[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2002 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

                    7


          Part 2000 to End

                         Revised as of January 1, 2002

Agriculture





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2002
          With Ancillaries
          Published by:
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



[[Page ii]]

                                      




                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2002



  For sale by the Superintendent of Documents, U.S. Government Printing 
                                  Office
  Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area 
                              (202) 512-1800
      Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001



[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................      vi

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued):
          Chapter XVIII--Rural Housing Service, Rural 
          Business-Cooperative Service, Rural Utilities 
          Service, and Farm Service Agency, Department of 
          Agriculture (Continued)                                    5
          Chapter XXVI--Office of Inspector General, 
          Department of Agriculture                                 23
          Chapter XXVII--Office of Information Resources 
          Management, Department of Agriculture                     31
          Chapter XXVIII--Office of Operations, Department of 
          Agriculture                                               37
          Chapter XXIX--Office of Energy, Department of 
          Agriculture                                               45
          Chapter XXX--Office of the Chief Financial Officer, 
          Department of Agriculture                                 53
          Chapter XXXI--Office of Environmental Quality, 
          Department of Agriculture                                219
          Chapter XXXII--Office of Procurement and Property 
          Management, Department of Agriculture                    227
          Chapter XXXIII--Office of Transportation, Department 
          of Agriculture                                           233
          Chapter XXXIV--Cooperative State Research, 
          Education, and Extension Service, Department of 
          Agriculture                                              247
          Chapter XXXV--Rural Housing Service, Department of 
          Agriculture                                              369

[[Page iv]]

          Chapter XXXVI--National Agricultural Statistics 
          Service, Department of Agriculture                       469
          Chapter XXXVII--Economic Research Service, 
          Department of Agriculture                                477
          Chapter XXXVIII--World Agricultural Outlook Board, 
          Department of Agriculture                                483
          Chapter XLI--[Reserved]
          Chapter XLII--Rural Business-Cooperative Service and 
          Rural Utilities Service, Department of Agriculture       487
  Finding Aids:
      Table of CFR Titles and Chapters........................     567
      Alphabetical List of Agencies Appearing in the CFR......     585
      List of CFR Sections Affected...........................     595



[[Page v]]


      


                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 7 CFR 2003.1 refers 
                       to title 7, part 2003, 
                       section 1.

                     ----------------------------

[[Page vi]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2002), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vii]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
info@fedreg.nara.gov.

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call 202-512-1800, 
M-F 8 a.m. to 4 p.m. e.s.t. or fax your order to 202-512-2250, 24 hours 
a day. For payment by check, write to the Superintendent of Documents, 
Attn: New Orders, P.O. Box 371954, Pittsburgh, PA 15250-7954. For GPO 
Customer Service call 202-512-1803.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
format at www.access.gpo.gov/nara (``GPO Access''). For more 
information, contact Electronic Information Dissemination Services, U.S. 
Government Printing Office. Phone 202-512-1530, or 888-293-6498 (toll-
free). E-mail, gpoaccess@gpo.gov.

[[Page viii]]

    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.nara.gov/fedreg. The NARA 
site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2002.



[[Page ix]]



                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2002.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

    Redesignation tables appear in the Finding Aids section of the 
volumes containing parts 210-299 and parts 1600-1899.

[[Page x]]





[[Page 1]]



                          TITLE 7--AGRICULTURE




                  (This book contains part 2000 to End)

  --------------------------------------------------------------------

   SUBTITLE B--Regulations of the Department of Agriculture--Continued

                                                                    Part

chapter xviii--Rural Housing Service, Rural Business-
  Cooperative Service, Rural Utilities Service, and Farm 
  Service Agency, Department of Agriculture (Continued).....        2003

chapter xxvi--Office of Inspector General, Department of 
  Agriculture...............................................        2610

chapter xxvii--Office of Information Resources Management, 
  Department of Agriculture.................................        2700

chapter xxviii--Office of Operations, Department of 
  Agriculture...............................................        2810

chapter xxix--Office of Energy, Department of Agriculture...        2900

chapter xxx--Office of the Chief Financial Officer, 
  Department of Agriculture.................................        3010

chapter xxxi--Office of Environmental Quality, Department of 
  Agriculture...............................................        3100

chapter xxxii--Office of Procurement and Property 
  Management, Department of Agriculture.....................        3200

chapter xxxiii--Office of Transportation, Department of 
  Agriculture...............................................        3300

chapter xxxiv--Cooperative State Research, Education, and 
  Extension Service, Department of Agriculture..............        3400

chapter xxxv--Rural Housing Service, Department of 
  Agriculture...............................................        3550

chapter xxxvi--National Agricultural Statistics Service, 
  Department of Agriculture.................................        3600

chapter xxxvii--Economic Research Service, Department of 
  Agriculture...............................................        3700

[[Page 2]]


chapter xxxviii--World Agricultural Outlook Board, 
  Department of Agriculture.................................        3800
chapter xli--[Reserved]

chapter xlii--Rural Business-Cooperative Service and Rural 
  Utilities Service, Department of Agriculture..............        4274

[[Page 3]]

  Subtitle B--Regulations of the Department of Agriculture--(Continued)

[[Page 5]]



    CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                         AGRICULTURE (Continued)




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter XVIII appear at 59 FR 
66443, Dec. 27, 1994; 61 FR 1109, Jan. 16, 1996; and 61 FR 2899, Jan. 
30, 1996.

                SUBCHAPTER I--ADMINISTRATIVE REGULATIONS
Part                                                                Page
2003            Organization................................           7
2018            General.....................................          17
2045            General.....................................          19

[[Page 7]]





                SUBCHAPTER I--ADMINISTRATIVE REGULATIONS



PART 2003--ORGANIZATION--Table of Contents




Subpart A--Functional Organization of the Rural Development Mission Area

Sec.
2003.1  Definitions.
2003.2  General.
2003.3-2003.4  [Reserved]
2003.5  Headquarters organization.
2003.6  Office of the Under Secretary.
2003.7-2003.9  [Reserved]
2003.10  Rural Development State Offices.
2003.11-2003.13  [Reserved]
2003.14  Field Offices.
2003.15-2003.16  [Reserved]
2003.17  Availability of information.
2003.18  Functional organization of RHS.
2003.19-2003.21  [Reserved]
2003.22  Functional organization of RUS.
2003.23-2003.25  [Reserved]
2003.26  Functional organization of RBS.
2003.27-2003.50  [Reserved]

    Authority: 5 U.S.C. 301; 7 U.S.C. 6941; and 7 CFR 2.17.

    Source: 62 FR 67259, Dec. 24, 1997, unless otherwise noted.



Subpart A--Functional Organization of the Rural Development Mission Area



Sec. 2003.1  Definitions.

    EEO--the Equal Employment Opportunity Act of 1972, 42 U.S.C. 
Sec. 2000e et seq.
    O&M--Operations and Management.
    P&P--Policy and Planning.
    RBS--Rural Business-Cooperative Development Service, USDA, or any 
successor agency.
    RHS--Rural Housing Service, USDA, or any successor agency.
    RTB--Rural Telephone Bank authorized by 7 U.S.C. 944.
    Rural Development--Rural Development mission area of USDA.
    RUS--Rural Utilities Service, USDA, or any successor agency.
    Secretary--the Secretary of USDA.
    USDA--the United States Department of Agriculture.



Sec. 2003.2  General.

    The Rural Development mission area of the Department of Agriculture 
was established as a result of the Department of Agriculture 
Reorganization Act of 1994, Title II of Pub.L. 103-354. Rural 
Development's basic organization consists of Headquarters in Washington, 
D.C. and 47 State Offices. Headquarters maintains overall planning, 
coordination, and control of Rural Development agency programs. 
Administrators head RHS, RBS, and RUS under the direction of the Under 
Secretary for Rural Development. State Directors head the State Offices 
and are directly responsible to the Under Secretary for the execution of 
all Rural Development agency programs within the boundaries of their 
states.



Secs. 2003.3-2003.4  [Reserved]



Sec. 2003.5  Headquarters organization.

    (a) The Rural Development Headquarters is comprised of:
    (1) The Office of the Under Secretary;
    (2) Two Deputy Under Secretaries; and,
    (3) Three Administrators and their staffs.
    (b) The Rural Development Headquarters is located at 1400 
Independence Avenue, SW., Washington, DC. 20250-0700



Sec. 2003.6  Office of the Under Secretary.

    In accordance with 7 CFR Sec. 2.17 the Secretary has delegated to 
the Under Secretary, Rural Development, authority to manage and 
administer programs and support functions of the Rural Development 
mission area.
    (a) Office of the Deputy Under Secretary for P&P. This office is 
headed by the Deputy Under Secretary for P&P. The Under Secretary, Rural 
Development, has delegated to the Deputy Under Secretary for P&P, 
responsibility for formulation and development of short-and long-range 
rural development policies of the Department in accordance with 7 CFR 
Sec. 2.45. The Deputy Under Secretary for P&P reports directly to the 
Under Secretary, Rural Development, and provides guidance and 
supervision for research, policy analysis and development, strategic 
planning, partnerships and special initiatives. For budget and 
accounting

[[Page 8]]

purposes, all of the staff offices under the Deputy Under Secretary for 
P&P are housed in RBS.
    (1) The Budget Analysis Division assesses potential impacts of 
alternative policies on the mission area's programs and operations and 
develops recommendations for change. The units are headed by the Chief 
Budget Officer, who individually serves as the top policy advisor to the 
Under Secretary and Deputy Under Secretary on all matters relating to 
mission area budget policy.
    (2) The Research, Analysis and Information Division analyzes 
information on rural conditions and the strategies and techniques for 
promoting rural development. The division performs, or arranges to have 
conducted, short-term and major research studies needed to formulate 
policy.
    (3) The Reinvention and Capacity Building Division coordinates the 
mission area's strategic planning initiatives, both at the National 
level and in the State Offices. The division assists the Rural 
Development agencies in their implementation of the Government 
Performance and Results Act (GPRA) and special initiatives of the 
Administration, USDA, and the Office of the Under Secretary.
    (4) The Rural Initiatives and Partnership Division manages the 
mission area's involvement and coordination with other Federal and state 
departments and agencies to assess rural issues and develop model 
partnerships and initiatives to achieve shared rural development goals. 
The division is responsible for managing the National Rural Development 
Partnership and providing support and oversight of 37 State Rural 
Development Councils.
    (b) Office of the Deputy Under Secretary for O&M. In accordance with 
7 CFR 2.45, the Under Secretary, Rural Development, has delegated to the 
Deputy Under Secretary for O&M responsibility for providing leadership 
in planning, developing, and administering overall administrative 
management program policies and operational activities of the Rural 
Development mission area. The Deputy Under Secretary for O&M reports 
directly to the Under Secretary, Rural Development.
    (1) Office of the Deputy Administrator for O&M. Headed by the Deputy 
Administrator for O&M, this office reports directly to the Deputy Under 
Secretary for O&M, and is responsible for directing and coordinating the 
consolidated administrative and financial management functions for Rural 
Development. This office provides overall guidance and supervision for 
budget and financial management, human resources management and 
personnel services, administrative and procurement services, information 
resources management and automated data systems. For budget and 
accounting purposes, all of the staff offices under the Deputy 
Administrator for O&M are housed in RHS.
    (i) Office of the Controller. Headed by the Chief Financial Officer, 
this office supports the Deputy Administrator for O&M in executing Rural 
Development requirements related to compliance with the Chief Financial 
Officers Act of 1990 and provides leadership, coordination, and 
oversight of all financial management matters and financial execution of 
the budget for the Rural Development agencies. This office also has full 
responsibility for Rural Development agencies' accounting, financial, 
reporting, and internal controls. The office provides direct oversight 
to the Headquarters Budget Division, Financial Management Division, and 
the Office of the Assistant Controller, located in St. Louis, Missouri.
    (ii) Office of Assistant Administrator for Procurement and 
Administrative Services. Headed by the Assistant Administrator for 
Procurement and Administrative Services, this office is responsible to 
the Deputy Administrator for O&M for overseeing the Procurement 
Management Division, the Property and Supply Management Division, and 
the Support Services Division:
    (A) The Procurement Management Division is responsible for 
developing, implementing, and interpreting procurement and contracting 
policies for the Rural Development mission area. Major functions include 
planning outreach efforts and goals for small and disadvantaged 
businesses, providing staff assistance reviews in State and Local 
Offices, administering the Contracting Officer Professionalism Warrant 
program for Rural Development

