defini- of such programs and projects are health
tion of Facilities and Administration, for a service projects and community service pro-
discussion of the components of indirect grams. However, when any of these activities
(F&A) costs. are undertaken by the institution without
outside support, they may be classified as
1. Major Functions of an Institution other institutional activities.
d. Other institutional activities means all ac-
Refers to instruction, organized research,
tivities of an institution except for instruc-
other sponsored activities and other institu-
tion, departmental research, organized re-
tional activities as defined in this section:
search, and other sponsored activities, as de-
a. Instruction means the teaching and
fined in this section; indirect (F&A) cost ac-
training activities of an institution. Except
for research training as provided in sub- tivities identified in this Appendix para-
section b, this term includes all teaching and graph B, Identification and assignment of in-
training activities, whether they are offered direct (F&A) costs; and specialized services
for credits toward a degree or certificate or facilities described in 200.468 Specialized
on a non-credit basis, and whether they are service facilities of this Part.
offered through regular academic depart- Examples of other institutional activities
ments or separate divisions, such as a sum- include operation of residence halls, dining
mer school division or an extension division. halls, hospitals and clinics, student unions,
Also considered part of this major function intercollegiate athletics, bookstores, faculty
are departmental research, and, where housing, student apartments, guest houses,
agreed to, university research. chapels, theaters, public museums, and other
(1) Sponsored instruction and training means similar auxiliary enterprises. This definition
specific instructional or training activity es- also includes any other categories of activi-
tablished by grant, contract, or cooperative ties, costs of which are unallowable to
agreement. For purposes of the cost prin- Federal awards, unless otherwise indicated
ciples, this activity may be considered a in an award.
major function even though an institutions 2. Criteria for Distribution
accounting treatment may include it in the
instruction function. a. Base period. A base period for distribu-
(2) Departmental research means research, tion of indirect (F&A) costs is the period
development and scholarly activities that during which the costs are incurred. The
are not organized research and, con- base period normally should coincide with
sequently, are not separately budgeted and the fiscal year established by the institution,
accounted for. Departmental research, for but in any event the base period should be so
purposes of this document, is not considered selected as to avoid inequities in the dis-
as a major function, but as a part of the in- tribution of costs.
struction function of the institution. b. Need for cost groupings. The overall ob-
b. Organized research means all research jective of the indirect (F&A) cost allocation
and development activities of an institution process is to distribute the indirect (F&A)
that are separately budgeted and accounted costs described in Section B, Identification
for. It includes: and assignment of indirect (F&A) costs, to
196
OMB Guidance Pt. 200, App. III
the major functions of the institution in pro- expenses, or operation and maintenance ex-
portions reasonably consistent with the na- penses to such activities should be accom-
ture and extent of their use of the institu- plished through cost groupings which include
tions resources. In order to achieve this ob- only that portion of central indirect (F&A)
jective, it may be necessary to provide for costs (such as for overall management)
selective distribution by establishing sepa- which are properly allocable to such activi-
rate groupings of cost within one or more of ties.
the indirect (F&A) cost categories referred (5) If the institution elects to treat fringe
to in subsection B.1, Definition of Facilities benefits as indirect (F&A) charges, such
and Administration. In general, the cost costs should be set aside as a separate cost
groupings established within a category grouping for selective distribution to related
should constitute, in each case, a pool of cost objectives.
those items of expense that are considered to
(6) The number of separate cost groupings
be of like nature in terms of their relative
within a category should be held within
contribution to (or degree of remoteness
practical limits, after taking into consider-
from) the particular cost objectives to which
distribution is appropriate. Cost groupings ation the materiality of the amounts in-
should be established considering the general volved and the degree of precision attainable
guides provided in subsection c of this sec- through less selective methods of distribu-
tion. Each such pool or cost grouping should tion.
then be distributed individually to the re- d. Selection of distribution method.
lated cost objectives, using the distribution (1) Actual conditions must be taken into
base or method most appropriate in light of account in selecting the method or base to
the guidelines set forth in subsection d of be used in distributing individual cost
this section. groupings. The essential consideration in se-
c. General considerations on cost groupings. lecting a base is that it be the one best suit-
The extent to which separate cost groupings ed for assigning the pool of costs to cost ob-
and selective distribution would be appro- jectives in accordance with benefits derived;
priate at an institution is a matter of judg- with a traceable cause-and-effect relation-
ment to be determined on a case-by-case ship; or with logic and reason, where neither
basis. Typical situations which may warrant benefit nor a cause-and-effect relationship is
the establishment of two or more separate determinable.
cost groupings (based on account classifica- (2) If a cost grouping can be identified di-
tion or analysis) within an indirect (F&A) rectly with the cost objective benefitted, it
cost category include but are not limited to should be assigned to that cost objective.
the following: (3) If the expenses in a cost grouping are
(1) If certain items or categories of expense
more general in nature, the distribution may
relate solely to one of the major functions of
be based on a cost analysis study which re-
the institution or to less than all functions,
sults in an equitable distribution of the
such expenses should be set aside as a sepa-
costs. Such cost analysis studies may take
rate cost grouping for direct assignment or
into consideration weighting factors, popu-
selective allocation in accordance with the
guides provided in subsections b and d. lation, or space occupied if appropriate. Cost
(2) If any types of expense ordinarily treat- analysis studies, however, must (a) be appro-
ed as general administration or depart- priately documented in sufficient detail for
mental administration are charged to Fed- subsequent review by the cognizant agency
eral awards as direct costs, expenses applica- for indirect costs, (b) distribute the costs to
ble to other activities of the institution the related cost objectives in accordance
when incurred for the same purposes in like with the relative benefits derived, (c) be sta-
circumstances must, through separate cost tistically sound, (d) be performed specifically
groupings, be excluded from the indirect at the institution at which the results are to
(F&A) costs allocable to those Federal be used, and (e) be reviewed periodically, but
awards and included in the direct cost of not less frequently than rate negotiations,
other activities for cost allocation purposes. updated if necessary, and used consistently.
(3) If it is determined that certain expenses Any assumptions made in the study must be
are for the support of a service unit or facil- stated and explained. The use of cost anal-
ity whose output is susceptible of measure- ysis studies and periodic changes in the
ment on a workload or other quantitative method of cost distribution must be fully
basis, such expenses should be set aside as a justified.
separate cost grouping for distribution on (4) If a cost analysis study is not per-
such basis to organized research, instruc- formed, or if the study does not result in an
tional, and other activities at the institution equitable distribution of the costs, the dis-
tribution must be made in accordance with
or within the department.

(4) If activities provide their own pur- the appropriate base cited in Section B, Iden-
chasing, personnel administration, building tification and assignment of indirect (F&A)
maintenance or similar service, the distribu- costs, unless one of the following conditions
tion of general administration and general is met:
197
(a) It can be demonstrated that the use of (1) Depreciation on buildings used exclu-
a different base would result in a more equi- sively in the conduct of a single function,
table allocation of the costs, or that a more and on capital improvements and equipment
readily available base would not increase the used in such buildings, must be assigned to
costs charged to Federal awards, or that function.
(b) The institution qualifies for, and elects (2) Depreciation on buildings used for more
to use, the simplified method for computing than one function, and on capital improve-
indirect (F&A) cost rates described in Sec- ments and equipment used in such buildings,
tion D, Simplified method for small institu- must be allocated to the individual functions
tions. performed in each building on the basis of
(5) Notwithstanding subsection (3), effec- usable square feet of space, excluding com-
tive July 1, 1998, a cost analysis or base other mon areas such as hallways, stairwells, and
than that in Section B must not be used to rest rooms.
distribute utility or student services costs. (3) Depreciation on buildings, capital im-
Instead, subsections B.4.c Operation and provements and equipment related to space
maintenance expenses, may be used in the (e.g., individual rooms, laboratories) used
recovery of utility costs. jointly by more than one function (as deter-
e. Order of distribution. mined by the users of the space) must be
(1) Indirect (F&A) costs are the broad cat- treated as follows. The cost of each jointly
egories of costs discussed in Section B.1, used unit of space must be allocated to bene-
Definitions of Facilities and Administration fitting functions on the basis of:
(2) Depreciation, interest expenses, oper- (a) The employee full-time equivalents
ation and maintenance expenses, and general (FTEs) or salaries and wages of those indi-
administrative and general expenses should vidual functions benefitting from the use of
be allocated in that order to the remaining that space; or
indirect (F&A) cost categories as well as to (b) Institution-wide employee FTEs or sal-
the major functions and specialized service aries and wages applicable to the benefitting
facilities of the institution. Other cost cat- major functions (see Section A.1) of the in-
egories may be allocated in the order deter- stitution.
mined to be most appropriate by the institu- (4) Depreciation on certain capital im-
tions. When cross allocation of costs is made provements to land, such as paved parking
as provided in subsection (3), this order of al- areas, fences, sidewalks, and the like, not in-
location does not apply. cluded in the cost of buildings, must be allo-
(3) Normally an indirect (F&A) cost cat- cated to user categories of students and em-
egory will be considered closed once it has ployees on a full-time equivalent basis. The
been allocated to other cost objectives, and amount allocated to the student category
costs may not be subsequently allocated to must be assigned to the instruction function
it. However, a cross allocation of costs be- of the institution. The amount allocated to
tween two or more indirect (F&A) cost cat- the employee category must be further allo-
egories may be used if such allocation will cated to the major functions of the institu-
result in a more equitable allocation of tion in proportion to the salaries and wages
costs. If a cross allocation is used, an appro- of all employees applicable to those func-
priate modification to the composition of tions.
the indirect (F&A) cost categories described
in Section B is required. 3. Interest
Interest on debt associated with certain
B. IDENTIFICATION AND ASSIGNMENT OF buildings, equipment and capital improve-
INDIRECT (F&A) COSTS ments, as defined in 200.449 Interest, must
be classified as an expenditure under the cat-
1. Definition of Facilities and Administration
egory Facilities. These costs must be allo-
See 200.414 Indirect (F&A) costs which cated in the same manner as the deprecia-
provides the basis for this indirect cost re- tion on the buildings, equipment and capital
quirements. improvements to which the interest relates.
2. Depreciation 4. Operation and Maintenance Expenses
a. The expenses under this heading are the a. The expenses under this heading are
portion of the costs of the institutions those that have been incurred for the admin-
buildings, capital improvements to land and istration, supervision, operation, mainte-
buildings, and equipment which are com- nance, preservation, and protection of the in-
puted in accordance with 200.436 Deprecia- stitutions physical plant. They include ex-
tion. penses normally incurred for such items as
b. In the absence of the alternatives pro- janitorial and utility services; repairs and
vided for in Section A.2.d, Selection of dis- ordinary or normal alterations of buildings,
tribution method, the expenses included in furniture and equipment; care of grounds;
this category must be allocated in the fol- maintenance and operation of buildings and
lowing manner: other plant facilities; security; earthquake
198
and disaster preparedness; environmental 5. General Administration and General Expenses
safety; hazardous waste disposal; property,
a. The expenses under this heading are
liability and all other insurance relating to those that have been incurred for the general
property; space and capital leasing; facility executive and administrative offices of edu-
planning and management; and central re- cational institutions and other expenses of a
ceiving. The operation and maintenance ex- general character which do not relate solely
pense category should also include its allo- to any major function of the institution; i.e.,
cable share of fringe benefit costs, deprecia- solely to (1) instruction, (2) organized re-
tion, and interest costs. search, (3) other sponsored activities, or (4)
b. In the absence of the alternatives pro- other institutional activities. The general
vided for in Section A.2.d, the expenses in- administration and general expense category
cluded in this category must be allocated in should also include its allocable share of
the same manner as described in subsection fringe benefit costs, operation and mainte-
2.b for depreciation. nance expense, depreciation, and interest
c. A utility cost adjustment of up to 1.3 costs. Examples of general administration
percentage points may be included in the ne- and general expenses include: those expenses
gotiated indirect cost rate of the IHE for or- incurred by administrative offices that serve
ganized research, per the computation alter- the entire university system of which the in-
natives in paragraphs (c)(1) and (2) of this stitution is a part; central offices of the in-
section: stitution such as the Presidents or
(1) Where space is devoted to a single func- Chancellors office, the offices for institu-
tion and metering allows unambiguous meas- tion-wide financial management, business
urement of usage related to that space, costs services, budget and planning, personnel
must be assigned to the function located in management, and safety and risk manage-
that space. ment; the office of the General Counsel; and
(2) Where space is allocated to different the operations of the central administrative
management information systems. General
functions and metering does not allow unam-
administration and general expenses must
biguous measurement of usage by function,
not include expenses incurred within non-
costs must be allocated as follows:
university-wide deans offices, academic de-
(i) Utilities costs should be apportioned to partments, organized research units, or simi-
functions in the same manner as deprecia- lar organizational units. (See subsection 6,
tion, based on the calculated difference be- Departmental administration expenses.)
tween the site or building actual square foot- b. In the absence of the alternatives pro-
age for monitored research laboratory space vided for in Section A.2.d, the expenses in-
(site, building, floor, or room), and a sepa- cluded in this category must be grouped first
rate calculation prepared by the IHE using according to common major functions of the
the effective square footage described in institution to which they render services or
subsection (c)(2)(ii) of this section. provide benefits. The aggregate expenses of
(ii) Effective square footage allocated to each group must then be allocated to serv-
research laboratory space must be calculated iced or benefitted functions on the modified
as the actual square footage times the rel- total cost basis. Modified total costs consist
ative energy utilization index (REUI) posted of the same elements as those in Section C.2.
on the OMB Web site at the time of a rate When an activity included in this indirect
determination. (F&A) cost category provides a service or
A. This index is the ratio of a laboratory product to another institution or organiza-
energy use index (lab EUI) to the cor- tion, an appropriate adjustment must be
responding index for overall average college made to either the expenses or the basis of
or university space (college EUI). allocation or both, to assure a proper alloca-
B. In July 2012, values for these two indices tion of costs.
(taken respectively from the Lawrence
Berkeley Laboratory Labs for the 21st Cen- 6. Departmental Administration Expenses
tury benchmarking tool http:// a. The expenses under this heading are
labs21benchmarking.lbl.gov/CompareData.php those that have been incurred for adminis-
and the US Department of Energy Build- trative and supporting services that benefit
ings Energy Databook and http:// common or joint departmental activities or
buildingsdatabook.eren.doe.gov/CBECS.aspx) objectives in academic deans offices, aca-
were 310 kBtu/sq ft-yr. and 155 kBtu/sq ft-yr., demic departments and divisions, and orga-
so that the adjustment ratio is 2.0 by this nized research units. Organized research
methodology. To retain currency, OMB will units include such units as institutes, study
adjust the EUI numbers from time to time centers, and research centers. Departmental
(no more often than annually nor less often administration expenses are subject to the
than every 5 years), using reliable and pub- following limitations.
licly disclosed data. Current values of both (1) Academic deans offices. Salaries and
the EUIs and the REUI will be posted on the operating expenses are limited to those at-
OMB Web site. tributable to administrative functions.
199
(2) Academic departments: c. In the absence of the alternatives pro-
(a) Salaries and fringe benefits attrib- vided for in Section A.2.d, the expenses in-
utable to the administrative work (including cluded in this category must be allocated as
bid and proposal preparation) of faculty (in- follows:
cluding department heads) and other profes- (1) The administrative expenses of the
sional personnel conducting research and/or deans office of each college and school must
instruction, must be allowed at a rate of 3.6 be allocated to the academic departments
percent of modified total direct costs. This within that college or school on the modified
category does not include professional busi- total cost basis.
ness or professional administrative officers. (2) The administrative expenses of each
This allowance must be added to the com- academic department, and the departments
putation of the indirect (F&A) cost rate for share of the expenses allocated in subsection
major functions in Section C, Determination (1) must be allocated to the appropriate func-
and application of indirect (F&A) cost rate tions of the department on the modified
or rates; the expenses covered by the allow- total cost basis.
ance must be excluded from the depart-
mental administration cost pool. No docu- 7. Sponsored Projects Administration
mentation is required to support this allow- a. The expenses under this heading are lim-
ance. ited to those incurred by a separate organi-
(b) Other administrative and supporting zation(s) established primarily to administer
expenses incurred within academic depart- sponsored projects, including such functions
ments are allowable provided they are treat- as grant and contract administration (Fed-
ed consistently in like circumstances. This eral and non-Federal), special security, pur-
would include expenses such as the salaries chasing, personnel, administration, and edit-
of secretarial and clerical staffs, the salaries ing and publishing of research and other re-
of administrative officers and assistants, ports. They include the salaries and expenses
travel, office supplies, stockrooms, and the of the head of such organization, assistants,
like. and immediate staff, together with the sala-
(3) Other fringe benefit costs applicable to ries and expenses of personnel engaged in
the salaries and wages included in sub- supporting activities maintained by the or-
sections (1) and (2) are allowable, as well as ganization, such as stock rooms, print shops,
an appropriate share of general administra- and the like. This category also includes an
tion and general expenses, operation and allocable share of fringe benefit costs, gen-
maintenance expenses, and depreciation. eral administration and general expenses,
(4) Federal agencies may authorize reim- operation and maintenance expenses, and de-
bursement of additional costs for department preciation. Appropriate adjustments will be
heads and faculty only in exceptional cases made for services provided to other functions
where an institution can demonstrate undue or organizations.
hardship or detriment to project perform- b. In the absence of the alternatives pro-
ance. vided for in Section A.2.d, the expenses in-
b. The following guidelines apply to the de- cluded in this category must be allocated to
termination of departmental administrative the major functions of the institution under
costs as direct or indirect (F&A) costs. which the sponsored projects are conducted
(1) In developing the departmental admin- on the basis of the modified total cost of
istration cost pool, special care should be ex- sponsored projects.
ercised to ensure that costs incurred for the c. An appropriate adjustment must be
same purpose in like circumstances are made to eliminate any duplicate charges to
treated consistently as either direct or indi- Federal awards when this category includes
rect (F&A) costs. For example, salaries of similar or identical activities as those in-
technical staff, laboratory supplies (e.g., cluded in the general administration and
chemicals), telephone toll charges, animals, general expense category or other indirect
animal care costs, computer costs, travel (F&A) cost items, such as accounting, pro-
costs, and specialized shop costs must be curement, or personnel administration.
treated as direct costs wherever identifiable
to a particular cost objective. Direct charg- 8. Library Expenses
ing of these costs may be accomplished a. The expenses under this heading are
through specific identification of individual those that have been incurred for the oper-
costs to benefitting cost objectives, or ation of the library, including the cost of
through recharge centers or specialized serv- books and library materials purchased for
ice facilities, as appropriate under the cir- the library, less any items of library income
cumstances. See 200.413 Direct costs, para- that qualify as applicable credits under
graph (c) and 200.468 Specialized service fa-
200.406 Applicable credits. The library ex-