[[Page 9]]

agencies, and coordinating the development of Rural Development's 
acquisition plans.
    (B) The Property and Supply Management Division is responsible for 
developing office space acquisition and utilization policies, providing 
training to field office leasing officers, administering the Leasing 
Officer Warrant program, assuring accessibility compliance in Rural 
Development's work sites, administering Rural Development's Physical 
Security program, and establishing and providing oversight to the 
worksite Energy Conservation program. This office operates a nationwide 
supply warehousing and distribution program, and oversees a nationwide 
Personal Property Management and Utilization Program, manages the U.S. 
Department of Agriculture (USDA) Excess Personal Property Program for 
field level activities, and provides direct support services to Rural 
Development's St. Louis facilities.
    (C) The Support Services Division has responsibility for designing, 
developing, administering, and controlling Rural Development's 
directives management and issuance system, coordinating Rural 
Development's Regulatory Agenda and Regulatory Program submissions to 
USDA and OMB, serving as Federal Register liaison, and analyzing and 
coordinating regulatory work plans for the Under Secretary. This office 
submits Paperwork Reduction Act public burden clearances to OMB, 
administers all printing programs, manages Rural Development travel 
policies and programs, and manages Freedom of Information Act, Privacy 
Act and Tort Claims programs.
    (iii) Office of Information Resources Management (IRM). Headed by 
the Chief Information Officer, this office is responsible to the Deputy 
Administrator for O&M for developing Rural Development's IRM policies, 
regulations, standards and guidelines. This office provides overall 
leadership and direction to activities assigned to the following four 
major divisions:
    (A) The Customer Services Division is responsible for direct 
customer and technical support (hardware and software).
    (B) The Management Services Division coordinates all IRM 
acquisition, budget, and policy and planning activities in support of 
Rural Development automation.
    (C) The Information Technology Division provides support technical 
services in the areas of data administration, system integrity 
management, research and development, and telecommunications.
    (D) The Systems Services Division is responsible for planning, 
directing, and controlling activities related to Rural Development's 
Automated Information Systems.
    (iv) Office of the Assistant Administrator for Human Resources. 
Headed by the Assistant Administrator for Human Resources, this office 
is responsible to the Deputy Administrator for O&M for the overall 
development, implementation, and management, of personnel and human 
resources support services for Rural Development. The office provides 
direction to the Headquarters Personnel Services, Human Resources 
Training and Mission Area Personnel Services Division, and Labor 
Relations Staff offices. The office is also responsible for the 
establishment of recruitment, retention, and development policies and 
programs supporting workforce diversity and affirmative action.
    (2) Office of Civil Rights Staff. Headed by a staff director, this 
staff has primary responsibility for providing leadership and 
administration of the Civil Rights Program for the Rural Development 
mission area. The staff conducts on-site reviews of borrowers and 
beneficiaries of Federal financial assistance to ensure compliance with 
Titles VI and VII of the Civil Rights Act of 1964, as amended, Title 
VIII of the Civil Rights Act of 1968, as amended, Section 504 of the 
Rehabilitation Act, the Americans with Disabilities Act, and prepares 
compliance reports. The staff conducts and evaluates Title VII 
compliance visits to insure that EEO programs are adequately 
implemented. In addition, the office develops, monitors, and evaluates 
Affirmative Employment programs for minorities, women and persons with 
disabilities, and coordinates and conducts community outreach activities 
at historically black colleges and universities. It also has oversight 
of special emphasis programs

[[Page 10]]

such as the Federal Women's Program, Hispanic Emphasis Program, and 
Black Emphasis Program. The staff director reports directly to the 
Deputy Under Secretary for O&M.
    (3) Office of Communications. Headed by a director who reports 
directly to the Deputy Under Secretary for O&M, this office has primary 
responsibility for tracking legislation and development and institution 
of policies to provide public communication and information services 
related to the Rural Development. The office maintains a constituent 
data base and conducts minority outreach efforts and administers a 
public information and media center responsible for media inquiries, 
news releases, program announcements, media advisories, and information 
retrieval. This office also serves as a liaison with Office of 
Congressional Relations (OCR), Office of the General Counsel (OGC), and 
other Departmental units involved in Congressional relations and public 
information. This office drafts testimony, prepares witnesses, and 
provides staff for hearings and markups. In addition, the office briefs 
Congressional members and staff on the Rural Development matters, 
coordinates Rural Development's legislative activities with other USDA 
agencies and OMB and develops and implements legislative strategy. The 
staff also coordinates development and production of brochures, press 
releases, and other public information materials.



Secs. 2003.7-2003.9  [Reserved]



Sec. 2003.10  Rural Development State Offices.

    (a) Headed by State Directors, State Offices report directly to the 
Under Secretary, Rural Development, and are responsible to the three 
Rural Development agency Administrators for carrying out agency program 
operations at the State level, ensuring adherence to program plans 
approved for the State by the Under Secretary, and rendering staff 
advisory and manpower support to Area and Local offices. The Rural 
Development State Directors, for budget and accounting purposes, are 
housed in the RHS agency.
    (b) Program Directors within the State Office provide oversight and 
leadership on major program functions. Major program functions include: 
Single Family and Multi-Family Housing loans and grants, Community 
Facility, Water and Waste Disposal, Business and Cooperative, and the 
Empowerment Zones and Enterprise Communities (EZ/EC) programs.
    (c) The USDA Rural Development State Office locations are as 
follows:

------------------------------------------------------------------------
                   State                              Location
------------------------------------------------------------------------
Alabama...................................  Montgomery, AL
Alaska....................................  Palmer, AK
Arizona...................................  Phoenix, AZ
Arkansas..................................  Little Rock, AR
California................................  Woodland, CA
Colorado..................................  Lakewood, CO
Delaware..................................  Camden, DE
Florida...................................  Gainesville, FL
Georgia...................................  Athens, GA
Hawaii....................................  Hilo, HI
Idaho.....................................  Boise, ID
Illinois..................................  Champaign, IL
Indiana...................................  Indianapolis, IN
Iowa......................................  Des Moines, IA
Kansas....................................  Topeka, KS
Kentucky..................................  Lexington, KY
Louisiana.................................  Alexandria, LA
Maine.....................................  Bangor, ME
Massachusetts.............................  Amherst, MA
Michigan..................................  East Lansing, MI
Minnesota.................................  St. Paul, MN
Mississippi...............................  Jackson, MS
Missouri..................................  Columbia, MO
Montana...................................  Bozeman, MT
Nebraska..................................  Lincoln, NE
Nevada....................................  Carson City, NV
New Jersey................................  Mt. Holly, NJ
New Mexico................................  Albuquerque, NM
New York..................................  Syracuse, NY
North Carolina............................  Raleigh, NC
North Dakota..............................  Bismarck, ND
Ohio......................................  Columbus, OH
Oklahoma..................................  Stillwater, OK
Oregon....................................  Portland, OR
Pennsylvania..............................  Harrisburg, PA
Puerto Rico...............................  Hato Rey, PR
South Carolina............................  Columbia, SC
South Dakota..............................  Huron, SD
Tennessee.................................  Nashville, TN
Texas.....................................  Temple, TX
Utah......................................  Salt Lake City, UT
Vermont...................................  Montpelier, VT
Virginia..................................  Richmond, VA
Washington................................  Olympia, WA
West Virginia.............................  Charleston, WV
Wisconsin.................................  Stevens Point, WI
Wyoming...................................  Casper, WY
------------------------------------------------------------------------


[62 FR 67259, Dec. 24, 1997; 63 FR 3256, Jan. 22, 1998]



Secs. 2003.11-2003.13  [Reserved]



Sec. 2003.14  Field Offices.

    Rural Development field offices report to their respective State 
Director

[[Page 11]]

and State Office Program Directors. State Directors may organizationally 
structure their offices based on the program workloads within their 
respective State. Field offices generally are patterned in a three or 
two tier program delivery structure. In a three tier system, Local 
offices report to an Area office, that reports to the State Office. In a 
two tier system, a ``Local'' or ``Area'' office reports to the State 
Office. Locations and telephone numbers of Area and Local Offices may be 
obtained from the appropriate Rural Development State Office.



Secs. 2003.15-2003.16  [Reserved]



Sec. 2003.17  Availability of information.

    Information concerning Rural Development programs and agencies may 
be obtained from the Office of Communications, Rural Development, U. S. 
Department of Agriculture, STOP 0705, 1400 Independence Avenue SW., 
Washington, DC 20250-0705.



Sec. 2003.18  Functional organization of RHS.

    (a) General. The Secretary established RHS pursuant to Sec. 233 of 
the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6943).
    (b) Office of the Administrator. According to 7 CFR 2.49, the 
Administrator has responsibility for implementing programs aimed at 
delivering loans and grant assistance to rural Americans and their 
communities in obtaining adequate and affordable housing and community 
facilities, in accordance with Title V of the Housing Act of 1949 (42 
U.S.C. 1471 et seq.) and the Consolidated Farm and Rural Development Act 
(7 U.S.C. 1921 et seq.).
    (1) Legislative Affairs Staff. The duties and responsibilities of 
this staff have now been aligned under the Office of Communication, 
headed by a director who reports directly to the Under Secretary for 
O&M. The Office of Communication is responsible for providing and 
carrying out legislative, public communication, and information services 
for the Rural Development mission area.
    (2) Office of Program Support Staff. The Program Support Staff is 
headed by a staff director who is responsible to the Administrator for 
monitoring managerial and technical effectiveness of RHS programs. The 
staff coordinates review and analysis of legislation, Executive Orders, 
OMB circulars, and Department regulations for their impact on Agency 
programs. The staff develops, implements, and reports on architectural 
and environmental policies, in cooperation with the Department. Staff 
responsibilities also include managing RHS's Hazardous Waste Management 
Fund, coordinating the Debarment and Suspension process for RHS, 
tracking the use of Program Loan Cost Expense funds, and maintaining the 
RHS Internet ``Home Page.''
    (3) Office of Deputy Administrator, Single Family Housing. Headed by 
the Deputy Administrator, Single Family Housing, this office is 
responsible to the Administrator for the development and implementation 
of RHS's Single Family Housing programs, which extend supervised housing 
credit to rural people of limited resources, for adequate, modest, 
decent, safe, and sanitary homes. The office is responsible for 
administering and managing sections 502 and 504 Rural Housing direct and 
guaranteed loan and grant programs, Rural Housing and Self-Help Site 
loans, the Self-Help Technical Assistance grant program, Housing 
Application Packaging and Technical and Supervisory Assistance grants, 
and Home Improvement and Repaid loans and grants. The office directs the 
following three divisions: Single Family Housing Processing Division, 
Single Family Housing Servicing and Property Management Division, and 
Single Family Housing Centralized Servicing Center in St. Louis, Mo.
    (i) Office of Single Family Housing Processing Division. Headed by a 
division director, this division is responsible for development and 
nationwide implementation of policies on processing Single Family 
Housing direct and guaranteed program loans. In addition, the division 
provides direction on the following: the Rural Housing Targeted Area 
Set-Aside program, debarments, payment assistance, title clearance and 
loan closing, site/subdivision development, Deferred Mortgage Payment 
Program; construction

[[Page 12]]

defects, credit reports, appraisals, Manufactured Housing, coordinated 
assessment reviews, Home Buyer's Counseling/Education Program, and 
allocation of loan and grant program funds.
    (ii) Office of Single Family Housing Servicing and Property 
Management Division. Headed by a division director, this division is 
responsible for the development and implementation of nationwide 
policies for servicing RHS's multi-billion dollar portfolio of Single 
Family Housing loans, and managing and selling Single Family Housing 
inventory properties. The division also conducts state program 
evaluations, identifies program weaknesses, makes recommendations for 
improvements, and identifies corrective actions.
    (iii) Office of Single Family Housing Centralized Servicing Center 
(CSC)--St. Louis, Missouri. Headed by a director, CSC is responsible for 
centrally servicing RHS's multi-billion dollar portfolio of Single 
Family Housing loans. CSC provides interest credit or payment assistance 
renewals, performs escrow activities for real estate taxes and property 
hazard insurance, oversees collection of loan payments, and grants 
interest credit, payment assistance, and moratoria.
    (4) Office of the Deputy Administrator, Multi-Family Housing 
Division. Headed by the Deputy Administrator, Multi-Family Housing, this 
office is responsible for the development and nationwide implementation 
of RHS's Multi-Family Housing programs, which extend supervised housing 
credit to rural residents an opportunity to have decent, safe, and 
sanitary rental housing. The following programs are administered and 
managed by this office: Section 515 Rural Rental Housing, Rural 
Cooperative and Congregate Housing Programs, Section 521 Rental 
Assistance, Farm Labor Housing loan and grant programs, Housing 
Preservation Grants, rural housing vouchers, and Housing Application 
Packaging Grants. This office directs the following two divisions:
    (i) Multi-Family Housing Processing Division. Headed by a division 
director, this division is responsible for the development and 
nationwide implementation of policies on processing Multi-Family Housing 
program loans. The division manages the following program areas: elderly 
and family rental housing, Farm Labor Housing loans and grants, outreach 
contacts, congregate facilities, Housing Preservation Grants, 
cooperative housing, rural housing vouchers, appraisals, Congregate 
Housing Services Grants, Rental Assistance, Housing Application 
Packaging Grants, targeted area and nonprofit set asides, Multi-Family 
Housing suspensions and debarments, title clearance and loan closing, 
allocation and monitoring of loan and grant funds, adverse decisions and 
appeals, commercial credit reports, individual credit reports, and, site 
development.
    (ii) Multi-Family Housing Portfolio Management Division. Headed by a 
division director, this division is responsible for the development and 
institution of policies on the management and servicing of the 
nationwide Multi-Family Housing programs. The Division implements 
current and long range plans for servicing Rural Rental Housing loans, 
Labor Housing loans and grants, and Rental Assistance or similar tenant 
subsidies.
    (5) Office of the Deputy Administrator, Community Programs. Headed 
by the Deputy Administrator, Community Programs, this office is 
responsible for overseeing the administration and management of 
Community Facilities loans and grants to hospitals and nursing homes, 
police and fire stations, libraries, schools, adult and child care 
centers, etc. The office monitors and evaluates the administration of 
loan and grant programs on a nationwide basis and provides guidance and 
direction for community programs through two divisions, Community 
Programs Loan Processing Division and Servicing and Special Authorities 
Division.
    (i) Community Programs Loan Processing Division. Headed by a 
director, this division is responsible for the overall administration, 
policy development, fund distribution, and processing of Community 
Facilities loans and grants and other loan and grant programs assigned 
to the Division.
    (ii) Servicing and Special Authorities Division. Headed by a 
division director, this division is responsible for the overall 
administration, policy development, and servicing of the Community

[[Page 13]]

Facilities loan and grant programs. The division conducts program 
evaluations, identifies program weaknesses, makes recommendations for 
improvements, and identifies corrective actions. The division also 
administers and services Nonprofit National Corporation loans and 
grants.

[62 FR 67259, Dec. 24, 1997, as amended at 64 FR 32388, June 17, 1999]



Secs. 2003.19-2003.21  [Reserved]



Sec. 2003.22  Functional organization of RUS.

    (a) General. The Secretary established RUS pursuant to Sec. 232 of 
the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6942).
    (b) Office of the Administrator. According to 7 CFR 2.47, the 
Administrator has responsibility for managing and administering the 
programs and support functions of RUS to provide financial and technical 
support for rural infrastructure to include electrification, clean 
drinking water, telecommunications, and water disposal systems, pursuant 
to the Consolidated Farm and Rural Development Act, as amended (7 U.S.C. 
1921 et seq.), and the Rural Electrification Act of 1936, as amended (7 
U.S.C. 901 et seq.). The office develops and implements strategic plans 
concerning the Rural Electrification Act of 1936, as amended. The 
Administrator serves as Governor of the Rural Telephone Bank (RTB) with 
a 13-member board of directors, and exercises and performs all 
functions, powers, and duties of the RTB in accordance with 7 U.S.C. 
944.
    (1) Borrower and Program Support Services. Borrower and Program 
Support Services consist of the three following staffs which are 
responsible to the Administrator for planning and carrying out a variety 
of program and administrative services in support of all RUS programs, 
and providing expert advice and coordination for the Administrator:
    (i) Administrative Liaison Staff. Headed by a staff director, this 
staff advises the Administrator on management issues and policies 
relating to human resources, EEO, labor-management partnership, 
administrative services, travel management, automated information 
systems, and administrative budgeting and funds control.
    (ii) Program Accounting Services Division. Headed by a division 
director, this division develops and evaluates the accounting systems 
and procedures of Electric, Telecommunications, and Water and Wastewater 
borrowers; assures that accounting policies, systems, and procedures 
meet regulatory, Departmental, General Accounting Office, OMB, and 
Treasury Department requirements; examines borrowers' records and 
operations, and reviews expenditures of loans and other funds; develops 
audit requirements; and approves Certified Public Accountants to perform 
audits of borrowers.
    (iii) Program and Financial Services Staff. Headed by a staff 
director, this staff evaluates the financial conditions of troubled 
borrowers, negotiates settlements of delinquent loans, and makes 
recommendations to program Assistant Administrators on ways to improve 
the financial health of borrowers.
    (2) Office of Assistant Administrator--Electric Program. Headed by 
the Assistant Administrator--Electric Program, this office is 
responsible to the Administrator for directing and coordinating the 
Rural Electrification program of RUS nationwide. This office develops, 
maintains, and implements regulations and program procedures on 
processing and approving loans and loan-related activities for rural 
electric borrowers. The office directs the following three divisions:
    (i) Electric Regional Divisions. Headed by division directors, these 
two divisions are responsible for administering the Rural 
Electrification program in specific geographic areas and serving as the 
single point of contact for all distribution borrowers. The divisions 
provide guidance to borrowers on RUS loan policies and procedures, 
maintain oversight of borrower rate actions, and make recommendations to 
the Administrator on borrower applications for RUS financing. The 
divisions also assure that power plant, distribution, and transmission 
systems and facilities are designed and constructed in accordance with 
the terms of the loan and proper engineering practices and 
specifications.

[[Page 14]]

    (ii) Power Supply Division. Headed by a division director, this 
division is responsible for administering the Rural Electrification 
program responsibilities with regard to power supply borrowers 
nationwide and serves as primary point of contact between RUS and all 
such borrowers. The division develops and maintains a loan processing 
program for Rural Electrification Act purposes, and develops and 
administers engineering and construction policies related to planning, 
design, construction, operation, and maintenance for power supply 
borrowers.
    (iii) Electric Staff Division. Headed by a division director, this 
division is responsible for engineering activities related to the 
design, construction, and technical operations and maintenance of power 
plants; distribution of power; and transmission systems and facilities, 
including load management and communications. The division develops 
criteria and techniques for evaluating the financing and performance of 
electric borrowers and forecasting borrowers' future power needs; and 
maintains financial expertise on the distribution and power supply loan 
program, and retail and wholesale rates.
    (3) Office of Assistant Administrator--Telecommunications Program. 
Headed by the Assistant Administrator--Telecommunications Program, this 
office is responsible to the Administrator for directing and 
coordinating the National Rural Telecommunications, Distance Learning, 
and Telemedicine programs of RUS. The Assistant Administrator, 
Telecommunications Program, serves as Assistant Governor of the RTB and 
is responsible for the day-to-day activities of the RTB. The office 
develops, maintains, and implements regulations and program procedures 
on the processing and approval of grants, loans, and loan-related 
activities for all rural telecommunications borrowers and grant 
recipients. The office directs the following three divisions:
    (i) Telecommunications Standards Division. Headed by a division 
director, this division is responsible for engineering staff activities 
related to the design, construction, and technical operation and 
maintenance of rural telecommunications systems and facilities. The 
office develops engineering practices, policies, and technical data 
related to borrowers' telecommunications systems; and evaluates the 
application of new communications network technology, including distance 
learning and telemedicine, to rural telecommunications systems.
    (ii) Advanced Telecommunications Services Staff. Headed by a staff 
director, this staff primarily serves the Assistant Administrator, 
Telecommunications Program in the role of the Assistant Governor of the 
RTB. The office performs analyses and makes recommendations to the AAT 
on issues raised by the RTB Governor, Board of Directors, or RTB 
borrowers. This staff maintains official records for the RTB Board and 
prepares minutes of RTB Board meetings. The staff director serves as the 
Assistant Secretary to the RTB. The staff performs the calculations 
necessary to determine the cost of money rate to RTB borrowers and 
recommends and develops program- wide procedures for loan and grant 
programs. The office is responsible for the Telecommunications Program's 
home page on the Internet.
    (iii) Telecommunications Area Offices. Headed by area directors, 
these four offices are responsible for administering the 
Telecommunications, Distance Learning, and Telemedicine programs for 
specific geographic areas, and serving as the single point of contact 
for all program applicants and borrowers within their respective areas. 
The offices provide guidance to applicants and borrowers on RUS and RTB 
loan policies and procedures, and make recommendations to the 
Administrator on applications for loans, guarantees, and grants. The 
offices assure that borrower systems and facilities are designed and 
constructed in accordance with the terms of the loan, acceptable 
engineering practices and specifications, and acceptable loan security 
standards.
    (4) Office of the Assistant Administrator--Water and Environmental 
Programs. Headed by the Assistant Administrator, Water and Environmental 
Programs, this office is responsible to the Administrator for directing 
and coordinating a nationwide Water and

[[Page 15]]

Waste Disposal Program for RUS as authorized under Section 306 of the 
Consolidated Farm and Rural Development Act, as amended (7 U.S.C. 1926). 
The office oversees administration of RUS policies on making and 
servicing loans and grants for water and waste facilities in rural 
America, and the development of engineering policies, and practices 
related to the construction and operation of community water and waste 
disposal systems. This office is responsible for development and 
coordination of environmental programs with regard to the Water and 
Waste Disposal Program and directs the following two divisions:
    (i) Water Programs Division. Headed by the division director, this 
division is responsible for administering the Water and Waste Disposal 
loan and grant making and servicing and special authorities activities 
nationwide. This office also makes allocation of loan and grant funds to 
field offices and manages National Office reserves.
    (ii) Engineering and Environmental Staff. Headed by a staff 
director, this staff is responsible for engineering activities at all 
stages of program implementation, including: review of preliminary 
engineering plans and specifications, procurement practices, contract 
awards, construction monitoring, and system operation and maintenance. 
The staff also develops Agency engineering practices, policies, and 
technical data related to the construction and operation of community 
water and waste disposal systems. The staff is responsible for 
coordinating environmental policy and providing technical support in 
areas such as: hazardous waste, debarment and suspension, flood 
insurance, drug free workplace requirements, and computer program 
software.



Secs. 2003.23-2003.25  [Reserved]



Sec. 2003.26  Functional organization of RBS.

    (a) General. The Secretary established RBS pursuant to Sec. 234 of 
the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6944).
    (b) Office of the Administrator. According to 7 CFR 2.48, the 
Administrator is responsible for managing and administering the programs 
and support functions of RBS to provide assistance to disadvantaged 
communities through grants and loans and technical assistance to 
businesses and communities for rural citizens and cooperatives, pursuant 
to the following authorities: the Rural Electrification Act of 1936, as 
amended (7 U.S.C. 940c and 950aa et seq.), the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1921 et seq.), the Cooperative Marketing 
Act of 1926 (7 U.S.C. 451-457), the Agricultural Marketing Act of 1946 
(7 U.S.C. 1621-1627), and the Food Security Act of 1985 (7 U.S.C. 1932). 
These grants, loans, and technical assistance improve community welfare 
by enhancing organizational and management skills, developing effective 
economic strategies, and expanding markets for a wide range of rural 
products and services.
    (1) Resources Coordination Staff. Headed by the staff director, this 
staff is responsible to the Administrator for preparing legislative 
initiatives and modifications for program enhancement. The staff 
monitors legislative and regulatory proposals that potentially impact 
RBS functions. The staff serves as liaison on budgetary and financial 
management matters between RBS staff and the Office of the Controller, 
and assists the Administrator in presenting and supporting RBS's budget 
and program plans. The staff also advises the Administrator and RBS 
officials on management issues and policies related to: human resources, 
labor relations, civil rights, EEO, space, equipment, travel, Senior 
Executive Service and Schedule C activities, contracting, automated 
information systems, and accounting. The staff provides analysis and 
recommendations on the effectiveness of administrative and management 
activities, and performs liaison functions between RBS and the Office of 
the Deputy Under Secretary for O&M on a wide variety of administrative 
functions.
    (2) Office of the Deputy Administrator, Business Programs. Headed by 
the Deputy Administrator, Business Programs, this office is responsible 
to the Administrator for overseeing and coordinating the Business and 
Industry Guaranteed and Direct Loan programs, Intermediary Relending 
Program