cilities. pense category should also include the fringe
(2) Items such as office supplies, postage, benefits applicable to the salaries and wages
local telephone costs, and memberships must included therein, an appropriate share of
normally be treated as indirect (F&A) costs. general administration and general expense,
200
operation and maintenance expense, and destruction function, and subsequently to Fed-
preciation. Costs incurred in the purchases eral awards in that function.
of rare books (museum-type books) with no
value to Federal awards should not be allo- 10. Offset for Indirect (F&A) Expenses Other-
cated to them. wise Provided for by the Federal Govern-
b. In the absence of the alternatives pro- ment
vided for in Section A.2.d, the expenses in- a. The items to be accumulated under this
cluded in this category must be allocated heading are the reimbursements and other
first on the basis of primary categories of payments from the Federal government
users, including students, professional em- which are made to the institution to support
ployees, and other users. solely, specifically, and directly, in whole or
(1) The student category must consist of in part, any of the administrative or service
full-time equivalent students enrolled at the activities described in subsections 2 through
institution, regardless of whether they earn 9.
credits toward a degree or certificate. b. The items in this group must be treated
(2) The professional employee category as a credit to the affected individual indirect
must consist of all faculty members and (F&A) cost category before that category is
other professional employees of the institu- allocated to benefitting functions.
tion, on a full-time equivalent basis. This
category may also include post-doctorate C. DETERMINATION AND APPLICATION OF
fellows and graduate students. INDIRECT (F&A) COST RATE OR RATES
(3) The other users category must consist 1. Indirect (F&A) Cost Pools
of a reasonable factor as determined by insti-
tutional records to account for all other a. (1) Subject to subsection b, the separate
users of library facilities. categories of indirect (F&A) costs allocated
c. Amount allocated in paragraph b of this to each major function of the institution as
section must be assigned further as follows: prescribed in paragraph B of this paragraph
(1) The amount in the student category C.1 Identification and assignment of indirect
must be assigned to the instruction function (F&A) costs, must be aggregated and treated
of the institution. as a common pool for that function. The
(2) The amount in the professional em- amount in each pool must be divided by the
ployee category must be assigned to the distribution base described in subsection 2 to
major functions of the institution in propor- arrive at a single indirect (F&A) cost rate for
tion to the salaries and wages of all faculty each function.
members and other professional employees (2) The rate for each function is used to
applicable to those functions. distribute indirect (F&A) costs to individual
(3) The amount in the other users category Federal awards of that function. Since a
must be assigned to the other institutional common pool is established for each major
activities function of the institution. function of the institution, a separate indi-
rect (F&A) cost rate would be established for
9. Student Administration and Services each of the major functions described in Sec-
tion A.1 under which Federal awards are car-
a. The expenses under this heading are ried out.
those that have been incurred for the admin- (3) Each institutions indirect (F&A) cost
istration of student affairs and for services rate process must be appropriately designed
to students, including expenses of such ac- to ensure that Federal sponsors do not in
tivities as deans of students, admissions, reg- any way subsidize the indirect (F&A) costs of
istrar, counseling and placement services, other sponsors, specifically activities spon-
student advisers, student health and infir- sored by industry and foreign governments.
mary services, catalogs, and commence- Accordingly, each allocation method used to
ments and convocations. The salaries of identify and allocate the indirect (F&A) cost
members of the academic staff whose respon- pools, as described in Sections A.2, Criteria
sibilities to the institution require adminis- for distribution, and B.2 through B.9, must
trative work that benefits sponsored projects contain the full amount of the institutions
may also be included to the extent that the modified total costs or other appropriate
portion charged to student administration is units of measurement used to make the com-
determined in accordance with Subpart E putations. In addition, the final rate dis-
Cost Principles of this Part. This expense tribution base (as defined in subsection 2) for
category also includes the fringe benefit each major function (organized research, in-
costs applicable to the salaries and wages instruction, etc., as described in Section A.1,
cluded therein, an appropriate share of gen- Major functions of an institution) must con-
eral administration and general expenses, tain all the programs or activities which uti-
operation and maintenance, interest ex- lize the indirect (F&A) costs allocated to
pense, and depreciation. that major function. At the time an indirect
b. In the absence of the alternatives pro- (F&A) cost proposal is submitted to a cog-
vided for in Section A.2.d, the expenses in nizant agency for indirect costs, each insti-
this category must be allocated to the in- tution must describe the process it uses to
201
ensure that Federal funds are not used to 3. Negotiated Lump Sum for Indirect (F&A)
subsidize industry and foreign government Costs
funded programs. A negotiated fixed amount in lieu of indi-
b. In some instances a single rate basis for rect (F&A) costs may be appropriate for self-
use across the board on all work within a contained, off-campus, or primarily subcon-
major function at an institution may not be tracted activities where the benefits derived
appropriate. A single rate for research, for from an institutions indirect (F&A) services
example, might not take into account those cannot be readily determined. Such nego-
different environmental factors and other tiated indirect (F&A) costs will be treated as
conditions which may affect substantially an offset before allocation to instruction, or-
the indirect (F&A) costs applicable to a par- ganized research, other sponsored activities,
ticular segment of research at the institu- and other institutional activities. The base
tion. A particular segment of research may on which such remaining expenses are allo-
be that performed under a single sponsored cated should be appropriately adjusted.
agreement or it may consist of research
4. Predetermined Rates for Indirect (F&A) Costs
under a group of Federal awards performed
in a common environment. The environ- Public Law 87638 (76 Stat. 437) as amended
mental factors are not limited to the phys- (41 U.S.C. 4708) authorizes the use of pre-
ical location of the work. Other important determined rates in determining the indi-
factors are the level of the administrative rect costs (indirect (F&A) costs) applicable
support required, the nature of the facilities under research agreements with educational
or other resources employed, the scientific institutions. The stated objectives of the law
are to simplify the administration of cost-
disciplines or technical skills involved, the
type research and development contracts (in-
organizational arrangements used, or any
cluding grants) with educational institu-
combination thereof. If a particular segment
tions, to facilitate the preparation of their
of a sponsored agreement is performed with- budgets, and to permit more expeditious
in an environment which appears to generate closeout of such contracts when the work is
a significantly different level of indirect completed. In view of the potential advan-
(F&A) costs, provisions should be made for a tages offered by this procedure, negotiation
separate indirect (F&A) cost pool applicable of predetermined rates for indirect (F&A)
to such work. The separate indirect (F&A) costs for a period of two to four years should
cost pool should be developed during the reg- be the norm in those situations where the
ular course of the rate determination process cost experience and other pertinent facts
and the separate indirect (F&A) cost rate re- available are deemed sufficient to enable the
sulting therefrom should be utilized; pro- parties involved to reach an informed judg-
vided it is determined that (1) such indirect ment as to the probable level of indirect
(F&A) cost rate differs significantly from (F&A) costs during the ensuing accounting
that which would have been obtained under periods.
subsection a, and (2) the volume of work to
which such rate would apply is material in 5. Negotiated Fixed Rates and Carry-Forward
Provisions
relation to other Federal awards at the insti-
tution. When a fixed rate is negotiated in advance
for a fiscal year (or other time period), the
2. The Distribution Basis over- or under-recovery for that year may be
included as an adjustment to the indirect
Indirect (F&A) costs must be distributed to
(F&A) cost for the next rate negotiation.
applicable Federal awards and other benefit-
When the rate is negotiated before the carry-
ting activities within each major function forward adjustment is determined, the carry-
(see section A.1, Major functions of an insti- forward amount may be applied to the next
tution) on the basis of modified total direct subsequent rate negotiation. When such ad-
costs (MTDC), consisting of all salaries and justments are to be made, each fixed rate ne-
wages, fringe benefits, materials and sup- gotiated in advance for a given period will be
plies, services, travel, and subgrants and sub- computed by applying the expected indirect
contracts up to the first $25,000 of each (F&A) costs allocable to Federal awards for
subaward (regardless of the period covered the forecast period plus or minus the carry-
by the subaward). MTDC is defined in 200.68 forward adjustment (over- or under-recovery)
Modified Total Direct Cost (MTDC). For this from the prior period, to the forecast dis-
purpose, an indirect (F&A) cost rate should tribution base. Unrecovered amounts under
be determined for each of the separate indi- lump-sum agreements or cost-sharing provi-
rect (F&A) cost pools developed pursuant to sions of prior years must not be carried for-
subsection 1. The rate in each case should be
ward for consideration in the new rate nego-