[[Page 16]]

loans, Rural Business Enterprise grants, Rural Business Opportunity 
grants, Rural Economic Development loan and grant programs, and the 
Rural Venture Capital Demonstration Program. The office participates in 
policy planning, and program development and evaluation. It also directs 
the following three divisions:
    (i) Processing Division. Headed by the division director, this 
division is responsible for developing and maintaining loan processing 
regulations, and directs the processing and approval of guaranteed and 
direct business and industry loans, and the Rural Venture Capital 
Demonstration Program. It provides technical assistance to field 
employees and borrowers on loan processing and develops approval 
criteria and performance standards for loans. The division recommends 
plans, programs, and activities related to business loan programs and 
provides environmental guidance and support.
    (ii) Servicing Division. Headed by the division director, this 
office is responsible for developing and maintaining servicing 
regulations. It directs and provides technical assistance to field 
employees and borrowers on servicing business loans and grants. The 
division reviews large, complex, or potentially controversial loan and 
grant dockets related to loan servicing and recommends servicing plans, 
programs, and activities related to business loan and grant programs.
    (iii) Specialty Lenders Division. Headed by the division director, 
this office is responsible for directing and developing and maintaining 
regulations concerning the processing and approval of Intermediary 
Relending loans, Rural Business Enterprise grants, Rural Business 
Opportunity grants, and Rural Economic Development loan and grant 
programs. The division provides technical assistance to field employees 
and borrowers on loan and grant processing and other activities. It also 
develops approval criteria and performance standards and recommends 
plans, programs, and activities related to business loan and grant 
programs.
    (3) Office of the Deputy Administrator, Cooperative Services 
Programs. Headed by the Deputy Administrator, Cooperative Services 
Programs, this office is responsible to the Administrator for providing 
service to cooperative associations by administering a program of 
research and analysis of economic, social, legal, financial, and other 
related issues concerning cooperatives. The office administers programs 
to assist cooperatives in the organization and management of their 
associations and a program for economic research and analysis of the 
marketing aspects of cooperatives. The division administers and monitors 
activities of the National Sheep Industry Improvement Center and the 
Appropriate Technology Transfer to Rural Areas Program, and the Rural 
Cooperative Development Grant Program. The office directs the following 
three divisions:
    (i) Cooperative Marketing Division. Headed by the division director, 
this division is responsible for participating in the formulation of 
National policies and procedures on cooperative marketing. The division 
conducts research and analysis and gives technical assistance to farmer 
cooperatives on cooperative marketing of certain crops, livestock, 
aquaculture, forestry, poultry, semen, milk, and dairy products to 
improve their market performance and economic position.
    (ii) Cooperative Development Division. Headed by the division 
director, this division is responsible for participating in the 
formulation of National policies and procedures on cooperative 
development. The office conducts evaluations and analysis of proposed 
new cooperatives to develop plans for implementing feasible operations, 
and advises and assists rural resident groups and developing 
cooperatives in implementing sound business plans for new cooperatives. 
It provides research, analysis, and technical assistance to rural 
residents on cooperative development initiatives and strategies to 
improve economic conditions through cooperative efforts.
    (iii) Cooperative Resource Management Division. Headed by the 
division director, this division is responsible for participating in the 
formulating of National policies and procedures on cooperative resource 
management. The division conducts research and analysis and gives 
technical assistance to cooperatives on their overall structure,

[[Page 17]]

strategic management and planning, financial issues, and operational 
characteristics to improve their use of resources, financial policies, 
and ability to adapt to market conditions. The division conducts 
research and analysis of policy, taxation, Federal laws, State statutes, 
and common laws that apply to cooperative incorporation, structure, and 
operation to assist cooperatives in meeting legal requirements.
    (4) Office of the Deputy Administrator, Community Development. 
Headed by the Deputy Administrator, Community Development, this office 
is responsible to the Under Secretary, Rural Development, for 
coordinating and overseeing all functions in the Community Outreach and 
Empowerment Program areas. The office assists in providing leadership 
and coordination to National and local rural economic and community 
development efforts. For appropriation and accounting purposes, this 
office is located under RBS. The office directs the following two 
divisions:
    (i) Empowerment Program Division. Headed by the division director, 
this division is responsible for formulating policies and developing 
plans, standards, procedures, and schedules for accomplishing RBS 
activities related to ``community empowerment programs'', including EZ/
EC, AmeriCorps, and other initiatives. The office develops informational 
materials and provides technical advice and services to support States 
on community empowerment programs. It also generates information about 
rural conditions and strategies and techniques for promoting rural 
economic development for community empowerment programs.
    (ii) Community Outreach Division. Headed by the division director, 
this division is responsible for designing and overseeing overall 
systems and developing resources to support State and community level 
implementation activities for RBS programs. The office designs program 
delivery systems and tools, removes impediments to effective community-
level action, supports field offices with specialized skills, and 
establishes partnerships with National organizations with grass-roots 
membership to assure that programs and initiatives are designed and 
implemented in a way that empowers communities. It develops methods for 
working with rural business intermediaries to assist them in providing 
technical assistance to new, small business, and provides Internet-based 
services to 1890 Land-grant universities, EZ/EC, and AmeriCorps 
volunteers, linking RBS information support to communities with high 
levels of need.
    (5) Alternative Agricultural Research and Commercialization 
Corporation. Headed by a director, this Corporation is responsible for 
providing and monitoring financial assistance for the development and 
commercialization of new nonfood and nonfeed products from agricultural 
and forestry commodities in accordance with 7 U.S.C. 5901 et seq. The 
Corporation acts as a catalyst in forming private and public 
partnerships and promotes new uses of agricultural materials. It expands 
market opportunities for U.S. farmers through development of value-added 
industrial products and promotes environmentally friendly products. For 
budget and accounting purposes, this office is assigned to RBS. The 
director of the Corporation is responsible to the Office of the 
Secretary.



Secs. 2003.27-2003.50  [Reserved]



PART 2018--GENERAL--Table of Contents




Subparts A-E  [Reserved]

                 Subpart F--Availability of Information

Sec.
2018.251  General statement.
2018.252  Public inspection and copying.
2018.253  Indexes.
2018.254  Requests for records.
2018.255  Appeals.
2018.256-2018.300  [Reserved]

    Authority: 5 U.S.C. 552.

Subparts A-E  [Reserved]



                 Subpart F--Availability of Information

    Source: 61 FR 32645, June 25, 1996, unless otherwise noted.

[[Page 18]]



Sec. 2018.251  General statement.

    In keeping with the spirit of the Freedom of Information Act (FOIA), 
the policy of Rural Development and its component agencies, Rural 
Housing Service (RHS), Rural Utilities Service (RUS), and Rural 
Business-Cooperative Service (RBS), governing access to information is 
one of nearly total availability, limited only by the countervailing 
policies recognized by the FOIA.



Sec. 2018.252  Public inspection and copying.

    Facilities for inspection and copying are provided by the Freedom of 
Information Officer (FOIO) in the National Office, by the State Director 
in each State Office, by the Rural Development Manager (formerly, 
District Director) in each District Office, and by the Community 
Development Manager (formerly, County Supervisor) in each County Office. 
A person requesting information may inspect such materials and, upon 
payment of applicable fees, obtain copies. Material may be reviewed 
during regular business hours. If any of the Rural Development materials 
requested are not located at the office to which the request was made, 
the request will be referred to the office where such materials are 
available.



Sec. 2018.253  Indexes.

    Since Rural Development does not maintain any materials to which 5 
U.S.C. 552(a)(2) applies, it maintains no indexes.



Sec. 2018.254  Requests for records.

    Requests for records are to be submitted in accordance with 7 CFR 
1.3 and may be made to the appropriate Community Development Manager, 
Rural Development Manager, State Administrative Management Program 
Director (formerly, State Administrative Officer), State Director, 
Freedom of Information/Privacy Act Specialist, or Freedom of Information 
Officer. The last two positions are located in the Rural Development 
Support Services Division, Washington, DC 20250. The phrase ``FOIA 
REQUEST'' should appear on the outside of the envelope in capital 
letters. The FOIA requests under the Farm Credit Programs (formally FmHA 
Farmer Programs) should be forwarded to the Farm Service Agency (FSA), 
Freedom of Information Officer, Room 3624, South Agriculture Building, 
14th & Independence Avenue, SW., Washington, DC 20250-0506. Requests 
should be as specific as possible in describing the records being 
requested. The FOIO, Freedom of Information/Privacy Act Specialist, each 
State Administrative Management Program Director, each State Director, 
each Rural Development Manager, and each Community Development Manager 
are delegated authority to act respectively at the national, state, 
district, or county level on behalf of Rural Development to:
    (a) Deny requests for records determined to be exempt under one or 
more provisions of 5 U.S.C. 552(b);
    (b) Make discretionary releases (unless prohibited by other 
authority) of such records when it is determined that the public 
interests in disclosure outweigh the public and/or private ones in 
withholding; and
    (c) Reduce or waive fees to be charged where determined to be 
appropriate.



Sec. 2018.255  Appeals.

    If all or any part of an initial request is denied, it may be 
appealed in accordance with 7 CFR 1.7 to that particular Agency 
possessing the documents. Please select the appropriate Agency to 
forward your FOIA appeal from the following addresses: Administrator, 
Rural Housing Service, Room 5014, AG Box 0701, 14th & Independence 
Avenue, SW.--South Building, Washington, DC 20250-0701; Administrator, 
Rural Business-Cooperative Service, Room 5045, AG Box 3201, 14th & 
Independence Avenue, SW.--South Building, Washington, DC 20250-3201 and 
Administrator, Rural Utilities Service, Room 4501, AG Box 1510, 14th & 
Independence Avenue, SW.--South Building, Washington, DC 20250-1510. The 
phrase ``FOIA APPEAL'' should appear on the front of the envelope in 
capital letters.

[[Page 19]]



Secs. 2018.256-2018.300  [Reserved]



PART 2045--GENERAL--Table of Contents




Subparts A-II  [Reserved]

    Subpart JJ--Rural Development--Utilization of Gratuitous Services

Sec.
2045.1751  General.
2045.1752  Policy.
2045.1753  Authority to accept gratuitous services.
2045.1754  Scope of gratuitous services performed.
2045.1755  Preparation and disposition of agreement forms.
2045.1756  Records and reports.

Exhibit A to Subpart JJ--Agreement Form

    Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; delegation of authority by 
the Secretary of Agriculture, 7 CFR 2.23; delegation of authority by the 
Assistant Secretary for Rural Development, 7 CFR 2.70.

    Source: 43 FR 3694, Jan. 27, 1978, unless otherwise noted.

Subparts A-II  [Reserved]



    Subpart JJ--Rural Development--Utilization of Gratuitous Services



Sec. 2045.1751  General.

    Section 331(b) of the Consolidated Farm and Rural Development Act 
(Pub. L. 92-419), and section 506(a) of the Housing Act of 1949, empower 
the Secretary of Agriculture to accept and utilize voluntary and 
uncompensated services in carrying out the provisions of the above cited 
Acts. The Secretary has delegated those authorities to the Administrator 
of the Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 in 7 CFR 2.70(a) (1) and (2).



Sec. 2045.1752  Policy.

    Voluntary and uncompensated (gratuitous) services may be accepted 
with the consent of the agency concerned, from the following sources 
under the conditions set forth in Exhibit A, ``Agreement for Utilization 
of Employee of (Enter Official Title of Governing Body or Other 
Authorized Organization) By the Farmers Home Administration or its 
successor agency under Public Law 103-354'' (Agreement Form).
    (a) Any agency of State government or of any territory or political 
subdivision.
    (b) Non-profit, educational, and charitable organizations, provided 
that no partisan, political, or profit motive is involved either 
explicitly or implicitly.



Sec. 2045.1753  Authority to accept gratuitous services.

    (a) State Directors, Director, Personnel Division, and Director, 
Finance Office, are hereby authorized to accept and utilize gratuitous 
services offered by the governmental agencies listed in 
Sec. 2045.1752(a).
    (b) An offer received by an FmHA or its successor agency under 
Public Law 103-354 State or County Office from a source listed in 
Sec. 2045.1752(b) shall be transmitted to the National Office, 
Attention: Director, Personnel Division, for decision. The offer will be 
accompanied by copies of the Articles of Incorporation and By-laws (if 
the organization is incorporated), a statement that the organization 
accepts the conditions set forth in the Agreement Form, and evidence 
that the organization is financially able to meet the required fiscal 
obligations of the agreement.



Sec. 2045.1754  Scope of gratuitous services performed.

    (a) Gratuitous services accepted in accordance with this subpart may 
be utilized to perform any function performed by regular FmHA or its 
successor agency under Public Law 103-354 employees (excluding Committee 
members). Such services must not result in the displacement of 
employees. Most of the gratuitous services should be performed at the 
County Office level and conform to a standard FmHA or its successor 
agency under Public Law 103-354 position description. A nonstandard 
position description may be developed and used, depending on current 
agency needs in a particular office and gratuitous skills available.
    (b) Orientation and other training will be provided by FmHA or its 
successor agency under Public Law 103-354 so that gratuitous services 
may be performed in accordance with current FmHA or its successor agency 
under Public Law 103-354 procedure.

[[Page 20]]

    (c) Persons performing authorized gratuitous services will be held 
to the same standard as regular FmHA or its successor agency under 
Public Law 103-354 employees performing similar duties. The issuance of, 
and accountability for, identification cards and clearance of employee 
accountability will be as prescribed in FmHA or its successor agency 
under Public Law 103-354 Instruction 2024-B which is available in all 
FmHA or its successor agency under Public Law 103-354 Offices. Such 
persons, except Construction Inspectors may, when under direct 
supervision of County Supervisors, act as Collection Officers and be 
allowed to use receipt books in accordance with FmHA or its successor 
agency under Public Law 103-354 Instructions 2024-C and 451.2 (part 1862 
of this chapter and other applicable regulations available in all FmHA 
or its successor agency under Public Law 103-354 Offices).



Sec. 2045.1755  Preparation and disposition of agreement forms.

    (a) Agreements to accept and utilize gratuitous services must be 
identical to the attached Exhibit A (Agreement Form) with such 
exceptions as may be authorized by the Office of the General Counsel, 
Department of Agriculture.
    (b) Two copies of each signed Agreement Form will be forwarded to 
the Personnel Division. One copy will be retained in the State or 
Finance Office.



Sec. 2045.1756  Records and reports.

    The FmHA or its successor agency under Public Law 103-354 official 
signing the Agreement Form will maintain records to show the names, duty 
assignments, time worked and work locations of all persons performing 
gratuitous services. Copies of time reports submitted to the persons' 
employers should suffice. These records will be necessary to respond to 
occasional requests for reports on the acceptance and utilization of 
gratuitous services in the FmHA or its successor agency under Public Law 
103-354.

                 Exhibit A to Subpart JJ--Agreement Form

  for utilization of employees of (official title of governing body or 
  other authorized organization, i.e., pickens county, ala., board of 
                             commissioners)

by the Farmers Home Administration or its successor agency under Public 
                               Law 103-354

    1. This Agreement, date ______ between, ____________________, a 
(political subdivision), (educational), (charitable), (or nonprofit) an 
organization of the State of____________(hereinafter called the Agency) 
and the United States of America acting through Farmers Home 
Administration or its successor agency under Public Law 103-354, U.S. 
Department of Agriculture (hereinafter called the Administration) is 
entered into for the purpose of permitting certain employees of the 
Agency (hereinafter called the Agency employees) to assist in the 
Administration's effort to provide agricultural, housing and other 
assistance for rural people of the State of____________in accordance 
with Section 331(b) of the Consolidated Farm and Rural Development Act 
and Section 506(a), Title V of the Housing Act of 1949.
    2. The Administration certifies that it is empowered by the current 
Federal laws cited above, and related rules and regulations, to accept 
personnel assistance from the Agency as provided in paragraphs 4 and 5 
below; and that the work assigned to Agency employees will be useful, in 
the public interest, could not otherwise be provided, and will not 
result in the displacement of employed workers.
    3. The Agency certifies that it has the authority under the laws of 
the State of____________to enter into this Agreeement and to provide the 
services agreed upon in the manner provided for.
    4. The Administration hereby supplies the Agency with a narrative 
description which is made a part of this Agreement as Attachment ``A,'' 
explicitly setting forth the duties, knowledge, skills, and abilities to 
be required of Agency employees.
    5. The Administration agrees to:
    (a) Provide training for and responsible supervision of qualified 
and acceptable Agency employees in accordance with Attachment ``A.''
    (b) Provide work within the State of____________for qualified and 
acceptable Agency employees for periods not to exceed eight hours per 
day and 40 hours per week.

[[Page 21]]

    (c) Provide the office space, tools, equipment, and supplies to be 
used by Agency employees in performing work for the Administration.
    (d) Report in the Agency, as required, the time worked by and work 
accomplishments of Agency employees.
    (e) Consult with the Agency, as necessary, on situations involving 
delinquency, misconduct, neglect of work, and apparent conflicts of 
interest of Agency employees.
    (f) Reimburse Agency employees for proper and reasonable travel and 
per diem expenses incurred in performing official duties for the 
Administration, in accordance with Administration travel regulations.
    (g) Consider Agency employees to be Federal employees for the 
purposes of the Federal Employees Compensation Act (5 U.S.C. 8101) and 
of the Federal Tort Claims Act (28 U.S.C. 2671-2680).
    6. The Agency agrees to:
    (a) Not discriminate against any employee or applicant for 
employment because of race, color, religion, sex, age, marital status, 
physical handicap, or national origin. The Agency will take affirmative 
action to ensure that applicants are employed, and that employees are 
treated during employment, without regard to their race, color, 
religion, sex, age, marital status, physical handicap, or national 
origin. Such action shall include, but not be limited to, the following 
Employment, upgrading, demotion or transfer; recruitment or recruitment 
advertising; layoff or termination; rates of pay or other forms of 
compensation; and selection for training including apprenticeship. The 
Agency will post in conspicuous places, available to employees and 
appliants for employment, notices setting forth the provisions of this 
nondiscriminating clause.
    (b) Obtain fingerprints, police records, and work qualifications 
checks on potential assignees, and divulge the results to the 
Administration or permit the Administration to obtain this information.
    (c) Assign only Agency employees who are acceptable to the 
Administration in terms of meeting the same ability and suitability 
standards which are applied to Federal employment.
    (d) Pay all salaries and other expenses of Agency employees and 
comply with Federal, State, and local minimum wage statutes. No monies 
will be paid by the Administration under this agreement, either to the 
Agency or its employees.
    (e) Consider any Tort claims by third parties under applicable laws 
and regulations.
    (f) Reassign or terminate the assignment of Agency employees upon 
request of the Administration.
    7. The Agency and the Administration mutually understand and agree 
that the reasons for determining that an Agency employee is unacceptable 
or unsuitable for initial or continued assignment to Administration work 
may include but shall not be limited to the following:
    (a) Practicing or appearing to practice discrimination for reasons 
of race, color, religion, sex, age, marital status, physical handicap, 
or national origin.
    (b) Being or becoming involved in real or apparent conflicts of 
interest, such as, engaging directly or indirectly in business 
transactions with Administration applicants or borrowers, or using or 
appearing to use the Administration work assignment for private gain.
    (c) Engaging in or having engaged in criminal, dishonest, or immoral 
conduct, or conducting himself in a manner which might embarrass or 
cause criticism of the Administration.
    (d) Being absent from duty without authorization.
    (e) Engaging in partisan political activity prohibited to Federal 
employees doing similar work.
    (f) Lack of work.
    (g) Inability of the employee to perform the duties of the 
assignment.
    8. The term of this Agreement shall commence on the date thereof. It 
shall end on________________, unless extended by mutual agreement, or 
unless terminated earlier by at least (30) days advanced written notice 
by either party to the other.
    9. The Agency and the Administration respectively certify, each for 
itself, that its officer signing this Agreement is duly authorized 
thereto.

  (Enter Official Title of Agency, i.e., City Council, Modesto, Calif.)

                                          BY

                                Chairman, City Council,

                                    Modesto, Calif.

                                     FARMERS HOME

               ADMINISTRATION or its successor agency under Public Law 
                                 103-354

                                          BY

                FmHA or its successor agency under Public Law 103-354 
                         State Director for (  )

[[Page 23]]



               CHAPTER XXVI--OFFICE OF INSPECTOR GENERAL,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
2610            Organization, functions, and delegations of 
                    authority...............................          25
2620            Availability of information to the public...          28

[[Page 25]]



PART 2610--ORGANIZATION, FUNCTIONS, AND DELEGATIONS OF AUTHORITY--Table of Contents




Sec.
2610.1  General statement.
2610.2  Headquarters organization.
2610.3  Regional organization.
2610.4  Requests for service.
2610.5  Delegations of authority.

    Authority: 5 U.S.C. 301 and 552, Pub. L. 95-452, 5 U.S.C. App., and 
Pub. L. 97-98, 7 U.S.C. 2270.

    Source: 60 FR 52840, Oct. 11, 1995, unless otherwise noted.



Sec. 2610.1  General statement.

    (a) The Inspector General Act of 1978 as amended, Pub. L. 95-452, 5 
U.S.C. App., establishes an Office of Inspector General (OIG) in the 
U.S. Department of Agriculture (USDA) and transfers to it the functions, 
powers, and duties of offices referred to in the Department as the 
``Office of Investigation'' and the ``Office of Audit,'' previously 
assigned to the OIG created by the Secretary's Memoranda 1915 and 1727, 
dated March 23, 1977, and October 5, 1977, respectively. Under this Act, 
OIG is established as an independent and objective unit, headed by the 
Inspector General (IG), who is appointed by the President and reports to 
and is under the general supervision of the Secretary.
    (b) The mission of OIG is to provide policy direction; to conduct, 
supervise, and coordinate audits and investigations of USDA programs and 
operations to determine efficiency and effectiveness; to prevent and 
detect fraud and abuse in such programs and operations; and to keep the 
Secretary and the Congress informed of problems and deficiencies 
relative to the programs and operations.
    (c) The Secretary has made the following delegations of authority to 
the IG (7 CFR 2.33):
    (1) Advise the Secretary and General Officers in the planning, 
development, and execution of Department policies and programs.
    (2) Provide for the personal security of the Secretary and Deputy 
Secretary.
    (3) Serve as liaison official for the Department for all audits of 
USDA performed by the General Accounting Office.
    (4) In addition to the above delegations of authority, the IG, under 
the general supervision of the secretary, has specific duties, 
responsibilities, and authorities pursuant to the Act, including:
    (i) Conduct and supervise audits and investigations relating to 
programs and operations of the Department.
    (ii) Provide leadership, coordination, and policy recommendations to 
promote economy, efficiency, and effectiveness, and to prevent and 
detect fraud and abuse in the administration of the Department's program 
and operations.
    (iii) Keep the Secretary and the congress fully and currently 
informed about problems and deficiencies and the necessity for and 
progress of corrective actions in the administration of the Department's 
programs and operations.
    (iv) Make such investigations and reports relating to the 
administration of programs and operations of the Department as are in 
the judgment of the IG, necessary or desirable.
    (v) Review existing and proposed legislation and regulations and 
make recommendations to the Secretary and the Congress on the impact 
such laws or regulations will have on the economy and efficiency of 
program administration or in the prevention and detection of fraud and 
abuse in the programs and operations of the Department.
    (vi) Have access to all records, reports, audits, reviews, 
documents, papers, recommendations, or other material available to the 
Department which relate to programs and operations for which the IG has 
responsibility.
    (vii) Report expeditiously to the Attorney General any matter where 
there are reasonable grounds to believe there has been a violation of 
Federal criminal law.
    (viii) Issue subpoenas to other than Federal agencies for the 
production of information, documents, reports, answers, records, 
accounts, papers, and other data and documentary evidence necessary in 
the performance of functions assigned by the Act.
    (ix) Receive and investigate complaints or information from any 
Department employee concerning possible

[[Page 26]]

violations of laws, rules or regulations, or mismanagement, gross waste 
of funds, abuse of authority, or substantial and specific dangers to the 
public health and safety.
    (x) Select, appoint, and employ necessary officers and employees in 
OIG in accordance with laws and regulations governing the civil service, 
including an Assistant Inspector General for Auditing and an Assistant 
Inspector General for Investigations.
    (xi) Obtain services as authorized by Section 3109 of Title 5, 
United States Code.
    (xii) Enter into contracts and other arrangements for audits, 
inspections, studies, analyses, and other services with public agencies 
and private persons, and make such payments as may be necessary to carry 
out the provisions of the Act to the extent and in such amounts as may 
be provided in an appropriation act.
    (d) The IG, under the Agriculture and Food Act of 1981, Pub. L. 97-
98, 7 U.S.C. 2270, and pursuant to rules issued by the Secretary in 7 
CFR part 1a, has the authority to:
    (1) Designate employees of the Office of Inspector General who 
investigate alleged or suspected felony criminal violations of statutes 
administered by the Secretary of Agriculture or any agency of USDA, when 
engaged in the performance of official duties to:
    (i) Execute and serve a warrant for an arrest, for the search of 
premises, or the seizure of evidence when issued under authority of the 
United States upon probable cause to believe that such a violation has 
been committed;
    (ii) Make an arrest without a warrant for any such violation if such 
violation is committed or if the employee has probable cause to believe 
that such violation is being committed in his/her presence; and
    (iii) Carry a firearm.
    (2) Issue directives and take the actions prescribed by the 
Secretary's rules.



Sec. 2610.2  Headquarters organization.