stated as the percentage which the amount tiation. There must, however, be an advance
of the particular indirect (F&A) cost pool is understanding in each case between the in-
of the modified total direct costs identified stitution and the cognizant agency for indi-
with such pool. rect costs as to whether these differences
202
will be considered in the rate negotiation Federal government at the time of an award
rather than making the determination after (because the educational institution is a new
the differences are known. Further, institu- recipient or the parties cannot reach agree-
tions electing to use this carry-forward pro- ment on a rate), the provisional rate used at
vision may not subsequently change without the time of the award must be adjusted once
prior approval of the cognizant agency for a rate is negotiated and approved by the cog-
indirect costs. In the event that an institu- nizant agency for indirect costs.
tion returns to a post-determined rate, any
over- or under-recovery during the period in 8. Limitation on Reimbursement of
which negotiated fixed rates and carry-for- Administrative Costs
ward provisions were followed will be in-
cluded in the subsequent post-determined a. Notwithstanding the provisions of sub-
rates. Where multiple rates are used, the section C.1.a, the administrative costs
same procedure will be applicable for deter- charged to Federal awards awarded or
mining each rate. amended (including continuation and re-
newal awards) with effective dates beginning
6. Provisional and Final Rates for Indirect on or after the start of the institutions first
(F&A) Costs fiscal year which begins on or after October
Where the cognizant agency for indirect 1, 1991, must be limited to 26% of modified
costs determines that cost experience and total direct costs (as defined in subsection 2)
other pertinent facts do not justify the use for the total of General Administration and
of predetermined rates, or a fixed rate with General Expenses, Departmental Adminis-
a carry-forward, or if the parties cannot tration, Sponsored Projects Administration,
agree on an equitable rate, a provisional rate and Student Administration and Services
must be established. To prevent substantial (including their allocable share of deprecia-
overpayment or underpayment, the provi- tion, interest costs, operation and mainte-
sional rate may be adjusted by the cognizant nance expenses, and fringe benefits costs, as
agency for indirect costs during the institu- provided by Section B, Identification and as-
tions fiscal year. Predetermined or fixed
signment of indirect (F&A) costs, and all
rates may replace provisional rates at any
other types of expenditures not listed spe-
time prior to the close of the institutions
cifically under one of the subcategories of fa-
fiscal year. If a provisional rate is not re-
placed by a predetermined or fixed rate prior cilities in Section B.
to the end of the institutions fiscal year, a b. Institutions should not change their ac-
final rate will be established and upward or counting or cost allocation methods if the ef-
downward adjustments will be made based on fect is to change the charging of a particular
the actual allowable costs incurred for the type of cost from F&A to direct, or to reclas-
period involved. sify costs, or increase allocations from the
administrative pools identified in paragraph
7. Fixed Rates for the Life of the Sponsored B.1 of this Appendix to the other F&A cost
Agreement pools or fringe benefits. Cognizant agencies
Federal agencies must use the negotiated for indirect cost are authorized to allow
rates except as provided in paragraph (e) of changes where an institutions charging
200.414 Indirect (F&A) costs, must para- practices are at variance with acceptable
graph (b)(1) for indirect (F&A) costs in effect practices followed by a substantial majority
at the time of the initial award throughout of other institutions.
the life of the Federal award. Award levels
for Federal awards may not be adjusted in 9. Alternative Method for Administrative Costs
future years as a result of changes in nego- a. Notwithstanding the provisions of sub-
tiated rates. Negotiated rates per the rate section 1.a, an institution may elect to claim
agreement include final, fixed, and predeter-
a fixed allowance for the Administration
mined rates and exclude provisional rates.
portion of indirect (F&A) costs. The allow-
Life for the purpose of this subsection
ance could be either 24% of modified total di-
means each competitive segment of a
project. A competitive segment is a period of rect costs or a percentage equal to 95% of the
years approved by the Federal awarding most recently negotiated fixed or predeter-
agency at the time of the Federal award. If mined rate for the cost pools included under
negotiated rate agreements do not extend Administration as defined in Section B.1,
through the life of the Federal award at the whichever is less. Under this alternative, no
time of the initial award, then the nego- cost proposal need be prepared for the Ad-
tiated rate for the last year of the Federal ministration portion of the indirect (F&A)
cost rate nor is further identification or doc-
award must be extended through the end of

the life of the Federal award. umentation of these costs required (see sub-
b. Except as provided in 200.414 Indirect section c). Where a negotiated indirect
(F&A) costs, when an educational institution (F&A) cost agreement includes this alter-
does not have a negotiated rate with the native, an institution must make no further
203
charges for the expenditure categories de- cided based on mutual agreement between
scribed in Section B.5, General administra- HHS and DOD.
tion and general expenses, Section B.6, De- (2) After cognizance is established, it must
partmental administration expenses, Section continue for a five-year period.
B.7, Sponsored projects administration, and b. Acceptance of rates. See 200.414 Indi-
Section B.9, Student administration and rect (F&A) costs.
services. c. Correcting deficiencies. The cognizant
b. In negotiations of rates for subsequent agency for indirect costs must negotiate
periods, an institution that has elected the changes needed to correct systems defi-
option of subsection a may continue to exer- ciencies relating to accountability for Fed-
cise it at the same rate without further iden- eral awards. Cognizant agencies for indirect
tification or documentation of costs. costs must address the concerns of other af-
c. If an institution elects to accept a fected agencies, as appropriate, and must ne-
threshold rate as defined in subsection a of gotiate special rates for Federal agencies
this section, it is not required to perform a that are required to limit recovery of indi-
detailed analysis of its administrative costs. rect costs by statute.
However, in order to compute the facilities d. Resolving questioned costs. The cog-
components of its indirect (F&A) cost rate, nizant agency for indirect costs must con-
the institution must reconcile its indirect duct any necessary negotiations with an edu-
(F&A) cost proposal to its financial state- cational institution regarding amounts ques-
ments and make appropriate adjustments tioned by audit that are due the Federal gov-
and reclassifications to identify the costs of ernment related to costs covered by a nego-
each major function as defined in Section tiated agreement.
A.1, as well as to identify and allocate the fa- e. Reimbursement. Reimbursement to cog-
cilities components. Administrative costs nizant agencies for indirect costs for work
that are not identified as such by the insti- performed under this Part may be made by
tutions accounting system (such as those in- reimbursement billing under the Economy
curred in academic departments) will be Act, 31 U.S.C. 1535.
classified as instructional costs for purposes f. Procedure for establishing facilities and
of reconciling indirect (F&A) cost proposals administrative rates must be established by
to financial statements and allocating facili- one of the following methods:
ties costs. (1) Formal negotiation. The cognizant
10. Individual Rate Components agency for indirect costs is responsible for
negotiating and approving rates for an edu-
In order to provide mutually agreed-upon cational institution on behalf of all Federal
information for management purposes, each agencies. Non-cognizant Federal agencies for
indirect (F&A) cost rate negotiation or de- indirect costs, which make Federal awards
termination shall include development of a to an educational institution, must notify
rate for each indirect (F&A) cost pool as well the cognizant agency for indirect costs of
as the overall indirect (F&A) cost rate. specific concerns (i.e., a need to establish
special cost rates) which could affect the ne-
11. Negotiation and Approval of Indirect (F&A) gotiation process. The cognizant agency for
Rate indirect costs must address the concerns of
a. Cognizant agency for indirect costs is all interested agencies, as appropriate. A
defined in Subpart AAcronyms and Defini- pre-negotiation conference may be scheduled
tions. among all interested agencies, if necessary.
(1) Cost negotiation cognizance is assigned The cognizant agency for indirect costs must
to the Department of Health and Human then arrange a negotiation conference with
Services (HHS) or the Department of De- the educational institution.
fenses Office of Naval Research (DOD), nor- (2) Other than formal negotiation. The cog-
mally depending on which of the two agen- nizant agency for indirect costs and edu-
cies (HHS or DOD) provides more funds to cational institution may reach an agreement
the educational institution for the most re- on rates without a formal negotiation con-
cent three years. Information on funding ference; for example, through correspond-
must be derived from relevant data gathered ence or use of the simplified method de-
by the National Science Foundation. In cases scribed in this section D of this Appendix.
where neither HHS nor DOD provides Fed- g. Formalizing determinations and agree-
eral funding to an educational institution, ments. The cognizant agency for indirect
the cognizant agency for indirect costs as- costs must formalize all determinations or
signment must default to HHS. Notwith- agreements reached with an educational in-
standing the method for cognizance deter- stitution and provide copies to other agen-
mination described in this section, other ar- cies having an interest. Determinations
rangements for cognizance of a particular should include a description of any adjust-
educational institution may also be based in ments, the actual amount, both dollar and
part on the types of research performed at percentage adjusted, and the reason for mak-
the educational institution and must be de- ing adjustments.
204
h. Disputes and disagreements. Where the are classified under the following titles or
cognizant agency for indirect costs is unable their equivalents:
to reach agreement with an educational in- (1) General administration and general ex-
stitution with regard to rates or audit reso- penses (exclusive of costs of student adminis-
lution, the appeal system of the cognizant tration and services, student activities, stu-
agency for indirect costs must be followed dent aid, and scholarships).
for resolution of the disagreement. (2) Operation and maintenance of physical
plant and depreciation (after appropriate ad-
12. Standard Format for Submission justment for costs applicable to other insti-
tutional activities).
For facilities and administrative (indirect (3) Library.
(F&A)) rate proposals, educational institu- (4) Department administration expenses,
tions must use the standard format, shown which will be computed as 20 percent of the
in section E of this appendix, to submit their salaries and expenses of deans and heads of
indirect (F&A) rate proposal to the cog- departments.
nizant agency for indirect costs. The cog- In those cases where expenditures classi-
nizant agency for indirect costs may, on an fied under subsection (1) have previously
institution-by-institution basis, grant excep- been allocated to other institutional activi-
tions from all or portions of Part II of the ties, they may be included in the indirect
standard format requirement. This require- (F&A) cost pool. The total amount of sala-
ment does not apply to educational institu- ries and wages included in the indirect (F&A)
tions that use the simplified method for cal- cost pool must be separately identified.
culating indirect (F&A) rates, as described in c. Establish a salary and wage distribution
Section D of this Appendix. base, determined by deducting from the total
In order to provide mutually agreed upon of salaries and wages as established in sub-
information for management purposes, each section a from the amount of salaries and
F&A cost rate negotiation or determination wages included under subsection b.
must include development of a rate for each d. Establish the indirect (F&A) cost rate,
F&A cost pool as well as the overall F&A determined by dividing the amount in the in-
rate. direct (F&A) cost pool, subsection b, by the
amount of the distribution base, subsection
D. SIMPLIFIED METHOD FOR SMALL c.
INSTITUTIONS e. Apply the indirect (F&A) cost rate to di-
rect salaries and wages for individual agree-
1. General ments to determine the amount of indirect
a. Where the total direct cost of work cov- (F&A) costs allocable to such agreements.
ered by this Part at an institution does not 3. Simplified ProcedureModified Total Direct
exceed $10 million in a fiscal year, the sim- Cost Base
plified procedure described in subsections 2
or 3 may be used in determining allowable a. Establish the total costs incurred by the
indirect (F&A) costs. Under this simplified institution for the base period.
procedure, the institutions most recent an- b. Establish an indirect (F&A) cost pool
nual financial report and immediately avail- consisting of the expenditures (exclusive of
able supporting information must be utilized capital items and other costs specifically
as a basis for determining the indirect (F&A) identified as unallowable) which customarily
cost rate applicable to all Federal awards. are classified under the following titles or
The institution may use either the salaries their equivalents:
and wages (see subsection 2) or modified (1) General administration and general ex-
total direct costs (see subsection 3) as the penses (exclusive of costs of student adminis-
distribution basis. tration and services, student activities, stu-
b. The simplified procedure should not be dent aid, and scholarships).
used where it produces results which appear (2) Operation and maintenance of physical
inequitable to the Federal government or the plant and depreciation (after appropriate ad-
institution. In any such case, indirect (F&A) justment for costs applicable to other insti-
costs should be determined through use of tutional activities).
(3) Library.
the regular procedure.
(4) Department administration expenses,
2. Simplified ProcedureSalaries and Wages which will be computed as 20 percent of the
Base salaries and expenses of deans and heads of
departments. In those cases where expendi-
a. Establish the total amount of salaries tures classified under subsection (1) have
and wages paid to all employees of the insti- previously been allocated to other institu-
tution.
tional activities, they may be included in the