    (a) The OIG has a headquarters office in Washington, DC, and 
regional offices throughout the United States. The headquarters office 
consists of the immediate office of the IG and three operational units.
    (b) Operational units. (1) The Assistant Inspector General for 
Policy Development and Resources Management (AIG/PD&RM) formulates OIG 
policies and procedures; develops, administers and directs comprehensive 
programs for the management, budget, financial, personnel, systems 
improvement, and information activities and operations of OIG; and is 
responsible for OIG automated date processing (ADP) and OIG information 
management systems. The staff maintains OIG's directives system; 
Departmental Regulations and Federal Register issuances; administers the 
Freedom of Information and Privacy Acts, which includes requests 
received from the Congress, other Federal agencies, intergovernmental 
organizations, the news media, and the public; and provides for the 
administration of an OIG EEO program, including affirmative action. The 
immediate office of the AIG/PD&RM and two divisions carry out these 
functions.
    (2) The Assistant Inspector General for Audit (AIG/A) carries out 
the OIG's domestic and foreign audit operations through a headquarters 
office, a Financial Management and ADP Audit Operations staff located in 
Kansas City, Missouri, and six regional offices shown in Sec. 2610.3(a). 
The staff provides a continual audit review of ADP security throughout 
USDA. Auditing officials conduct operational liaison on audit matters; 
schedule and conduct audits; release audit reports to management; follow 
agency action to assure that audit reports have been properly acted upon 
through review of Department management follow up system; monitor the 
quality of OIG audit reports; and coordinate activities with the 
Assistant inspector General (AIG) for Investigations. The staff also 
provides an integrated approach to fraud prevention and detection and 
management improvement in USDA programs and operations; reviews 
Department legislation and regulations through the involvement and 
cooperation of the Department's principal officers and program managers; 
coordinates analyses and reports on the conduct of fraud

[[Page 27]]

vulnerability assessments; and recommends policies and provides 
technical assistance for investigative and audit operations. The 
Auditing headquarters office consists of the immediate office of the 
AIG/A and four staff divisions.
    (3) The Assistant Inspector General for Investigations (AIG/I) 
carries out the OIG's domestic and foreign investigative operations 
through a headquarters office and the seven regional offices shown in 
Sec. 2610.3(b). Investigations officials conduct operational and 
intelligence liaison on investigative matters with the FBI, Secret 
Service, Internal Revenue Service (IRS), Interpol, and other Federal and 
State law enforcement organizations; determine the need for 
investigative action; conduct investigations; prepare factual reports of 
investigative findings; refer reports for appropriate administrative or 
legal action; followup on agency actions to assure that OIG 
investigative reports have been properly acted upon; monitor the quality 
of investigative reports; and coordinate activities with the AIG/A. The 
staff also conducts special investigations of major programs, 
operations, and high level officials; provides for the protection of the 
Secretary and Deputy Secretary; receives and processes employee 
complaints concerning possible violations of laws, rules, regulations or 
mismanagement. The Investigations headquarters office consists of the 
immediate office of the AIG/I and three staff divisions.



Sec. 2610.3  Regional organization.

    (a) Each Regional Inspector General for Audit (RIG/A) is responsible 
to the IG and to the AIG/A for supervising the performance of all OIG 
auditing activities relating to the Department's domestic and foreign 
programs and operations within an assigned geographic area. The 
addresses and telephone numbers of the six Audit Regional Offices and 
the territories served are as follows:

         Audit Region, Address, Telephone Number, and Territory

Northeast Region, ATTN: Suite 5D06, 4700 River Road, Unit 151, 
Riverdale, Maryland 20737-1237, (301) 734-8763; Connecticut, Delaware, 
District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New 
Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Virgin 
Islands, Vermont, Virginia, and West Virginia.
Southeast Region, 401 W. Peachtree Street NW., Room 2328, Atlanta, 
Georgia 30365-3520, (404) 730-3210; Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee.
Midwest Region, 111 N. Canal Street, Suite 1130, Chicago, Illinois 
60606-7295, (312) 353-1352; Illinois, Indiana, Michigan, Minnesota, 
Ohio, and Wisconsin.
Southwest Region, 101 South Main, Room 324, Temple, Texas 76501, (817) 
774-1430; Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.
Great Plains Region, 9435 Holmes, Room 233, Kansas City, Missouri 64131, 
Mailing address: PO Box 293, Kansas City, Missouri 64141, (816) 926-
7667; Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, 
South Dakota, Wyoming, and Utah.
Western Region, 600 Harrison Street, Suite 225, San Francisco, 
California 94107, (415) 744-2851; Alaska, Arizona, California, Hawaii, 
Idaho, Nevada, Oregon, Territory of Guam, Trust Territories of the 
Pacific, and Washington.

    (b) Each RIG/I is responsible to the IG and to the AIG/I for 
supervising the performance of all OIG investigative activities relating 
to the Department's domestic and foreign programs and operations within 
an assigned geographic area. The addresses and telephone numbers of the 
seven Investigations Regional Offices and the territories served are as 
follows:

     Investigations Region, Address, Telephone Number, and Territory

North Atlantic Region, 26 Federal Plaza, Room 1409, New York, New York 
          10278, (212) 264-8400; Connecticut, Maine, Massachusetts, New 
          Hampshire, New Jersey, New York, Puerto Rico, Rhode Island, 
          Vermont, and Virgin Islands.
Northeast Region, ATTN: Suite 5D06, 4700 River Road, Unit 151, 
          Riverdale, Maryland 20737-1237, (301) 734-8850; Delaware, 
          District of Columbia, Maryland, Pennsylvania, Virginia, and 
          West Virginia.
Southeast Region, 401 W. Peachtree Street NW., Room 2329, Atlanta, 
          Georgia 30365-3520, (404) 730-2170; Alabama, Florida, Georgia, 
          Kentucky, Mississippi, North Carolina, South Carolina, and 
          Tennessee.
Midwest Region, 111 N. Canal Street, Suite 1130, Chicago, Illinois 
          60606-7295, (312) 353-1358; Illinois, Indiana, Michigan, 
          Minnesota, Ohio, and Wisconsin.
Southwest Region, 101 South Main, Room 311, Temple, Texas 76501, (817) 
          774-1351;

[[Page 28]]

          Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.
Great Plains Region, 9435 Holmes, Room 210, Kansas City, Missouri 64131, 
          Mailing address: PO Box 293, Kansas City, Missouri 64141, 
          (816) 926-7606: Colorado, Iowa, Kansas, Missouri, Montana, 
          Nebraska, North Dakota, South Dakota, Wyoming, and Utah.
Western Region, 600 Harrison Street, Room 225, San Francisco, California 
          94107, (415) 744-2887; Alaska, Arizona, California, Hawaii, 
          Idaho, Nevada, Oregon, Territory of Guam, Trust Territories of 
          the Pacific, and Washington.



Sec. 2610.4  Requests for service.

    (a) Heads of USDA agencies will direct requests for audit or 
investigative service to the AIG/A, AIG/I, RIG/A, RIG/I, or to other OIG 
audit or investigation officials responsible for providing service of 
the type desired in the geographical area where service is desired.
    (b) Agency officials or other employees may, at any time, direct to 
the personal attention of the IG any audit or investigation matter that 
warrants such attention.
    (c) Other persons may address their communications regarding audit 
or investigative matters to: The Inspector General, U.S. Department of 
Agriculture, Ag Box 2301, Washington, DC 20250. Additionally, persons 
may call or write the hotline office at 202-690-1622, 1-800-424-9121, 
TDD 202-690-1202, or Office of Inspector General, PO Box 23399, 
Washington, DC 20026. Bribes involving USDA programs may be reported 
using the 24 hour bribery hotline number at 202 720-7257.



Sec. 2610.5  Delegations of authority.

    (a) AIG's listed in Sec. 2610.2; and RIG's listed in Sec. 2610.3, 
are authorized to take whatever actions are necessary to carry out their 
assigned functions. This authority may be redelegated.
    (b) The IG reserves the right to establish audit and investigation 
policies, program, procedures, and standards; to allocate appropriated 
funds; to determine audit and investigative jurisdiction; and to 
exercise any of the powers or functions or perform any of the duties 
referenced in the above delegation.



PART 2620--AVAILABILITY OF INFORMATION TO THE PUBLIC--Table of Contents




Sec.
2620.1  General statement.
2620.2  Public inspection and copying.
2620.3  Requests.
2620.4  Denials.
2620.5  Appeals.

    Authority: 5 U.S.C. 301 and 552; 5 U.S.C. App.

    Source: 60 FR 52842, Oct. 11, 1995, unless otherwise noted.



Sec. 2620.1  General statement.

    This part is issued in accordance with, and subject to, the 
regulations of the Secretary of Agriculture Sec. 1.1 through Sec. 1.23 
(and appendix A of subpart A of part 1) of this title, implementing the 
Freedom of Information Act, 5 U.S.C. 552, and governs the availability 
of records of the Office of Inspector General (OIG) to the public upon 
request.



Sec. 2620.2  Public inspection and copying.

    5 U.S.C. 522(a)(2) requires that certain materials be made available 
for public inspection and copying, and that a current index of these 
materials be published quarterly or otherwise made available. OIG does 
not maintain any materials within the scope of these requirements.



Sec. 2620.3  Requests.

    (a) Requests for OIG records shall be in writing in accordance with 
Sec. 1.6(a) of this title and addressed to the Assistant Inspector 
General for Policy Development and Resources Management (AIG/PD&RM), 
Office of Inspector General, U.S. Department of Agriculture, Ag Box 
2310, Washington, DC 20250. The above official is hereby delegated 
authority to make determinations regarding such requests in accordance 
with Sec. 1.3(a)(3) of this title.
    (b) Requests should be reasonably specific in identifying the record 
requested and should include the name, address, and telephone number of 
the requester.
    (c) Available records may be inspected and copied in the office of 
the AIG/PD&RM, from 8 a.m. to 4:30 p.m. local time on regular working 
days or may be obtained by mail. Copies will

[[Page 29]]

be provided upon payment of applicable fees, unless waived or reduced, 
in accordance with the Department's fee schedule as set forth in 
appendix A of subpart A of part 1 of this title.



Sec. 2620.4  Denials.

    If the AIG/PD&RM determines that a requested record is exempt from 
mandatory disclosure and that discretionary release would be improper, 
the AIG/PD&RM shall give written notice of denial in accordance with 
Sec. 1.8(a) of this title.



Sec. 2620.5  Appeals.

    The denial of a requested record may be appealed in accordance with 
Sec. 1.6(e) of this title. Appeals shall be addressed to the Inspector 
General, U.S. Department of Agriculture, Ag Box 2301, Washington, DC 
20250. The Inspector General will give prompt notice of the 
determination concerning an appeal in accordance with Sec. 1.8(d) of 
this title.

[[Page 31]]



CHAPTER XXVII--OFFICE OF INFORMATION RESOURCES MANAGEMENT, DEPARTMENT OF 
                               AGRICULTURE




  --------------------------------------------------------------------

Part                                                                Page
2700            Organization and functions..................          33
2710            Availability of information to the public...          33

[[Page 33]]



PART 2700--ORGANIZATION AND FUNCTIONS--Table of Contents




Sec.
2700.1  General statement.
2700.2  Organization.
2700.3  Functions.

    Authority: 5 U.S.C. 301, 552; 7 CFR 2.81.

    Source: 47 FR 39128, Sept. 7, 1982, unless otherwise noted.



Sec. 2700.1  General statement.

    This part is issued in accordance with 5 U.S.C. 552(a) to provide 
guidance for the general public as to the organization and functions of 
the Office of Information Resources Management.



Sec. 2700.2  Organization.

    The Office of Information Resources Management (OIRM) was 
established on January 12, 1982. Delegations of authority to the 
Director, OIRM appear at 7 CFR 2.81. The organization is comprised of 
five headquarters divisions, an administrative staff and three computer 
centers to serve the Department. The organization is headed by the 
Director or, in the Director's absence, by the Deputy Director or, in 
the absence of both, by the Director's desginee.



Sec. 2700.3  Functions.

    (a) Director. Provides executive direction for OIRM. Develops and 
recommends Departmental information resources management principles, 
policies, and objectives; develops and disseminates Departmental 
information resources management standards, guidelines, rules, and 
regulations necessary to implement approved principles, policies, and 
programs; designs, develops, implements, and revises systems, processes, 
work methods, and techniques to improve the management of information 
resources and the operational effectiveness of the Department; provides 
telecommunications and automated data processing services to the 
Department's agencies and staff offices.
    (b) Deputy Director. Assists the Director and, in the absence of the 
Director, serves as the Acting Director.
    (c) Administrative Management Staff. Provides support for agency 
management regarding budget, accounting, personnel, and other 
administrative matters.
    (d) Planning Division. Defines, develops, guides, and administers 
the Department's long-range planning process for information resources.
    (e) Information Management Division. Develops policy, standards and 
guidelines for collection, protection, access, use and management of 
information.
    (f) Review and Evaluation Division. Reviews and evaluates 
information resources programs and activities of Department agencies and 
staff offices for conformance with plans, policies, and standards.
    (g) Agency Technical Services Division. Advises and consults with 
and assists Department agencies and staff offices on activities related 
to the development and implementation of automated information systems.
    (h) Operations and Telecommunications Division. Coordinates the 
development and implementation of programs for ADP and 
telecommunications resource planning within Departmental computer 
centers and the National Finance Center, and for the acquisition and use 
of Department-wide telecommunications facilities and services.
    (i) Departmental Computer Centers. The following centers provide ADP 
facilities and services to agencies and staff offices of the Department.
    (1) Washington Computer Center, 14th and Independence Ave., SW., Rm. 
S-107-South, Washington, DC 20250.
    (2) Fort Collins Computer Center, 3825 E. Mulberry Street (P.O. Box 
1206), Fort Collins, CO 80524.
    (3) Kansas City Computer Center, 8930 Ward Parkway (P.O. Box 205), 
Kansas City, MO 64141.