b. Establish an indirect (F&A) cost pool indirect (F&A) cost pool. The modified total
consisting of the expenditures (exclusive of direct costs amount included in the indirect
capital items and other costs specifically (F&A) cost pool must be separately identi-
identified as unallowable) which customarily fied.
205
Pt. 200, App. IV 2 CFR Ch. II (1114 Edition)
c. Establish a modified total direct cost rates in accordance with the requirements of
distribution base, as defined in Section C.2, this section, the Federal government must
The distribution basis, that consists of all unilaterally establish such rates. Such rates
institutions direct functions. may be based upon audited historical data or
d. Establish the indirect (F&A) cost rate, such other data that have been furnished to
determined by dividing the amount in the in- the cognizant agency for indirect costs and
direct (F&A) cost pool, subsection b, by the for which it can be demonstrated that all un-
amount of the distribution base, subsection allowable costs have been excluded. When in-
c. direct (F&A) cost rates are unilaterally es-
e. Apply the indirect (F&A) cost rate to tablished by the Federal government because
the modified total direct costs for individual of failure of the institution to submit a cer-
agreements to determine the amount of indi- tified proposal for establishing such rates in
rect (F&A) costs allocable to such agree- accordance with this section, the rates es-
ments. tablished will be set at a level low enough to
ensure that potentially unallowable costs
E. DOCUMENTATION REQUIREMENTS will not be reimbursed.
The standard format for documentation re- c. Certificate. The certificate required by
quirements for indirect (indirect (F&A)) rate this section must be in the following form:
proposals for claiming costs under the reg-
CERTIFICATE OF INDIRECT (F&A) COSTS
ular method is available on the OMB Web
site here: http://www.whitehouse.gov/omb/ This is to certify that to the best of my
grantslforms. knowledge and belief:
(1) I have reviewed the indirect (F&A) cost
F. CERTIFICATION proposal submitted herewith;
(2) All costs included in this proposal [iden-
1. Certification of Charges
tify date] to establish billing or final indi-
To assure that expenditures for Federal rect (F&A) costs rate for [identify period
awards are proper and in accordance with covered by rate] are allowable in accordance
the agreement documents and approved with the requirements of the Federal agree-
project budgets, the annual and/or final fis- ment(s) to which they apply and with the
cal reports or vouchers requesting payment cost principles applicable to those agree-
under the agreements will include a certifi- ments.
cation, signed by an authorized official of (3) This proposal does not include any costs
the university, which reads By signing this which are unallowable under applicable cost
report, I certify to the best of my knowledge principles such as (without limitation): pub-
and belief that the report is true, complete, lic relations costs, contributions and dona-
and accurate, and the expenditures, disburse- tions, entertainment costs, fines and pen-
ments and cash receipts are for the purposes alties, lobbying costs, and defense of fraud
and intent set forth in the award documents. proceedings; and
I am aware that any false, fictitious, or (4) All costs included in this proposal are
fraudulent information, or the omission of properly allocable to Federal agreements on
any material fact, may subject me to crimi- the basis of a beneficial or causal relation-
nal, civil or administrative penalties for ship between the expenses incurred and the
fraud, false statements, false claims or oth- agreements to which they are allocated in
erwise. (U.S. Code, Title 18, Section 1001 and accordance with applicable requirements.
Title 31, Sections 37293733 and 38013812). I declare that the foregoing is true and cor-
rect.
2. Certification of Indirect (F&A) Costs
Institution of Higher Education:
a. Policy. Cognizant agencies must not ac- Signature: llllllllllllllllll
cept a proposed indirect cost rate must un- Name of Official: llllllllllllll
less such costs have been certified by the Title: llllllllllllllllllll
educational institution using the Certificate Date of Execution: lllllllllllll
of indirect (F&A) Costs set forth in sub-
section F.2.c APPENDIX IV TO PART 200INDIRECT
b. The certificate must be signed on behalf (F&A) COSTS IDENTIFICATION AND
of the institution by the chief financial offi-
ASSIGNMENT, AND RATE DETERMINA-
cer or an individual designated by an indi-
vidual at a level no lower than vice president TION FOR NONPROFIT ORGANIZA-
or chief financial officer. TIONS
(1) No indirect (F&A) cost rate must be
A. GENERAL
binding upon the Federal government if the
most recent required proposal from the insti- 1. Indirect costs are those that have been
tution has not been certified. Where it is incurred for common or joint objectives and
necessary to establish indirect (F&A) cost cannot be readily identified with a par-
rates, and the institution has not submitted ticular final cost objective. Direct cost of
a certified proposal for establishing such minor amounts may be treated as indirect
206
OMB Guidance Pt. 200, App. IV
costs under the conditions described in rating the organizations total costs for the
200.413 Direct costs paragraph (d) of this base period as either direct or indirect, and
Part. After direct costs have been deter- (ii) dividing the total allowable indirect
mined and assigned directly to awards or costs (net of applicable credits) by an equi-
other work as appropriate, indirect costs are table distribution base. The result of this
those remaining to be allocated to benefit- process is an indirect cost rate which is used
ting cost objectives. A cost may not be allo- to distribute indirect costs to individual
cated to a Federal award as an indirect cost Federal awards. The rate should be expressed
if any other cost incurred for the same pur- as the percentage which the total amount of
pose, in like circumstances, has been as- allowable indirect costs bears to the base se-
signed to a Federal award as a direct cost. lected. This method should also be used
Major nonprofit organizations are de- where an organization has only one major
fined in 200.414 Indirect (F&A) costs. See in- function encompassing a number of indi-
direct cost rate reporting requirements in vidual projects or activities, and may be
sections B.2.e and B.3.g of this Appendix. used where the level of Federal awards to an
organization is relatively small.
B. ALLOCATION OF INDIRECT COSTS AND
b. Both the direct costs and the indirect
DETERMINATION OF INDIRECT COST RATES
costs must exclude capital expenditures and
1. General unallowable costs. However, unallowable
costs which represent activities must be in-
a. If a nonprofit organization has only one cluded in the direct costs under the condi-
major function, or where all its major functions described in 200.413 Direct costs, para-
tions benefit from its indirect costs to ap- graph (e) of this Part.
proximately the same degree, the allocation c. The distribution base may be total di-
of indirect costs and the computation of an rect costs (excluding capital expenditures
indirect cost rate may be accomplished and other distorting items, such contracts or
through simplified allocation procedures, as subawards for $25,000 or more), direct sala-
described in section B.2 of this Appendix. ries and wages, or other base which results in
b. If an organization has several major
an equitable distribution. The distribution
functions which benefit from its indirect
base must exclude participant support costs
costs in varying degrees, allocation of indi-
as defined in 200.75 Participant support
rect costs may require the accumulation of
costs.
such costs into separate cost groupings
d. Except where a special rate(s) is re-
which then are allocated individually to ben-
quired in accordance with section B.5 of this
efitting functions by means of a base which
Appendix, the indirect cost rate developed
best measures the relative degree of benefit.
The indirect costs allocated to each function under the above principles is applicable to
are then distributed to individual Federal all Federal awards of the organization. If a
awards and other activities included in that special rate(s) is required, appropriate modi-
function by means of an indirect cost rate(s). fications must be made in order to develop
c. The determination of what constitutes the special rate(s).
an organizations major functions will de- e. For an organization that receives more
pend on its purpose in being; the types of than $10 million in Federal funding of direct
services it renders to the public, its clients, costs in a fiscal year, a breakout of the indi-
and its members; and the amount of effort it rect cost component into two broad cat-
devotes to such activities as fundraising, egories, Facilities and Administration as de-
public information and membership activi- fined in section A.3 of this Appendix, is re-
ties. quired. The rate in each case must be stated
d. Specific methods for allocating indirect as the percentage which the amount of the
costs and computing indirect cost rates particular indirect cost category (i.e., Facili-
along with the conditions under which each ties or Administration) is of the distribution
method should be used are described in sec- base identified with that category.
tion B.2 through B.5 of this Appendix.
e. The base period for the allocation of in- 3. Multiple Allocation Base Method
direct costs is the period in which such costs a. General. Where an organizations indi-
are incurred and accumulated for allocation rect costs benefit its major functions in
to work performed in that period. The base varying degrees, indirect costs must be accu-
period normally should coincide with the or- mulated into separate cost groupings, as de-
ganizations fiscal year but, in any event, scribed in subparagraph b. Each grouping
must be so selected as to avoid inequities in must then be allocated individually to bene-
the allocation of the costs. fitting functions by means of a base which
best measures the relative benefits. The de-
2. Simplified Allocation Method
fault allocation bases by cost pool are de-
a. Where an organizations major functions scribed in section B.3.c of this Appendix.

benefit from its indirect costs to approxi- b. Identification of indirect costs. Cost
mately the same degree, the allocation of in- groupings must be established so as to per-
direct costs may be accomplished by (i) sepa- mit the allocation of each grouping on the
207
basis of benefits provided to the major func- services costs must be treated as direct costs
tions. Each grouping must constitute a pool wherever identifiable to a particular pro-
of expenses that are of like character in gram. The salaries and wages of administra-
terms of functions they benefit and in terms tive and pooled clerical staff should nor-
of the allocation base which best measures mally be treated as indirect costs. Direct
the relative benefits provided to each func- charging of these costs may be appropriate
tion. The groupings are classified within the where a major project or activity explicitly
two broad categories: Facilities and Ad- requires and budgets for administrative or
ministration, as described in section A.3 of clerical services and other individuals in-
this Appendix. The indirect cost pools are de- volved can be identified with the program or
fined as follows: activity. Items such as office supplies, post-
(1) Depreciation. The expenses under this age, local telephone costs, periodicals and
heading are the portion of the costs of the memberships should normally be treated as
organizations buildings, capital improve- indirect costs.
ments to land and buildings, and equipment c. Allocation bases. Actual conditions
which are computed in accordance with must be taken into account in selecting the
200.436 Depreciation. base to be used in allocating the expenses in
(2) Interest. Interest on debt associated each grouping to benefitting functions. The
with certain buildings, equipment and cap- essential consideration in selecting a method
ital improvements are computed in accord- or a base is that it is the one best suited for
ance with 200.449 Interest. assigning the pool of costs to cost objectives
(3) Operation and maintenance expenses. in accordance with benefits derived; a trace-
The expenses under this heading are those able cause and effect relationship; or logic
that have been incurred for the administra- and reason, where neither the cause nor the
tion, operation, maintenance, preservation, effect of the relationship is determinable.
and protection of the organizations physical When an allocation can be made by assign-
plant. They include expenses normally in- ment of a cost grouping directly to the func-
curred for such items as: janitorial and util- tion benefitted, the allocation must be made
ity services; repairs and ordinary or normal in that manner. When the expenses in a cost
alterations of buildings, furniture and equip- grouping are more general in nature, the al-
ment; care of grounds; maintenance and op- location must be made through the use of a
eration of buildings and other plant facili- selected base which produces results that are
ties; security; earthquake and disaster pre- equitable to both the Federal government
paredness; environmental safety; hazardous and the organization. The distribution must
waste disposal; property, liability and other be made in accordance with the bases de-
insurance relating to property; space and scribed herein unless it can be demonstrated
capital leasing; facility planning and man- that the use of a different base would result
agement; and central receiving. The oper- in a more equitable allocation of the costs,
ation and maintenance expenses category or that a more readily available base would
must also include its allocable share of not increase the costs charged to Federal
fringe benefit costs, depreciation, and inter- awards. The results of special cost studies
est costs. (such as an engineering utility study) must
(4) General administration and general ex- not be used to determine and allocate the in-
penses. The expenses under this heading are direct costs to Federal awards.
those that have been incurred for the overall (1) Depreciation. Depreciation expenses
general executive and administrative offices must be allocated in the following manner:
of the organization and other expenses of a (a) Depreciation on buildings used exclu-
general nature which do not relate solely to sively in the conduct of a single function,
any major function of the organization. This and on capital improvements and equipment
category must also include its allocable used in such buildings, must be assigned to
share of fringe benefit costs, operation and that function.
maintenance expense, depreciation, and in- (b) Depreciation on buildings used for more
terest costs. Examples of this category in- than one function, and on capital improve-
clude central offices, such as the directors ments and equipment used in such buildings,
office, the office of finance, business serv- must be allocated to the individual functions
ices, budget and planning, personnel, safety performed in each building on the basis of
and risk management, general counsel, man- usable square feet of space, excluding com-
agement information systems, and library mon areas, such as hallways, stairwells, and
costs. restrooms.
In developing this cost pool, special care (c) Depreciation on buildings, capital im-
should be exercised to ensure that costs in- provements and equipment related space
curred for the same purpose in like cir- (e.g., individual rooms, and laboratories)
cumstances are treated consistently as ei- used jointly by more than one function (as
ther direct or indirect costs. For example, determined by the users of the space) must
salaries of technical staff, project supplies, be treated as follows. The cost of each joint-
project publication, telephone toll charges, ly used unit of space must be allocated to
computer costs, travel costs, and specialized the benefitting functions on the basis of:
208
OMB Guidance Pt. 200, App. IV
(i) the employees and other users on a full- common pool for that function. The costs in
time equivalent (FTE) basis or salaries and the common pool must then be distributed to
wages of those individual functions benefit- individual Federal awards included in that
ting from the use of that space; or function by use of a single indirect cost rate.
(ii) organization-wide employee FTEs or f. Distribution basis. Indirect costs must
salaries and wages applicable to the benefit- be distributed to applicable Federal awards
ting functions of the organization. and other benefitting activities within each
(d) Depreciation on certain capital im- major function on the basis of MTDC (see
provements to land, such as paved parking definition in 200.68 Modified Total Direct
areas, fences, sidewalks, and the like, not in- Cost (MTDC) of Part 200.
cluded in the cost of buildings, must be allo- g. Individual Rate Components. An indi-
cated to user categories on a FTE basis and rect cost rate must be determined for each
distributed to major functions in proportion separate indirect cost pool developed. The
to the salaries and wages of all employees rate in each case must be stated as the per-
applicable to the functions. centage which the amount of the particular
(2) Interest. Interest costs must be allo- indirect cost pool is of the distribution base
cated in the same manner as the deprecia- identified with that pool. Each indirect cost
tion on the buildings, equipment and capital rate negotiation or determination agreement
equipment to which the interest relates. must include development of the rate for
(3) Operation and maintenance expenses. each indirect cost pool as well as the overall
Operation and maintenance expenses must indirect cost rate. The indirect cost pools
be allocated in the same manner as the de- must be classified within two broad cat-
preciation. egories: Facilities and Administration,
(4) General administration and general ex- as described in section A.3 of this Appendix.
penses. General administration and general
expenses must be allocated to benefitting 4. Direct Allocation Method
functions based on modified total costs
(MTC). The MTC is the modified total direct a. Some nonprofit organizations treat all
costs (MTDC), as described in Subpart A costs as direct costs except general adminis-
Acronyms and Definitions of Part 200, plus tration and general expenses. These organi-
the allocated indirect cost proportion. The zations generally separate their costs into
expenses included in this category could be three basic categories: (i) General adminis-
grouped first according to major functions of tration and general expenses, (ii) fund-
the organization to which they render serv- raising, and (iii) other direct functions (in-
ices or provide benefits. The aggregate excluding projects performed under Federal
penses of each group must then be allocated awards). Joint costs, such as depreciation,
to benefitting functions based on MTC. rental costs, operation and maintenance of
d. Order of distribution. facilities, telephone expenses, and the like
(1) Indirect cost categories consisting of are prorated individually as direct costs to
depreciation, interest, operation and mainte- each category and to each Federal award or
nance, and general administration and gen- other activity using a base most appropriate
eral expenses must be allocated in that order to the particular cost being prorated.
to the remaining indirect cost categories as b. This method is acceptable, provided each
well as to the major functions of the organi- joint cost is prorated using a base which ac-
zation. Other cost categories should be allo- curately measures the benefits provided to
cated in the order determined to be most ap- each Federal award or other activity. The
propriate by the organization. This order of bases must be established in accordance with
allocation does not apply if cross allocation reasonable criteria, and be supported by cur-
of costs is made as provided in section B.3.d.2 rent data. This method is compatible with
of this Appendix. the Standards of Accounting and Financial
(2) Normally, an indirect cost category will Reporting for Voluntary Health and Welfare
be considered closed once it has been allo- Organizations issued jointly by the National
cated to other cost objectives, and costs Health Council, Inc., the National Assembly
must not be subsequently allocated to it. of Voluntary Health and Social Welfare Or-
However, a cross allocation of costs between ganizations, and the United Way of America.
two or more indirect costs categories could c. Under this method, indirect costs con-
be used if such allocation will result in a sist exclusively of general administration
more equitable allocation of costs. If a cross and general expenses. In all other respects,
allocation is used, an appropriate modifica- the organizations indirect cost rates must
tion to the composition of the indirect cost be computed in the same manner as that de-
categories is required. scribed in section B.2 Simplified allocation
e. Application of indirect cost rate or method of this Appendix.
rates. Except where a special indirect cost