PART 2710--AVAILABILITY OF INFORMATION TO THE PUBLIC--Table of Contents




Sec.
2710.1  General statement.
2710.2  Public inspection and copying.
2710.3  Indexes.
2710.4  Initial request for records.
2710.5  Appeals.

Appendix A to Part 2710--List of Addresses

    Authority: 5 U.S.C. 301, 552; 7 CFR 1.1-1.16.

    Source: 47 FR 39129, Sept. 7, 1982, unless otherwise noted.

[[Page 34]]



Sec. 2710.1  General statement.

    This part is issued in accordance with 7 CFR 1.4 of the U.S. 
Department of Agriculture regulations governing the availability of 
records (7 CFR 1.1-1.16 and Appendix A) under the Freedom of Information 
Act (5 U.S.C. 552). The Department's regulations, as supplemented by the 
regulations in this part, provide guidance for any person wishing to 
request records from the Office of Information Resources Management 
(OIRM).



Sec. 2710.2  Public inspection and copying.

    (a) Background. 5 U.S.C. 552(a)(2) required that each agency make 
certain kinds of records available for public inspection and copying.
    (b) Procedure. Persons wishing to gain access to OIRM records should 
contact the Information Access & Disclosure Officer by writing to the 
address shown in 2710.4(b)(2).



Sec. 2710.3  Indexes.

    (a) Background. 5 U.S.C. 552(a)(2) also required that each agency 
maintain and make available for public inspection and copying current 
indexes providing identifying information for the public with regard to 
any records which are made available for public inspection and copying.
    (b) Procedure. Persons wishing to get an index may contact the 
division or center that maintains the records. Publication of these 
indexes as a separate document is unnecessary and impractical.



Sec. 2710.4  Initial request for records.

    (a) Background. The Information Access and Disclosure Officer is 
authorized to:
    (1) Grant or deny requests for OIRM records.
    (2) Make discretionary releases of OIRM records when it is 
determined that the public interests in disclosure outweigh the public 
and/or private ones in withholding.
    (3) Reduce or waive fees to be charged where determined to be 
appropriate.
    (b) Procedure. Persons wishing to request records from the Office of 
Information Resources Management may do so as follows:
    (1) How. Submit each initial request for OIRM records as prescribed 
in 7 CFR 1.3(a).
    (2) Where. Submit each initial request to the Information Access and 
Disclosure Officer, Office of Information Resources Management, USDA, 
14th and Independence Ave., SW., Room 407-W, Washington, DC 20250.



Sec. 2710.5  Appeals.

    Procedure. Any person whose initial request is denied in whole or in 
part may appeal that denial, in accordance with 7 CFR 1.3(e) and 1.7, to 
the Director, Office of Information Resources Management, by sending the 
appeal to the Information Access and Disclosure Officer, Office of 
Information Resources Management, USDA, 14th and Independence Ave., SW., 
Room 407-W, Washington, DC 20250. The Director, Office of Information 
Resources Management, will make the determination on the appeal.

               Appendix A to Part 2710--List of Addresses

                           Section 1. General

    This list provides the titles and mailing addresses of officials who 
have custody of OIRM records. This list also identifies the normal 
working hours, Monday through Friday, excluding holidays, during which 
public inspection and copying of certain kinds of records, and indexes 
to those records, is permitted.

                      Section 2. List of Addresses

Director, Office of Information Resources Management, 14th and 
Independence Ave., SW., Rm. 113-W, Washington, DC 20250; Hours: 8:30 
a.m.-5:00 p.m.
Chief, Planning Division, OIRM, 14th and Independence Ave., SW., Rm. 
446-W, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.
Chief, Review and Evaluation Division, OIRM, 14th and Independence Ave., 
SW., Rm. 442-W, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.
Chief, Agency Technical Services Division, OIRM, 14th and Independence 
Ave., SW., Rm. 416-W, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.
Chief, Operations and Telecommunications Division, OIRM, 14th and 
Independence Ave., SW., Rm. 419-W, Washington, DC 20250; Hours: 8:30 
a.m.-5:00 p.m.
Chief, Information Management Division, OIRM, 14th and Independence 
Ave., SW., Rm. 404-W, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.

[[Page 35]]

Chief, St. Louis Computer Center, OIRM, 1520 Market Street, Rm. 3441, 
St. Louis, MO 63101; Hours: 8:00 a.m.-4:40 p.m.
Director, Kansas City Computer Center, OIRM, 8930 Ward Parkway, (P.O. 
Box 205), Kansas City, MO 64141; Hours: 8:00 a.m.-4:45 p.m.
Director, Fort Collins Computer Center, OIRM, 3825 E. Mulberry Street, 
(P.O. Box 1206), Fort Collins, CO 80521; Hours: 8:00 a.m.-4:30 p.m.
Director, Washington Computer Center, OIRM, 14th and Independence Ave., 
SW., Rm. S-107-S, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.
Information Access and Disclosure Officer, OIRM, 14th and Independence 
Ave., SW., Rm. 407-W, Washington, DC 20250; Hours: 8:30 a.m.-5:00 p.m.

[[Page 37]]



                  CHAPTER XXVIII--OFFICE OF OPERATIONS,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
2810            Organization and functions--Office of 
                    Operations..............................          39
2811            Availability of information to the public...          39
2812            Department of Agriculture guidelines for the 
                    donation of excess research equipment 
                    under 15 U.S.C. 3710(i).................          41

[[Page 39]]



PART 2810--ORGANIZATION AND FUNCTIONS--OFFICE OF OPERATIONS--Table of Contents




Sec.
2810.1  General statement.
2810.2  Organization.
2810.3  Functions.

    Authority: 5 U.S.C. 301 and 552; 7 CFR 2.76.

    Source: 54 FR 52013, Dec. 20, 1989, unless otherwise noted.



Sec. 2810.1  General statement.

    This part is issued in accordance with 5 U.S.C. 552(a) to provide 
guidance for the general public as to Office of Operations (OO) 
organization and functions.



Sec. 2810.2  Organization.

    The Office of Operations (OO) was established January 12, 1982. 
Delegations of authority to the Director, OO, appear at 7 CFR 2.76. The 
organization is comprised of six divisions and one staff located at 
Department headquarters. Description of the functions of these 
organizational units are in the following section. The organization is 
headed by a Director.



Sec. 2810.3  Functions.

    (a) Director. Provides executive direction for OO. Develops and 
promulgates overall policies and provides general direction, leadership, 
oversight, and coordination of USDA management of procurement, real and 
personal property activities, mail and copier management. Provides 
executive services to the Office of the Secretary and operates 
activities providing consolidated USDA administrative functions and 
services.
    (b) Deputy Director. Assists the Director, and in the absence of the 
Director, serves as Acting Director.
    (c) Administrative Unit. Provides support for agency management 
regarding budget, accounting, personnel, and other administrative 
matters.
    (d) Executive Services Division. Provides executive services to the 
Office of the Secretary in travel arrangements, supplies, furnishings, 
communications, equipment, and records. Operates the central USDA DC 
imprest fund.
    (e) Facilities Management Division. Operates and maintains the USDA 
DC headquarters building complex, including headquarters parking. 
Oversees management and operation of USDA buildings nationwide, and 
provides DC area labor services.
    (f) Mail and Reproduction Management Division. Oversees USDA mail, 
copier, and duplicating programs. Operates DC area central activities in 
these areas.
    (g) Personal Property Management Division. Oversees USDA supply, 
motor vehicle, and personal property programs. Operates centralized 
warehouse and property rehabilitation facilities.
    (h) Procurement Division. Oversees USDA procurement programs. 
Operates centralized purchasing operations for ADP and Washington area 
activities.
    (i) Real Property Management Division. Oversees USDA real property 
management programs.



PART 2811--AVAILABILITY OF INFORMATION TO THE PUBLIC--Table of Contents




Sec.
2811.1  General statement.
2811.2  Public inspection and copying.
2811.3  Indexes.
2811.4  Initial requests for records.
2811.5  Appeals.
2811.6  Fee schedule.

Appendix A to Part 2811--List of Addresses

    Authority: 5 U.S.C. 301 and 552 (as amended); 7 CFR 1.3.

    Source: 54 FR 52014, Dec. 20, 1989, unless otherwise noted.



Sec. 2811.1  General statement.

    This part is issued in accordance with 7 CFR 1.3 of the Department 
of Agriculture regulations governing the availability of records (7 CFR 
1.1-1.23 and Appendix A) under the Freedom of Information Act (FOIA), 5 
U.S.C. 552. The Department's regulations, as supplemented by the 
regulations in this part, provide guidance for any person wishing to 
request records from Office of Operations.



Sec. 2811.2  Public inspection and copying.

    (a) Background. 5 U.S.C. 552(a)(2) requires that each agency 
maintain and make available for public inspection and copying certain 
kinds of records.

[[Page 40]]

    (b) Procedure. To gain access to OO records that are available for 
public inspection, contact the division that maintains them. See 
Appendix A, List of Addresses, for the location and hours of operation.



Sec. 2811.3  Indexes.

    (a) Background. 15 U.S.C. 552(a)(2) also requires that each agency 
maintain and make available for public inspection and copying current 
indexes provided identifying information for the public with regard to 
any records which are made available for public inspection and copying. 
OO does not maintain any materials within the scope of these 
requirements.



Sec. 2811.4  Initial requests for records.

    (a) Background. The head of each OO division, each OO contracting 
officer, each OO leasing officer, and the OO FOIA officer is authorized 
to:
    (1) Grant or deny requests for OO records.
    (2) Make discretionary release of OO records when it is determined 
that the public interest in disclosure outweighs the public and/or 
private ones in withholding.
    (3) Reduce or waive fees to be charged where determined to be 
appropriate.
    (4) Refer a request to the OO FOIA Officer for determination.
    (b) Procedures. Persons wishing to request records from the Office 
of Operations may do so as follows:
    (1) How. Submit each initial request for OO records as prescribed in 
7 CFR 1.6.
    (2) Where. Submit each initial request to the head of the unit that 
maintains the records. See Appendix A, List of Addresses. Contact the 
FOIA Officer for guidance as needed. Or, submit the request to the FOIA 
Officer for forwarding to the proper officials: FOIA Officer, Office of 
Operations, USDA, Room 134-W Administration Building, 14th & 
Independence Avenue SW., Washington, DC 20250.



Sec. 2811.5  Appeals.

    Procedure. Any person whose initial request is denied in whole or in 
part may appeal that denial, in accordance with 7 CFR 1.6(e) and 1.8, to 
the Director, Office of Operations, USDA, Room 113-W Administration 
Building, 14th & Independence Avenue SW., Washington, DC 20250.



Sec. 2811.6  Fee schedule.

    Department regulations provide for a schedule of reasonable standard 
charges for document search and duplication. See 7 CFR 1.2(b). Fees to 
be charged are set forth in 7 CFR part 1, subpart A, appendix A.

               Appendix A to Part 2811--List of Addresses

                           Section 1. General

    This list provides the titles and mailing address of officials who 
have custody of OO records. The normal working hours of these offices 
are 8:30 a.m. to 5:00 p.m., Monday through Friday, exclusing holidays, 
during which public inspection and copying of certain kinds of records 
is permitted.

                      Section 2. List of Addresses

    All of the following addresses are located at 14th Street and 
Independence Avenue, Washington, DC. Address mail as follows:

Director, Office of Operations, USDA, Room 113-W Administration 
Building, Washington, DC 20250.
FOIA Officer, Office of Operations, USDA, Room 134-W Administration 
Building, Washington, DC 20250.
Chief, Administrative Unit, Office of Operations, USDA, Room 134-W, 
Washington, DC 20250.
Chief, Executive Services Division, Office of Operations, USDA, Room 10-
A, Administration Building, Washington, DC 20250.
Chief, Facilities Management Division, Office of Operations, USDA, Room 
S-313 South Building, Washington, DC 20250.
Chief, Mail and Reproduction Management Division, Office of Operations, 
USDA, Room 1540 South Building, Washington, DC 20250.
Chief, Personal Property Management Division, Office of Operations, USDA 
Room 1524 South Building, Washington, DC 20250.
Chief, Procurement Division, Office of Operations, USDA, Room 1550 South 
Building, Washington, DC 20250.
Chief, Real Property Management Division, Office of Operations, USDA, 
Room 1566, South Building, Washington, DC 20250.

[[Page 41]]



PART 2812--DEPARTMENT OF AGRICULTURE GUIDELINES FOR THE DONATION OF EXCESS RESEARCH EQUIPMENT UNDER 15 U.S.C. 3710(i)--Table of Contents




Sec.
2812.1  Purpose.
2812.2  Eligibility.
2812.3  Definitions.
2812.4  Procedures.
2812.5  Restrictions.
2812.6  Title.
2812.7  Costs.
2812.8  Accountability and recordkeeping.
2812.9  Disposal.
2812.10  Liabilities and losses.