5. Special Indirect Cost Rates
rate(s) is required in accordance with section
B.5 of this Appendix, the separate groupings In some instances, a single indirect cost
of indirect costs allocated to each major rate for all activities of an organization or
function must be aggregated and treated as a for each major function of the organization
209
may not be appropriate, since it would not f. Indirect cost proposal means the docu-
take into account those different factors mentation prepared by an organization to
which may substantially affect the indirect substantiate its claim for the reimbursement
costs applicable to a particular segment of of indirect costs. This proposal provides the
work. For this purpose, a particular segment basis for the review and negotiation leading
of work may be that performed under a sin- to the establishment of an organizations in-
gle Federal award or it may consist of work direct cost rate.
under a group of Federal awards performed g. Cost objective means a function, organiza-
in a common environment. These factors tional subdivision, contract, Federal award,
may include the physical location of the or other work unit for which cost data are
work, the level of administrative support re- desired and for which provision is made to
quired, the nature of the facilities or other accumulate and measure the cost of proc-
resources employed, the scientific disciplines esses, projects, jobs and capitalized projects.
or technical skills involved, the organiza-
tional arrangements used, or any combina- 2. Negotiation and Approval of Rates
tion thereof. When a particular segment of a. Unless different arrangements are
work is performed in an environment which agreed to by the Federal agencies concerned,
appears to generate a significantly different the Federal agency with the largest dollar
level of indirect costs, provisions should be value of Federal awards with an organization
made for a separate indirect cost pool appli- will be designated as the cognizant agency
cable to such work. The separate indirect for indirect costs for the negotiation and ap-
cost pool should be developed during the proval of the indirect cost rates and, where
course of the regular allocation process, and necessary, other rates such as fringe benefit
the separate indirect cost rate resulting and computer charge-out rates. Once an
therefrom should be used, provided it is de- agency is assigned cognizance for a par-
termined that (i) the rate differs signifi- ticular nonprofit organization, the assign-
cantly from that which would have been ob- ment will not be changed unless there is a
tained under sections B.2, B.3, and B.4 of this shift in the dollar volume of the Federal
Appendix, and (ii) the volume of work to awards to the organization for at least three
which the rate would apply is material. years. All concerned Federal agencies must
be given the opportunity to participate in
C. NEGOTIATION AND APPROVAL OF INDIRECT
the negotiation process but, after a rate has
COST RATES
been agreed upon, it will be accepted by all
1. Definitions Federal agencies. When a Federal agency has
reason to believe that special operating fac-
As used in this section, the following terms tors affecting its Federal awards necessitate
have the meanings set forth in this section: special indirect cost rates in accordance
a. Cognizant agency for indirect costs means with section B.5 of this Appendix, it will,
the Federal agency responsible for negoti- prior to the time the rates are negotiated,
ating and approving indirect cost rates for a notify the cognizant agency for indirect
nonprofit organization on behalf of all Fed- costs. (See also 200.414 Indirect (F&A) costs
eral agencies. of Part 200.)
b. Predetermined rate means an indirect cost b. Except as otherwise provided in 200.414
rate, applicable to a specified current or fu- Indirect (F&A) costs paragraph (e) of this
ture period, usually the organizations fiscal Part, a nonprofit organization which has not
year. The rate is based on an estimate of the previously established an indirect cost rate
costs to be incurred during the period. A pre- with a Federal agency must submit its ini-
determined rate is not subject to adjust- tial indirect cost proposal immediately after
ment. the organization is advised that a Federal
c. Fixed rate means an indirect cost rate award will be made and, in no event, later
which has the same characteristics as a pre- than three months after the effective date of
determined rate, except that the difference the Federal award.
between the estimated costs and the actual c. Unless approved by the cognizant agency
costs of the period covered by the rate is car- for indirect costs in accordance with 200.414
ried forward as an adjustment to the rate Indirect (F&A) costs paragraph (f) of this
computation of a subsequent period. Part, organizations that have previously es-
d. Final rate means an indirect cost rate tablished indirect cost rates must submit a
applicable to a specified past period which is new indirect cost proposal to the cognizant
based on the actual costs of the period. A agency for indirect costs within six months
final rate is not subject to adjustment. after the close of each fiscal year.
e. Provisional rate or billing rate means a d. A predetermined rate may be negotiated
temporary indirect cost rate applicable to a for use on Federal awards where there is rea-
specified period which is used for funding, in- sonable assurance, based on past experience
terim reimbursement, and reporting indirect and reliable projection of the organizations
costs on Federal awards pending the estab- costs, that the rate is not likely to exceed a
lishment of a final rate for the period. rate based on the organizations actual costs.
210
OMB Guidance Pt. 200, App. V
e. Fixed rates may be negotiated where to which they apply and with Subpart E
predetermined rates are not considered ap- Cost Principles of Part 200.
propriate. A fixed rate, however, must not be (3) This proposal does not include any costs
negotiated if (i) all or a substantial portion which are unallowable under Subpart E
of the organizations Federal awards are ex- Cost Principles of Part 200 such as (without
pected to expire before the carry-forward ad- limitation): public relations costs, contribu-
justment can be made; (ii) the mix of Federal tions and donations, entertainment costs,
and non-Federal work at the organization is fines and penalties, lobbying costs, and de-
too erratic to permit an equitable carry-for- fense of fraud proceedings; and
ward adjustment; or (iii) the organizations (4) All costs included in this proposal are
operations fluctuate significantly from year properly allocable to Federal awards on the
to year. basis of a beneficial or causal relationship
f. Provisional and final rates must be nego- between the expenses incurred and the Fed-
tiated where neither predetermined nor fixed eral awards to which they are allocated in
rates are appropriate. Predetermined or accordance with applicable requirements.
fixed rates may replace provisional rates at
I declare that the foregoing is true and cor-
any time prior to the close of the organiza-
rect.
tions fiscal year. If that event does not
occur, a final rate will be established and up- Nonprofit Organization: lllllllllll
ward or downward adjustments will be made Signature: llllllllllllllllll
based on the actual allowable costs incurred Name of Official: llllllllllllll
for the period involved. Title: llllllllllllllllllll
g. The results of each negotiation must be Date of Execution: lllllllllllll
formalized in a written agreement between
the cognizant agency for indirect costs and APPENDIX V TO PART 200STATE/LOCAL
the nonprofit organization. The cognizant GOVERNMENT AND INDIAN TRIBE-
agency for indirect costs must make avail-
WIDE CENTRAL SERVICE COST ALLO-
able copies of the agreement to all concerned
CATION PLANS
Federal agencies.
h. If a dispute arises in a negotiation of an A. GENERAL
indirect cost rate between the cognizant
agency for indirect costs and the nonprofit 1. Most governmental units provide certain
organization, the dispute must be resolved in services, such as motor pools, computer cen-
accordance with the appeals procedures of ters, purchasing, accounting, etc., to oper-
the cognizant agency for indirect costs. ating agencies on a centralized basis. Since
i. To the extent that problems are encoun- federally-supported awards are performed
tered among the Federal agencies in connec- within the individual operating agencies,
tion with the negotiation and approval proc- there needs to be a process whereby these
ess, OMB will lend assistance as required to central service costs can be identified and
resolve such problems in a timely manner. assigned to benefitted activities on a reason-
able and consistent basis. The central service
D. Certification of Indirect (F&A) Costs cost allocation plan provides that process.
Required Certification. No proposal to es- All costs and other data used to distribute
tablish indirect (F&A) cost rates must be ac- the costs included in the plan should be sup-
ceptable unless such costs have been cer- ported by formal accounting and other
tified by the non-profit organization using records that will support the propriety of the
the Certificate of Indirect (F&A) Costs set costs assigned to Federal awards.
forth in section j. of this appendix. The cer- 2. Guidelines and illustrations of central
tificate must be signed on behalf of the orga- service cost allocation plans are provided in
nization by an individual at a level no lower a brochure published by the Department of
than vice president or chief financial officer Health and Human Services entitled A
for the organization. Guide for State, Local and Indian Tribal Gov-
j. Each indirect cost rate proposal must be ernments: Cost Principles and Procedures for
accompanied by a certification in the fol- Developing Cost Allocation Plans and Indirect
lowing form: Cost Rates for Agreements with the Federal
Government. A copy of this brochure may be
Certificate of Indirect (F&A) Costs obtained from the Superintendent of Docu-
This is to certify that to the best of my ments, U.S. Government Printing Office.
knowledge and belief: B. DEFINITIONS
(1) I have reviewed the indirect (F&A) cost
proposal submitted herewith; 1. Agency or operating agency means an or-
(2) All costs included in this proposal [iden- ganizational unit or sub-division within a
tify date] to establish billing or final indi- governmental unit that is responsible for the
rect (F&A) costs rate for [identify period performance or administration of Federal
covered by rate] are allowable in accordance awards or activities of the governmental
with the requirements of the Federal awards unit.
211
Pt. 200, App. V 2 CFR Ch. II (1114 Edition)
2. Allocated central services means central 4. All central service cost allocation plans
services that benefit operating agencies but will be prepared and, when required, sub-
are not billed to the agencies on a fee-for- mitted within six months prior to the begin-
service or similar basis. These costs are allo- ning of each of the governmental units fis-
cated to benefitted agencies on some reason- cal years in which it proposes to claim cen-
able basis. Examples of such services might tral service costs. Extensions may be grant-
include general accounting, personnel ad- ed by the cognizant agency for indirect costs
ministration, purchasing, etc. on a case-by-case basis.
3. Billed central services means central serv-
ices that are billed to benefitted agencies or E. DOCUMENTATION REQUIREMENTS FOR
programs on an individual fee-for-service or SUBMITTED PLANS
similar basis. Typical examples of billed cen-
tral services include computer services, The documentation requirements described
transportation services, insurance, and in this section may be modified, expanded, or
fringe benefits. reduced by the cognizant agency for indirect
4. Cognizant agency for indirect costs is de- costs on a case-by-case basis. For example,
fined in 200.19 Cognizant agency for indirect the requirements may be reduced for those
costs of this Part. The determination of cog- central services which have little or no im-
nizant agency for indirect costs for states pact on Federal awards. Conversely, if a re-
and local governments is described in section view of a plan indicates that certain addi-
F.1, Negotiation and Approval of Central tional information is needed, and will likely
Service Plans. be needed in future years, it may be rou-
5. Major local government means local gov- tinely requested in future plan submissions.
ernment that receives more than $100 million Items marked with an asterisk (*) should be
in direct Federal awards subject to this Part. submitted only once; subsequent plans
C. SCOPE OF THE CENTRAL SERVICE COST should merely indicate any changes since the
ALLOCATION PLANS last plan.
The central service cost allocation plan 1. General

will include all central service costs that
will be claimed (either as a billed or an allo- All proposed plans must be accompanied by
cated cost) under Federal awards and will be the following: an organization chart suffi-
documented as described in section E. Costs ciently detailed to show operations including
of central services omitted from the plan the central service activities of the state/
will not be reimbursed. local government whether or not they are
shown as benefitting from central service
D. SUBMISSION REQUIREMENTS functions; a copy of the Comprehensive An-
1. Each state will submit a plan to the De- nual Financial Report (or a copy of the Exec-
partment of Health and Human Services for utive Budget if budgeted costs are being pro-
each year in which it claims central service posed) to support the allowable costs of each
costs under Federal awards. The plan should central service activity included in the plan;
include (a) a projection of the next years al- and, a certification (see subsection 4.) that
located central service cost (based either on the plan was prepared in accordance with
actual costs for the most recently completed this Part, contains only allowable costs, and
year or the budget projection for the coming was prepared in a manner that treated simi-
year), and (b) a reconciliation of actual allo- lar costs consistently among the various
cated central service costs to the estimated Federal awards and between Federal and
costs used for either the most recently com- non-Federal awards/activities.
pleted year or the year immediately pre-
ceding the most recently completed year. 2. Allocated Central Services
2. Each major local government is also re-
For each allocated central service, the
quired to submit a plan to its cognizant
plan must also include the following: a brief
agency for indirect costs annually.
description of the service, an identification
3. All other local governments claiming
central service costs must develop a plan in of the unit rendering the service and the op-
accordance with the requirements described erating agencies receiving the service, the
in this Part and maintain the plan and re- items of expense included in the cost of the
lated supporting documentation for audit. service, the method used to distribute the
These local governments are not required to cost of the service to benefitted agencies,
submit their plans for Federal approval un- and a summary schedule showing the alloca-
less they are specifically requested to do so tion of each service to the specific benefitted
agencies. If any self-insurance funds or
by the cognizant agency for indirect costs.

Where a local government only receives fringe benefits costs are treated as allocated
funds as a subrecipient, the pass-through en- (rather than billed) central services, docu-
tity will be responsible for monitoring the mentation discussed in subsections 3.b. and
subrecipients plan. c. must also be included.
212
OMB Guidance Pt. 200, App. V
3. Billed Services insurance plans, the following information
must be provided: the governmental units
a. General. The information described in
funding policies, e.g., legislative bills, trust
this section must be provided for all billed
agreements, or state-mandated contribution
central services, including internal service
rules, if different from actuarially deter-
funds, self-insurance funds, and fringe ben-
mined rates; the pension plans costs accrued
efit funds.
for the year; the amount funded, and date(s)
b. Internal service funds.
of funding; a copy of the current actuarial
(1) For each internal service fund or simi-
report (including the actuarial assumptions);
lar activity with an operating budget of $5
the plan trustees report; and, a schedule
million or more, the plan must include: a
from the activity showing the value of the
brief description of each service; a balance
interest cost associated with late funding.
sheet for each fund based on individual ac-
counts contained in the governmental units 4. Required Certification
accounting system; a revenue/expenses state-
ment, with revenues broken out by source, Each central service cost allocation plan
e.g., regular billings, interest earned, etc.; a will be accompanied by a certification in the
listing of all non-operating transfers (as de- following form:
fined by Generally Accepted Accounting CERTIFICATE OF COST ALLOCATION
Principles (GAAP)) into and out of the fund; PLAN
a description of the procedures (method-
ology) used to charge the costs of each serv- This is to certify that I have reviewed the
ice to users, including how billing rates are cost allocation plan submitted herewith and
determined; a schedule of current rates; and, to the best of my knowledge and belief:
a schedule comparing total revenues (includ- (1) All costs included in this proposal [iden-
ing imputed revenues) generated by the serv- tify date] to establish cost allocations or bil-
ice to the allowable costs of the service, as lings for [identify period covered by plan] are
determined under this Part, with an expla- allowable in accordance with the require-
nation of how variances will be handled. ments of this Part and the Federal award(s)
(2) Revenues must consist of all revenues to which they apply. Unallowable costs have
generated by the service, including unbilled been adjusted for in allocating costs as indi-
and uncollected revenues. If some users were cated in the cost allocation plan.
not billed for the services (or were not billed (2) All costs included in this proposal are
at the full rate for that class of users), a properly allocable to Federal awards on the
schedule showing the full imputed revenues basis of a beneficial or causal relationship
associated with these users must be pro- between the expenses incurred and the Fed-
vided. Expenses must be broken out by ob- eral awards to which they are allocated in
ject cost categories (e.g., salaries, supplies, accordance with applicable requirements.
etc.). Further, the same costs that have been
c. Self-insurance funds. For each self-insur- treated as indirect costs have not been
ance fund, the plan must include: the fund claimed as direct costs. Similar types of
balance sheet; a statement of revenue and costs have been accounted for consistently.
expenses including a summary of billings I declare that the foregoing is true and cor-
and claims paid by agency; a listing of all rect.
non-operating transfers into and out of the Governmental Unit: lllllllllllll
fund; the type(s) of risk(s) covered by the Signature: llllllllllllllllll
fund (e.g., automobile liability, workers Name of Official: llllllllllllll
compensation, etc.); an explanation of how Title: llllllllllllllllllll
the level of fund contributions are deter- Date of Execution: lllllllllllll
mined, including a copy of the current actu-
arial report (with the actuarial assumptions F. NEGOTIATION AND APPROVAL OF CENTRAL
used) if the contributions are determined on SERVICE PLANS
an actuarial basis; and, a description of the
1. Federal Cognizant Agency for Indirect Costs
procedures used to charge or allocate fund
Assignments for Cost Negotiation
contributions to benefitted activities. Re-
serve levels in excess of claims (1) submitted In general, unless different arrangements
and adjudicated but not paid, (2) submitted are agreed to by the concerned Federal agen-
but not adjudicated, and (3) incurred but not cies, for central service cost allocation
submitted must be identified and explained. plans, the cognizant agency responsible for
d. Fringe benefits. For fringe benefit costs, review and approval is the Federal agency
the plan must include: a listing of fringe ben- with the largest dollar value of total Federal
efits provided to covered employees, and the awards with a governmental unit. For indi-
overall annual cost of each type of benefit; rect cost rates and departmental indirect
current fringe benefit policies; and proce- cost allocation plans, the cognizant agency
dures used to charge or allocate the costs of is the Federal agency with the largest dollar
the benefits to benefitted activities. In addi- value of direct Federal awards with a govern-
tion, for pension and post-retirement health mental unit or component, as appropriate.
213
Pt. 200, App. V 2 CFR Ch. II (1114 Edition)
Once designated as the cognizant agency for complete or inaccurate. The results of the
indirect costs, the Federal agency must re- negotiation must be made available to all
main so for a period of five years. In addi- Federal agencies for their use.
tion, the following Federal agencies continue
to be responsible for the indicated govern- 4. Adjustments
mental entities: Negotiated cost allocation plans based on a
Department of Health and Human Services proposal later found to have included costs
Public assistance and state-wide cost alloca- that: (a) are unallowable (i) as specified by
tion plans for all states (including the Dis- law or regulation, (ii) as identified in subpart
trict of Columbia and Puerto Rico), state F, General Provisions for selected Items of
and local hospitals, libraries and health dis- Cost of this Part, or (iii) by the terms and
tricts. conditions of Federal awards, or (b) are unal-
Department of the InteriorIndian tribal lowable because they are clearly not allo-
governments, territorial governments, and cable to Federal awards, must be adjusted, or
state and local park and recreational dis- a refund must be made at the option of the
tricts. cognizant agency for indirect costs, includ-
Department of LaborState and local labor ing earned or imputed interest from the date
departments. of transfer and debt interest, if applicable,
Department of EducationSchool districts chargeable in accordance with applicable
and state and local education agencies. Federal cognizant agency for indirect costs
Department of AgricultureState and local regulations. Adjustments or cash refunds
agriculture departments. may include, at the option of the cognizant
Department of TransportationState and agency for indirect costs, earned or imputed
local airport and port authorities and transit interest from the date of expenditure and de-
districts. linquent debt interest, if applicable, charge-
Department of CommerceState and local able in accordance with applicable cognizant
economic development districts. agency claims collection regulations. These
Department of Housing and Urban Develop- adjustments or refunds are designed to cor-
mentState and local housing and develop- rect the plans and do not constitute a re-
ment districts. opening of the negotiation.
Environmental Protection AgencyState and
local water and sewer districts. G. OTHER POLICIES
2. Review 1. Billed Central Service Activities

All proposed central service cost allocation Each billed central service activity must
plans that are required to be submitted will separately account for all revenues (includ-
be reviewed, negotiated, and approved by the ing imputed revenues) generated by the serv-
cognizant agency for indirect costs on a ice, expenses incurred to furnish the service,
timely basis. The cognizant agency for indi- and profit/loss.
rect costs will review the proposal within six
months of receipt of the proposal and either 2. Working Capital Reserves
negotiate/approve the proposal or advise the Internal service funds are dependent upon
governmental unit of the additional docu- a reasonable level of working capital reserve
mentation needed to support/evaluate the to operate from one billing cycle to the next.
proposed plan or the changes required to Charges by an internal service activity to
make the proposal acceptable. Once an provide for the establishment and mainte-
agreement with the governmental unit has nance of a reasonable level of working cap-
been reached, the agreement will be accepted ital reserve, in addition to the full recovery
and used by all Federal agencies, unless proof costs, are allowable. A working capital re-
hibited or limited by statute. Where a Fed- serve as part of retained earnings of up to 60
eral awarding agency has reason to believe calendar days cash expenses for normal oper-
that special operating factors affecting its ating purposes is considered reasonable. A
Federal awards necessitate special consider- working capital reserve exceeding 60 cal-
ation, the funding agency will, prior to the endar days may be approved by the cog-
time the plans are negotiated, notify the nizant agency for indirect costs in excep-
cognizant agency for indirect costs. tional cases.
3. Agreement 3. Carry-Forward Adjustments of Allocated
Central Service Costs
The results of each negotiation must be
formalized in a written agreement between Allocated central service costs are usually
the cognizant agency for indirect costs and negotiated and approved for a future fiscal
the governmental unit. This agreement will year on a fixed with carry-forward basis.
be subject to re-opening if the agreement is Under this procedure, the fixed amounts for
subsequently found to violate a statute or the future year covered by agreement are
the information upon which the plan was ne- not subject to adjustment for that year.
gotiated is later found to be materially in- However, when the actual costs of the year
214
OMB Guidance Pt. 200, App. VI
involved become known, the differences be- 7. OMB Assistance
tween the fixed amounts previously approved
To the extent that problems are encoun-
and the actual costs will be carried forward
tered among the Federal agencies or govern-
and used as an adjustment to the fixed mental units in connection with the negotia-
amounts established for a later year. This tion and approval process, OMB will lend as-
carry-forward procedure applies to all cen- sistance, as required, to resolve such prob-
tral services whose costs were fixed in the lems in a timely manner.
approved plan. However, a carry-forward ad-
justment is not permitted, for a central serv- APPENDIX VI TO PART 200PUBLIC
ice activity that was not included in the ap- ASSISTANCE COST ALLOCATION PLANS
proved plan, or for unallowable costs that
must be reimbursed immediately. A. GENERAL
4. Adjustments of Billed Central Services Federally-financed programs administered
by state public assistance agencies are fund-
Billing rates used to charge Federal awards ed predominately by the Department of
must be based on the estimated costs of pro- Health and Human Services (HHS). In sup-
viding the services, including an estimate of port of its stewardship requirements, HHS
the allocable central service costs. A com- has published requirements for the develop-
parison of the revenue generated by each ment, documentation, submission, negotia-
billed service (including total revenues tion, and approval of public assistance cost
whether or not billed or collected) to the ac- allocation plans in Subpart E of 45 CFR Part
tual allowable costs of the service will be 95. All administrative costs (direct and indi-
made at least annually, and an adjustment rect) are normally charged to Federal awards
will be made for the difference between the by implementing the public assistance cost
revenue and the allowable costs. These ad- allocation plan. This Appendix extends these
justments will be made through one of the requirements to all Federal agencies whose
following adjustment methods: (a) a cash re- programs are administered by a state public
fund including earned or imputed interest assistance agency. Major federally-financed
from the date of transfer and debt interest, if programs typically administered by state
applicable, chargeable in accordance with public assistance agencies include: Tem-
applicable Federal cognizant agency for indi- porary Aid to Needy Families (TANF), Med-
rect costs regulations to the Federal Govern- icaid, Food Stamps, Child Support Enforce-
ment for the Federal share of the adjustment, Adoption Assistance and Foster Care,
ment, (b) credits to the amounts charged to and Social Services Block Grant.
the individual programs, (c) adjustments to
B. DEFINITIONS
future billing rates, or (d) adjustments to al-
located central service costs. Adjustments to 1. State public assistance agency means a
allocated central services will not be per- state agency administering or supervising
mitted where the total amount of the adjust- the administration of one or more public as-
ment for a particular service (Federal share sistance programs operated by the state as
and non-Federal) share exceeds $500,000. Ad- identified in Subpart E of 45 CFR Part 95.
justment methods may include, at the option For the purpose of this Appendix, these pro-
of the cognizant agency, earned or imputed grams include all programs administered by
interest from the date of expenditure and de- the state public assistance agency.
linquent debt interest, if applicable, charge- 2. State public assistance agency costs means
able in accordance with applicable cognizant all costs incurred by, or allocable to, the
agency claims collection regulations. state public assistance agency, except ex-
penditures for financial assistance, medical
5. Records Retention contractor payments, food stamps, and pay-
ments for services and goods provided di-
All central service cost allocation plans rectly to program recipients.
and related documentation used as a basis
for claiming costs under Federal awards C. POLICY
must be retained for audit in accordance
State public assistance agencies will de-
with the records retention requirements con-
velop, document and implement, and the
tained in Subpart DPost Federal Award
Federal Government will review, negotiate,
Requirements, of Part 200.
and approve, public assistance cost alloca-
6. Appeals tion plans in accordance with Subpart E of 45
CFR Part 95. The plan will include all pro-
If a dispute arises in the negotiation of a grams administered by the state public as-
plan between the cognizant agency for indi-
sistance agency. Where a letter of approval

rect costs and the governmental unit, the or disapproval is transmitted to a state pub-
dispute must be resolved in accordance with lic assistance agency in accordance with
the appeals procedures of the cognizant Subpart E, the letter will apply to all Fed-
agency for indirect costs. eral agencies and programs. The remaining
215
Pt. 200, App. VII 2 CFR Ch. II (1114 Edition)
sections of this Appendix (except for the re- F. UNALLOWABLE COSTS
quirement for certification) summarize the
Claims developed under approved cost allo-
provisions of Subpart E of 45 CFR Part 95.
cation plans will be based on allowable costs
D. SUBMISSION, DOCUMENTATION, AND AP- as identified in this Part. Where unallowable
PROVAL OF PUBLIC ASSISTANCE COST ALLO- costs have been claimed and reimbursed,
CATION PLANS they will be refunded to the program that re-
imbursed the unallowable cost using one of
1. State public assistance agencies are re- the following methods: (a) a cash refund, (b)
quired to promptly submit amendments to offset to a subsequent claim, or (c) credits to
the cost allocation plan to HHS for review the amounts charged to individual Federal
and approval. awards. Cash refunds, offsets, and credits
2. Under the coordination process outlined may include at the option of the cognizant
in section E, Review of Implementation of agency for indirect cost, earned or imputed
Approved Plans, affected Federal agencies interest from the date of expenditure and de-
will review all new plans and plan amend- linquent debt interest, if applicable, charge-
ments and provide comments, as appro- able in accordance with applicable cognizant
priate, to HHS. The effective date of the plan agency for indirect cost claims collection
or plan amendment will be the first day of regulations.
the calendar quarter following the event
that required the amendment, unless an- APPENDIX VII TO PART 200STATES AND
other date is specifically approved by HHS. LOCAL GOVERNMENT AND INDIAN
HHS, as the cognizant agency for indirect TRIBE INDIRECT COST PROPOSALS
costs acting on behalf of all affected Federal
agencies, will, as necessary, conduct negotia- A. GENERAL
tions with the state public assistance agency
and will inform the state agency of the ac- 1. Indirect costs are those that have been
tion taken on the plan or plan amendment. incurred for common or joint purposes.
These costs benefit more than one cost ob-
E. REVIEW OF IMPLEMENTATION OF APPROVED jective and cannot be readily identified with
PLANS a particular final cost objective without ef-
fort disproportionate to the results achieved.
1. Since public assistance cost allocation After direct costs have been determined and
plans are of a narrative nature, the review assigned directly to Federal awards and
during the plan approval process consists of other activities as appropriate, indirect costs
evaluating the appropriateness of the pro- are those remaining to be allocated to bene-
posed groupings of costs (cost centers) and fitted cost objectives. A cost may not be al-
the related allocation bases. As such, the located to a Federal award as an indirect
Federal government needs some assurance cost if any other cost incurred for the same
that the cost allocation plan has been imple- purpose, in like circumstances, has been as-
mented as approved. This is accomplished by signed to a Federal award as a direct cost.
reviews by the funding agencies, single au- 2. Indirect costs include (a) the indirect
dits, or audits conducted by the cognizant costs originating in each department or
audit agency. agency of the governmental unit carrying
2. Where inappropriate charges affecting out Federal awards and (b) the costs of cen-
more than one funding agency are identified, tral governmental services distributed
the cognizant HHS cost negotiation office through the central service cost allocation
will be advised and will take the lead in re- plan (as described in Appendix V to Part
solving the issue(s) as provided for in Sub- 200State/Local Government and Indian
part E of 45 CFR Part 95. Tribe-Wide Central Service Cost Allocation
3. If a dispute arises in the negotiation of Plans) and not otherwise treated as direct
a plan or from a disallowance involving two costs.
or more funding agencies, the dispute must 3. Indirect costs are normally charged to
be resolved in accordance with the appeals Federal awards by the use of an indirect cost
procedures set out in 45 CFR Part 16. Dis- rate. A separate indirect cost rate(s) is usu-
putes involving only one funding agency will ally necessary for each department or agen-
be resolved in accordance with the Federal cy of the governmental unit claiming indi-
awarding agencys appeal process. rect costs under Federal awards. Guidelines
4. To the extent that problems are encoun- and illustrations of indirect cost proposals
tered among the Federal agencies or govern- are provided in a brochure published by the
mental units in connection with the negotia- Department of Health and Human Services
tion and approval process, the Office of Man- entitled A Guide for States and Local Govern-
agement and Budget will lend assistance, as ment Agencies: Cost Principles and Procedures
required, to resolve such problems in a time- for Establishing Cost Allocation Plans and Indi-
ly manner. rect Cost Rates for Grants and Contracts with
216
OMB Guidance Pt. 200, App. VII
the Federal Government. A copy of this bro- bear. It is the ratio (expressed as a percent-
chure may be obtained from the Super- age) of the indirect costs to a direct cost
intendent of Documents, U.S. Government base.
Printing Office. 8. Indirect cost rate proposal means the doc-
4. Because of the diverse characteristics umentation prepared by a governmental unit
and accounting practices of governmental or subdivision thereof to substantiate its re-
units, the types of costs which may be classi- quest for the establishment of an indirect
fied as indirect costs cannot be specified in cost rate.
all situations. However, typical examples of 9. Predetermined rate means an indirect cost
indirect costs may include certain state/ rate, applicable to a specified current or fu-
local-wide central service costs, general ad- ture period, usually the governmental units
ministration of the non-Federal entity ac- fiscal year. This rate is based on an estimate
counting and personnel services performed of the costs to be incurred during the period.
within the non-Federal entity, depreciation Except under very unusual circumstances, a
on buildings and equipment, the costs of op- predetermined rate is not subject to adjust-
erating and maintaining facilities. ment. (Because of legal constraints, pre-
5. This Appendix does not apply to state determined rates are not permitted for Fed-
public assistance agencies. These agencies eral contracts; they may, however, be used
should refer instead to Appendix VII to Part for grants or cooperative agreements.) Pre-
200States and Local Government and In- determined rates may not be used by govern-
dian Tribe Indirect Cost Proposals. mental units that have not submitted and
negotiated the rate with the cognizant agen-
B. DEFINITIONS cy for indirect costs. In view of the potential
1. Base means the accumulated direct costs advantages offered by this procedure, nego-
(normally either total direct salaries and tiation of predetermined rates for indirect
wages or total direct costs exclusive of any costs for a period of two to four years should
extraordinary or distorting expenditures) be the norm in those situations where the
used to distribute indirect costs to indi- cost experience and other pertinent facts
vidual Federal awards. The direct cost base available are deemed sufficient to enable the
selected should result in each Federal award parties involved to reach an informed judg-
bearing a fair share of the indirect costs in ment as to the probable level of indirect
reasonable relation to the benefits received costs during the ensuing accounting periods.
from the costs. 10. Provisional rate means a temporary indi-
2. Base period for the allocation of indirect rect cost rate applicable to a specified period
costs is the period in which such costs are in- which is used for funding, interim reimburse-
curred and accumulated for allocation to ac- ment, and reporting indirect costs on Fed-
tivities performed in that period. The base eral awards pending the establishment of a
period normally should coincide with the final rate for that period.
governmental units fiscal year, but in any
C. ALLOCATION OF INDIRECT COSTS AND
event, must be so selected as to avoid inequi-
DETERMINATION OF INDIRECT COST RATES
ties in the allocation of costs.
3. Cognizant agency for indirect costs means 1. General
the Federal agency responsible for reviewing
and approving the governmental units indi- a. Where a governmental units depart-
rect cost rate(s) on the behalf of the Federal ment or agency has only one major function,
government. The cognizant agency for indi- or where all its major functions benefit from
rect costs assignment is described in Appen- the indirect costs to approximately the same
dix VI, section F, Negotiation and Approval degree, the allocation of indirect costs and
of Central Service Plans. the computation of an indirect cost rate may
4. Final rate means an indirect cost rate ap- be accomplished through simplified alloca-
plicable to a specified past period which is tion procedures as described in subsection 2.
based on the actual allowable costs of the pe- b. Where a governmental units depart-
riod. A final audited rate is not subject to ment or agency has several major functions
adjustment. which benefit from its indirect costs in vary-
5. Fixed rate means an indirect cost rate ing degrees, the allocation of indirect costs
which has the same characteristics as a pre- may require the accumulation of such costs
determined rate, except that the difference into separate cost groupings which then are
between the estimated costs and the actual, allocated individually to benefitted func-
allowable costs of the period covered by the tions by means of a base which best meas-
rate is carried forward as an adjustment to ures the relative degree of benefit. The indi-
the rate computation of a subsequent period. rect costs allocated to each function are
6. Indirect cost pool is the accumulated then distributed to individual Federal
costs that jointly benefit two or more pro- awards and other activities included in that
grams or other cost objectives. function by means of an indirect cost rate(s).
7. Indirect cost rate is a device for deter- c. Specific methods for allocating indirect
mining in a reasonable manner the propor- costs and computing indirect cost rates
tion of indirect costs each program should along with the conditions under which each
217
method should be used are described in sub- rectly to the function benefitted, the alloca-
sections 2, 3 and 4. tion must be made in that manner. When the
expenses in a grouping are more general in
2. Simplified Method nature, the allocation should be made
a. Where a non-Federal entitys major through the use of a selected base which pro-
functions benefit from its indirect costs to duces results that are equitable to both the
approximately the same degree, the alloca- Federal government and the governmental
tion of indirect costs may be accomplished unit. In general, any cost element or related
by (1) classifying the non-Federal entitys factor associated with the governmental
total costs for the base period as either di- units activities is potentially adaptable for
rect or indirect, and (2) dividing the total al- use as an allocation base provided that: (1) it
lowable indirect costs (net of applicable can readily be expressed in terms of dollars
credits) by an equitable distribution base. or other quantitative measures (total direct
The result of this process is an indirect cost costs, direct salaries and wages, staff hours
rate which is used to distribute indirect applied, square feet used, hours of usage,
costs to individual Federal awards. The rate number of documents processed, population
should be expressed as the percentage which served, and the like), and (2) it is common to
the total amount of allowable indirect costs the benefitted functions during the base pe-
bears to the base selected. This method riod.
should also be used where a governmental d. Except where a special indirect cost
units department or agency has only one rate(s) is required in accordance with para-
major function encompassing a number of in- graph (C)(4) of this Appendix, the separate
dividual projects or activities, and may be groupings of indirect costs allocated to each
used where the level of Federal awards to major function must be aggregated and
that department or agency is relatively treated as a common pool for that function.
small. The costs in the common pool must then be
b. Both the direct costs and the indirect distributed to individual Federal awards in-
costs must exclude capital expenditures and cluded in that function by use of a single in-
unallowable costs. However, unallowable direct cost rate.
costs must be included in the direct costs if e. The distribution base used in computing
they represent activities to which indirect the indirect cost rate for each function may
costs are properly allocable. be (1) total direct costs (excluding capital ex-
c. The distribution base may be (1) total di- penditures and other distorting items such
rect costs (excluding capital expenditures as pass-through funds, subcontracts in excess
and other distorting items, such as pass- of $25,000, participant support costs, etc.), (2)
through funds, subcontracts in excess of direct salaries and wages, or (3) another base
$25,000, participant support costs, etc.), (2) which results in an equitable distribution.
direct salaries and wages, or (3) another base An indirect cost rate should be developed for
which results in an equitable distribution. each separate indirect cost pool developed.
The rate in each case should be stated as the
3. Multiple Allocation Base Method percentage relationship between the par-
a. Where a non-Federal entitys indirect ticular indirect cost pool and the distribu-
costs benefit its major functions in varying tion base identified with that pool.
degrees, such costs must be accumulated
4. Special Indirect Cost Rates
into separate cost groupings. Each grouping
must then be allocated individually to bene- a. In some instances, a single indirect cost
fitted functions by means of a base which rate for all activities of a non-Federal entity
best measures the relative benefits. or for each major function of the agency may
b. The cost groupings should be established not be appropriate. It may not take into ac-
so as to permit the allocation of each group- count those different factors which may sub-
ing on the basis of benefits provided to the stantially affect the indirect costs applicable
major functions. Each grouping should con- to a particular program or group of pro-
stitute a pool of expenses that are of like grams. The factors may include the physical
character in terms of the functions they ben- location of the work, the level of administra-
efit and in terms of the allocation base tive support required, the nature of the fa-
which best measures the relative benefits cilities or other resources employed, the or-
provided to each function. The number of ganizational arrangements used, or any com-
separate groupings should be held within bination thereof. When a particular Federal
practical limits, taking into consideration award is carried out in an environment
the materiality of the amounts involved and which appears to generate a significantly
the degree of precision needed. different level of indirect costs, provisions
c. Actual conditions must be taken into ac- should be made for a separate indirect cost
count in selecting the base to be used in allo- pool applicable to that Federal award. The
cating the expenses in each grouping to ben- separate indirect cost pool should be devel-
efitted functions. When an allocation can be oped during the course of the regular alloca-
made by assignment of a cost grouping dition process, and the separate indirect cost
218
OMB Guidance Pt. 200, App. VII
rate resulting therefrom should be used, pro- amounts ultimately approved will be com-
vided that: (1) The rate differs significantly pensated for by an adjustment in a subse-
from the rate which would have been devel- quent period.
oped under paragraphs (C)(2) and (C)(3) of
this Appendix, and (2) the Federal award to 2. Documentation of Proposals
which the rate would apply is material in The following must be included with each
amount. indirect cost proposal:
b. Where Federal statutes restrict the re- a. The rates proposed, including subsidiary
imbursement of certain indirect costs, it work sheets and other relevant data, cross
may be necessary to develop a special rate referenced and reconciled to the financial
for the affected Federal award. Where a re- data noted in subsection b. Allocated central
stricted rate is required, the same proce- service costs will be supported by the sum-
dure for developing a non-restricted rate will mary table included in the approved central
be used except for the additional step of the service cost allocation plan. This summary
elimination from the indirect cost pool those table is not required to be submitted with
costs for which the law prohibits reimburse- the indirect cost proposal if the central serv-
ment. ice cost allocation plan for the same fiscal
D. SUBMISSION AND DOCUMENTATION OF year has been approved by the cognizant
PROPOSALS agency for indirect costs and is available to
the funding agency.
1. Submission of Indirect Cost Rate Proposals b. A copy of the financial data (financial
statements, comprehensive annual financial
a. All departments or agencies of the gov- report, executive budgets, accounting re-
ernmental unit desiring to claim indirect ports, etc.) upon which the rate is based. Ad-
costs under Federal awards must prepare an justments resulting from the use of
indirect cost rate proposal and related docu- unaudited data will be recognized, where ap-
mentation to support those costs. The pro- propriate, by the Federal cognizant agency
posal and related documentation must be re-
for indirect costs in a subsequent proposal.
tained for audit in accordance with the c. The approximate amount of direct base
records retention requirements contained in
costs incurred under Federal awards. These
the Common Rule.
costs should be broken out between salaries
b. A governmental department or agency
and wages and other direct costs.
unit that receives more than $35 million in
d. A chart showing the organizational
direct Federal funding must submit its indi-
structure of the agency during the period for
rect cost rate proposal to its cognizant agen-
which the proposal applies, along with a
cy for indirect costs. Other governmental de-
functional statement(s) noting the duties
partment or agency must develop an indirect
and/or responsibilities of all units that com-
cost proposal in accordance with the require-
prise the agency. (Once this is submitted,
ments of this Part and maintain the proposal
only revisions need be submitted with subse-
and related supporting documentation for
audit. These governmental departments or quent proposals.)
agencies are not required to submit their 3. Required certification.
proposals unless they are specifically re-
quested to do so by the cognizant agency for Each indirect cost rate proposal must be
indirect costs. Where a non-Federal entity accompanied by a certification in the fol-
only receives funds as a subrecipient, the lowing form:
pass-through entity will be responsible for
CERTIFICATE OF INDIRECT COSTS
negotiating and/or monitoring the subrecipi-
ents indirect costs. This is to certify that I have reviewed the
c. Each Indian tribal government desiring indirect cost rate proposal submitted here-
reimbursement of indirect costs must submit with and to the best of my knowledge and
its indirect cost proposal to the Department belief:
of the Interior (its cognizant agency for indi- (1) All costs included in this proposal [iden-
rect costs). tify date] to establish billing or final indi-
d. Indirect cost proposals must be devel- rect costs rates for [identify period covered
oped (and, when required, submitted) within by rate] are allowable in accordance with the
six months after the close of the govern- requirements of the Federal award(s) to
mental units fiscal year, unless an exception which they apply and the provisions of this
is approved by the cognizant agency for indi- Part. Unallowable costs have been adjusted
rect costs. If the proposed central service for in allocating costs as indicated in the in-
cost allocation plan for the same period has direct cost proposal
not been approved by that time, the indirect (2) All costs included in this proposal are
cost proposal may be prepared including an properly allocable to Federal awards on the
amount for central services that is based on basis of a beneficial or causal relationship
the latest federally-approved central service between the expenses incurred and the agree-
cost allocation plan. The difference between ments to which they are allocated in accord-
these central service amounts and the ance with applicable requirements. Further,
219
the same costs that have been treated as in- F. OTHER POLICIES
direct costs have not been claimed as direct
costs. Similar types of costs have been ac- 1. Fringe Benefit Rates
counted for consistently and the Federal If overall fringe benefit rates are not ap-
government will be notified of any account- proved for the governmental unit as part of
ing changes that would affect the predeter- the central service cost allocation plan,
mined rate. these rates will be reviewed, negotiated and
I declare that the foregoing is true and cor- approved for individual recipient agencies
rect. during the indirect cost negotiation process.
Governmental Unit: lllllllllllll In these cases, a proposed fringe benefit rate
Signature: llllllllllllllllll computation should accompany the indirect
Name of Official: llllllllllllll cost proposal. If fringe benefit rates are not
used at the recipient agency level (i.e., the
Title: llllllllllllllllllll
agency specifically identifies fringe benefit
Date of Execution: lllllllllllll
costs to individual employees), the govern-
E. NEGOTIATION AND APPROVAL OF RATES. mental unit should so advise the cognizant
agency for indirect costs.
1. Indirect cost rates will be reviewed, ne-
gotiated, and approved by the cognizant 2. Billed Services Provided by the Recipient
agency on a timely basis. Once a rate has Agency
been agreed upon, it will be accepted and
In some cases, governmental departments
used by all Federal agencies unless prohib-
or agencies (components of the govern-
ited or limited by statute. Where a Federal
mental unit) provide and bill for services
awarding agency has reason to believe that
similar to those covered by central service
special operating factors affecting its Fed-
cost allocation plans (e.g., computer cen-
eral awards necessitate special indirect cost
ters). Where this occurs, the governmental
rates, the funding agency will, prior to the
departments or agencies (components of the
time the rates are negotiated, notify the cog-
governmental unit)should be guided by the
nizant agency for indirect costs.
requirements in Appendix VI relating to the
2. The use of predetermined rates, if al-
development of billing rates and documenta-
lowed, is encouraged where the cognizant
tion requirements, and should advise the
agency for indirect costs has reasonable as-
cognizant agency for indirect costs of any
surance based on past experience and reli-
billed services. Reviews of these types of
able projection of the non-Federal entitys
services (including reviews of costing/billing
costs, that the rate is not likely to exceed a
methodology, profits or losses, etc.) will be
rate based on actual costs. Long-term agree-
made on a case-by-case basis as warranted by
ments utilizing predetermined rates extend-
the circumstances involved.
ing over two or more years are encouraged,
where appropriate. 3. Indirect Cost Allocations Not Using Rates
3. The results of each negotiation must be
formalized in a written agreement between In certain situations, governmental de-
the cognizant agency for indirect costs and partments or agencies (components of the
the governmental unit. This agreement will governmental unit), because of the nature of
be subject to re-opening if the agreement is their Federal awards, may be required to de-
subsequently found to violate a statute, or velop a cost allocation plan that distributes
the information upon which the plan was ne- indirect (and, in some cases, direct) costs to
gotiated is later found to be materially in- the specific funding sources. In these cases, a
complete or inaccurate. The agreed upon narrative cost allocation methodology
rates must be made available to all Federal should be developed, documented, main-
agencies for their use. tained for audit, or submitted, as appro-
4. Refunds must be made if proposals are priate, to the cognizant agency for indirect
later found to have included costs that (a) costs for review, negotiation, and approval.
are unallowable (i) as specified by law or reg-
4. Appeals
ulation, (ii) as identified in 200.420 Consider-
ations for selected items of cost, of this Part, If a dispute arises in a negotiation of an in-
or (iii) by the terms and conditions of Fed- direct cost rate (or other rate) between the
eral awards, or (b) are unallowable because cognizant agency for indirect costs and the
they are clearly not allocable to Federal governmental unit, the dispute must be re-
awards. These adjustments or refunds will be solved in accordance with the appeals proce-
made regardless of the type of rate nego- dures of the cognizant agency for indirect
tiated (predetermined, final, fixed, or provi- costs.
sional).
220
OMB Guidance Pt. 200, App. XI
5. Collection of Unallowable Costs and 19. National Radiological Astronomy Observ-
Erroneous Payments atory, Green Bank, West Virginia
Costs specifically identified as unallowable 20. National Renewable Energy Laboratory,
and charged to Federal awards either di- Golden, Colorado
rectly or indirectly will be refunded (includ- 21. Oak Ridge Associated Universities, Oak
ing interest chargeable in accordance with Ridge, Tennessee
applicable Federal cognizant agency for indi- 22. Rand Corporation, Santa Monica, Cali-
rect costs regulations). fornia
23. Research Triangle Institute, Research
6. OMB Assistance Triangle Park, North Carolina
To the extent that problems are encoun- 24. Riverside Research Institute, New York,
tered among the Federal agencies or govern- New York
mental units in connection with the negotia- 25. South Carolina Research Authority
tion and approval process, OMB will lend as- (SCRA), Charleston, South Carolina
sistance, as required, to resolve such prob- 26. Southern Research Institute, Bir-
lems in a timely manner. mingham, Alabama
27. Southwest Research Institute, San Anto-
APPENDIX VIII TO PART 200NONPROFIT nio, Texas
ORGANIZATIONS EXEMPTED FROM 28. SRI International, Menlo Park, California
29. Syracuse Research Corporation, Syra-
SUBPART ECOST PRINCIPLES OF
cuse, New York
PART 200 30. Universities Research Association, Incor-
1. Advance Technology Institute (ATI), porated (National Acceleration Lab), Ar-
Charleston, South Carolina gonne, Illinois
2. Aerospace Corporation, El Segundo, Cali- 31. Urban Institute, Washington DC
fornia 32. Non-profit insurance companies, such as
3. American Institutes of Research (AIR), Blue Cross and Blue Shield Organizations
Washington, DC 33. Other non-profit organizations as nego-
4. Argonne National Laboratory, Chicago, Il- tiated with Federal awarding agencies
linois
5. Atomic Casualty Commission, Wash- APPENDIX IX TO PART 200HOSPITAL
ington, DC COST PRINCIPLES
6. Battelle Memorial Institute,
Headquartered in Columbus, Ohio Based on initial feedback, OMB proposes to
7. Brookhaven National Laboratory, Upton, establish a review process to consider exist-
New York ing hospital cost determine how best to up-
8. Charles Stark Draper Laboratory, Incor- date and align them with this Part. Until
porated, Cambridge, Massachusetts such time as revised guidance is proposed
9. CNA Corporation (CNAC), Alexandria, Vir- and implemented for hospitals, the existing
ginia principles located at 45 CFR Part 74 Appen-
10. Environmental Institute of Michigan, dix E, entitled Principles for Determining
Ann Arbor, Michigan Cost Applicable to Research and Develop-
11. Georgia Institute of Technology/Georgia ment Under Grants and Contracts with Hos-
Tech Applied Research Corporation/Geor- pitals, remain in effect.
gia Tech Research Institute, Atlanta,
Georgia APPENDIX X TO PART 200DATA
12. Hanford Environmental Health Founda- COLLECTION FORM (FORM SFSAC)
tion, Richland, Washington
13. IIT Research Institute, Chicago, Illinois The Data Collection Form SFSAC is
14. Institute of Gas Technology, Chicago, Il- available on the FAC Web site.
linois
15. Institute for Defense Analysis, Alexan- APPENDIX XI TO PART 200COMPLIANCE
dria, Virginia SUPPLEMENT
16. LMI, McLean, Virginia
17. Mitre Corporation, Bedford, Massachu- The compliance supplement is available on
setts the OMB Web site: (e.g. for 2013 here http://
18. Noblis, Inc., Falls Church, Virginia www.whitehouse.gov/omb/circulars/)
221

CFR 2014 Title2 Vol1 Part200

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

CFR 2014 Title2 Vol1 Part200

Caricato da

Copyright:

Formati disponibili

PART 200UNIFORM ADMINISTRA- 200.48 General purpose equipment.

200.49 Generally Accepted Accounting Prin-

200.43 Federal share.

Subpart BGeneral Provisions 200.315 Intangible property.

200.311 Real property.

Subpart ECost Principles 200.438 Entertainment costs.

200.435 Defense and prosecution of criminal

SAM System for Award Management

SPOC Single Point of Contact 200.5 Audit finding.

The process may entail assigning a signed to a Federal program in the

200.11 CFDA program title. tities to which specific provisions or

(d) Federal agencies offering appro-

(e) Federal agency leadership sending ty determines to be unallowable, in ac-

200.31 Disallowed costs. crual basis, expenditures are the sum

(2) The amount of indirect expense through entity, as described in 200.101

under the Federal Acquisition Regula- dividuals as described in 200.502 Basis

200.41 Federal interest. type of Federal award reduces some of

eral awarding agency or pass-through entific activities, church, synagogue,

(d) An organization located in a (c) Does not include an agreement

tween the Federal awarding agency or

Intermediate cost objective means a guarantee received or administered by

(k) Intrastate district; cludes equipment, capital expendi-

Federal awarding agency which is the used to distinguish or trace an individ-

linkable to a specific individual. Some 200.82 Protected Personally Identifi-

200.81 Property. program. The term recipient does not

200.87 Research and Development Commonwealth of Puerto Rico, the

eral entity for financial statement pur-

200.95 Termination. Federal awards to non-Federal entities,

200.100 Purpose. Audit Follow-up. Subpart FAudit Re-

Authority: 31 U.S.C. 503

Subpart FAudit Requirements All.

(2) Federal award of cost-reimbursement nancial assistance programs and

States or the statute or regulations of the following programs:

(i) Temporary Assistance to Needy (iii) State Administrative Expenses

must implement the language in the 200.111 English language.

apply directly to Federal agencies will suspension or debarment. (See also 2

Subpart CPre-Federal Award ty may use fixed amount awards if the

(5) General Eligibility Requirements: endar day availability period but no

determined by the Federal awarding rity information, such as Federal

2313 note to review information avail- on non-Federal entities.

suspension and debarment in 2 CFR (5) Requiring the non-Federal entity

(3) Requiring additional, more de- award information in each Federal

(3) If a non-Federal entity requests a strategic objectives or performance

allow the subrecipient to develop ac- including noncompliance identified in

checks, warrants, or payment by other tions, or when the non-Federal entity

questing additional cash payments. non-Federal entity. However, the non-

(2) The current fair market value. party-donated equipment, buildings

(b) Recipients are required to report written approvals required by para-

completion of the Federal award or subject to the following conditions:

property is no longer needed for the (3) Notwithstanding the encourage-

agencies. Use for non-federally-funded (e) Disposition. When original or re-

other activities currently or previously there is a residual inventory of unused

plies costs, including costs of com- Department of Commerce at 37 CFR

Awards, Contracts and Cooperative yses, drafts of scientific papers, plans

factual material commonly accepted in

200.318 General procurement stand- able or appears to be unable to be im-

standards to which it must conform if (c) Procurement by sealed bids (for-

purchase procedures are used, price or (d) Procurement by competitive pro-

200.324 Federal awarding agency or systems comply with the standards of

reviewed by the Federal awarding to assure payment as required by law

progress reports, Research Perform- (iii) Additional pertinent information

agency should include this as a per- Federal awarding agency or pass-

efit of the pass-through entity. 200.32 Data Universal Numbering Sys-

records. posals, cost allocation plans, and any