    Authority: 5 U.S.C. 301; E.O. 12999, 61 FR 17227, 3 CFR, 1997 Comp., 
p. 180.

    Source: 60 FR 34456, July 3, 1995, unless otherwise noted.



Sec. 2812.1  Purpose.

    This part sets forth the procedures to be utilized by USDA agencies 
and laboratories in the donation of excess research equipment to 
educational institutions and non-profit organizations for the conduct of 
technical and scientific education and research activities as authorized 
by 15 U.S.C. 3710(i). Title to excess research equipment donated 
pursuant to 15 U.S.C. 3710(i), shall pass to the donee.



Sec. 2812.2  Eligibility.

    Eligible organizations are educational institutions or non-profit 
organizations involved in the conduct of technical and scientific 
educational and research activities.



Sec. 2812.3  Definitions.

    (a) Cannibalization. The dismantling of equipment for parts to 
repair or enhance other equipment. The residual is reported for 
disposal. Cannibalization is only authorized if the property value is 
greater when cannibalized than retention in the original condition.
    (b) Community-based educational organization means nonprofit 
organizations that are engaged in collaborative projects with pre-
kindergarten through twelfth grade educational institutions or that have 
education as their primary focus. Such organizations shall qualify as 
nonprofit educational institutions for purposes of section 203(j) of the 
Federal Property and Administrative Services Act of 1949 (40 U.S.C. 
484(j)).
    (c) Educational institution means a public or private, non-profit 
educational institution, encompassing pre-kindergarten through twelfth 
grade and two- and four-year institutions of higher education, as well 
as public school districts.
    (d) Educationally useful Federal equipment means computers and 
related peripheral tools (e.g., printers, modems, routers, and servers), 
including telecommunications and research equipment, that are 
appropriate for use in pre-kindergarten, elementary, middle, or 
secondary school education. It shall also include computer software, 
where the transfer of licenses is permitted.
    (e) Excess personal property. Items of personal property no longer 
required by the controlling Federal agency.
    (f) Federal empowerment zone or enterprise community (EZ/EC) means a 
rural area designated by the Secretary of Agriculture under 7 CFR part 
25.
    (g) Non-profit organization means any corporation, trust 
association, cooperative, or other organization which:
    (1) Is operated primarily for scientific, educational, service, 
charitable, or similar purposes in the public interest;
    (2) Is not organized primarily for profit; and
    (3) Uses its net proceeds to maintain, improve, or expand its 
operations. For the purposes of this part, ``non-profit organizations'' 
may include utilities affiliated with institutions of higher education, 
or with state and local governments and federally recognized Indian 
tribes.
    (h) Research equipment. Federal property determined to be essential 
to conduct scientific or technical educational research.
    (i) Technical and scientific education and research activities. Non-
profit tax exempt public educational institutions or government 
sponsored research organizations which serve to conduct technical and 
scientific education and research.

[60 FR 34456, July 3, 1995, as amended at 65 FR 69857, Nov. 21, 2000]

[[Page 42]]



Sec. 2812.4  Procedures.

    (a) [Reserved]
    (b) Each agency head will designate in writing an authorized 
official to approve donations of excess property/equipment under this 
part.
    (c) After USDA screening has been accomplished, excess personal 
property targeted for donation under this part will be made available on 
a first-come, first-served basis. If there are competing requests, 
donations will be made to eligible recipients in the following priority 
order:
    (1) Educationally useful Federal equipment for pre-kindergarten 
through twelfth grade educational institutions and community-based 
educational organizations in rural EZ/EC communities;
    (2) Educationally useful Federal equipment for pre-kindergarten 
through twelfth grade educational institutions and community-based 
educational organizations not in rural EZ/EC areas;
    (3) All other eligible organizations.
    (d) Upon reporting property for excess screening, if the pertinent 
USDA agency has an eligible organization in mind for donation under this 
part, it shall enter ``P.L. 102-245'' in the note field. The property 
will remain in the excess system approximately 30 days, and if no USDA 
agency or cooperator requests it during the excess cycle, the 
Departmental Excess Personal Property Coordinator will send the agency a 
copy of the excess report stamped, ``DONATION AUTHORITY TO THE HOLDING 
AGENCY IN ACCORDANCE WITH P.L. 102-245.'' The holding USDA agency may 
then donate the excess property to the eligible organization.
    (e) Donations under this Part will be accomplished by preparing a 
Standard Form (SF) 122, ``Transfer Order-Excess Personal Property''.
    (f) The SF-122 should be signed by both an authorized official of 
the agency and the Agency Property Management Officer. The following 
information should also be provided.

    (1) Name and address of Donee Institution (Ship to)
    (2) Agency name and address (holding Agency)
    (3) Location of property
    (4) Shipping instructions (Donee contact person)
    (5) Complete description of property, including acquisition amount, 
serial no., condition code, quantity, and agency order no.
    (6) This statement needs to be added following property 
descriptions. ``The property requested hereon is certified to be used 
for the conduct of technical and scientific education and research 
activities. This donation is pursuant to the provisions of Pub. L. 102-
245.''

    (g) Once the excess personal property/equipment is physically 
received, the donee is required to immediately return a copy of the SF-
122 to the donating agency indicating receipt of requested items. 
Cancellations should be reported to DEPPC so the property can be 
reported to the General Services Administration (GSA).
    Note: The USDA agency shall send an informational copy of the 
transaction to GSA.

[60 FR 34456, July 3, 1995, as amended at 65 FR 69857, Nov. 21, 2000]



Sec. 2812.5  Restrictions.

    (a) The authorized official (see Sec. 2812.4(b)) will approve the 
donation of excess personal property/equipment in the following groups 
to educational institutions or nonprofit organizations for the conduct 
of technical and scientific educational and research activities.

                             Eligible Groups
------------------------------------------------------------------------
               FSC group                               Name
------------------------------------------------------------------------
19.....................................  Ships, Small Craft, Pontoons,
                                          and Floating Docks.
23.....................................  Vehicles, Trailers and Cycles.
24.....................................  Tractors.
37.....................................  Agricultural Machinery and
                                          Equipment.
43.....................................  Pumps, Compressors.
48.....................................  Valves.
58.....................................  Communication, Detection, and
                                          Coherent Radiation Equipment.
59.....................................  Electrical and Electronic
                                          Equipment Components.
65.....................................  Medical, Dental, and Veterinary
                                          Equipment and Supplies.
66.....................................  Instruments and Laboratory
                                          Equipment.
67.....................................  Photographic Equipment.
68.....................................  Chemicals and Chemical
                                          Products.
70.....................................  General Purpose Automatic Data
                                          Processing Equipment, Software
                                          Supplies, and Support
                                          Equipment.
74.....................................  Office Machines and Visible
                                          Record Equipment.
------------------------------------------------------------------------


[[Page 43]]

    Note: Requests for items in FSC Groups or Classes other than the 
above should be referred to the agency head for consideration and 
approval.
    (b) Excess personal property/equipment may be donated for 
cannibalization purposes, provided the donee submits a supporting 
statement which clearly indicates that cannibalizing the requested 
property for secondary use has greater potential benefit than 
utilization of the item in its existing form.



Sec. 2812.6  Title.

    Title to excess personal property/equipment donated under this Part 
will automatically pass to the donee once the sponsoring agency receives 
the SF-122 indicating that the donee has received the property.



Sec. 2812.7  Costs.

    Donated excess personal property/equipment is free of charge. 
However, the donee must pay all costs associated with packaging and 
transportation, unless the sponsoring agency has made other 
arrangements. The donee should specify the method of shipment.



Sec. 2812.8  Accountability and recordkeeping.

    USDA requires that property requested by a donee be placed into use 
by the donee within a year of receipt and used for at least 1 year 
thereafter. Donees must maintain accountable records for such property 
during this time period.



Sec. 2812.9  Disposal.

    When the property is no longer needed by the donee, it may be used 
in support of other Federal projects or sold and the proceeds used for 
technical and scientific education and research activities.



Sec. 2812.10  Liabilities and losses.

    USDA assumes no liability with respect to accidents, bodily injury, 
illness, or any other damages or loss related to excess personal 
property/equipment donated under this part. The donee is advised to 
insure or otherwise protect itself and others as appropriate.

[[Page 45]]



                     CHAPTER XXIX--OFFICE OF ENERGY,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
2900            Essential agricultural uses and volumetric 
                    requirements--Natural Gas Policy Act....          47
2901            Administrative procedures for adjustments of 
                    natural gas curtailment priority........          48

[[Page 47]]



PART 2900--ESSENTIAL AGRICULTURAL USES AND VOLUMETRIC REQUIREMENTS--NATURAL GAS POLICY ACT--Table of Contents




Sec.
2900.1  General.
2900.2  Definitions.
2900.3  Essential agricultural uses.
2900.4  Natural gas requirements.
2900.6  Effective date.

    Authority: Pub. L. 95-621, Nov. 9, 1978.

    Source: 44 FR 28786, May 17, 1979, unless otherwise noted.



Sec. 2900.1  General.

    Section 401(c) of the Natural Gas Policy Act of 1978 (NGPA) requires 
the Secretary of Agriculture to determine the essential uses of natural 
gas, and to certify to the Secretary of Energy and the Federal Energy 
Regulatory Commission (FERC) the natural gas requirements, expressed 
either as volumes or percentages of use, of persons, or classes thereof, 
for essential agricultural uses in order to meet requirements of full 
food and fiber production. This rule covers establishments performing 
functions classed as essential agricultural uses whose natural gas 
supplies are distributed through the interstate pipeline systems even 
though such establishments may receive such gas directly from an 
intrastate pipeline or local distribution company. The rule provides to 
the Secretary of Energy (for purposes of Section 401(a) of the NGPA) and 
to the Federal Energy Regulatory Commission the following 
certifications:
    (a) Essential agricultural uses of natural gas, expressed as classes 
of establishments that use gas for essential agricultural purposes; and
    (b) Essential agricultural current requirements of natural gas, 
expressed as percentages of use.



Sec. 2900.2  Definitions.

    (a) Full food and fiber production means the entire output of food 
and fiber produced for the domestic market, and for export, for building 
of reserves, and crops for soil building or conservation. This term also 
includes the processing of food and fiber into stable and storable 
products, and the maintenance of food quality after processing.
    (b) Establishment means an economic unit, generally at a single 
physical location where business is conducted or where service or 
industrial operations are performed (for example, a factory, mill, 
store, mine, farm, sales office, or warehouse). (Note: This is the same 
definition used in the Standard Industrial Classification Manual, 1972 
edition).
    (c) Essential Agricultural Use Establishment means any 
Establishment, or the portion of an Establishment, which performs (or 
has the capability to perform) activities specified in Sec. 2900.3.
    (d) Current Natural Gas Requirements means the amount of natural gas 
required by an Essential Agricultural Use Establishment to perform the 
activities devoted to full food and fiber production.

(Pub. L. 95-621, Nov. 8, 1979, 92 Stat. 3350, 15 U.S.C. 3301 et seq.)

[44 FR 28786, May 17, 1979, as amended at 46 FR 47216, Sept. 25, 1981]



Sec. 2900.3  Essential agricultural uses.

    For purposes of Section 401(c) of the NGPA the following classes or 
portions of classes are certified as essential agricultural uses in 
order to meet the requirements of full food and fiber production:

                       Essential Agricultural Uses

                Industry SIC No. and Industry Description

                    Food and Natural Fiber Production

    01  Agricultural Production--Crops
    02  Agricultural Production--Livestock Excluding 0272--Horses and 
Other Equines, and Nonfood Portions of 0279--Animal Specialties, Not 
Elsewhere Classified.
    0723  Crop Preparation Services for Market, Except Cotton Ginning 
(see fiber processing).
    4971  Irrigation Systems.

                  Fertilizer and Agricultural Chemicals

                    (Process and Feedstock Use Only)

    1474  Potash, Soda, and Borate Materials.
    1475  Phosphate Rock.
    1477  Sulfur.
    2819  Industrial Inorganic Chemicals, n.e.c. (Agricultural related 
only).
    2865  Cyclic Crudes and Cyclic Intermediates, Dyes and Organic 
Pigments (Agricutural related only).

[[Page 48]]

    2869  Industrial Organic Chemicals, n.e.c. (Agricutural related 
only).
    287  Agricultural Chemicals.
    2899  Chemicals and Chemical Preparations, n.e.c. (Salt--Feed grade 
only).
    3274  Lime (Agricultural lime only).

                 Food and Natural Fiber Processing-Food

    20  Food and Kindred Products Except 2047  Dog, Cat and Other Pet 
Food, and 2048  Prepared Feeds and Feed Ingredients for Animals and 
Fowls, Not Elsewhere Classified.
    2869  Industrial Organic Chemicals (Monosodium Glutamate, Food-grade 
Citric Acid and Food-grade Enzymes only).
    2899  Chemicals and Chemical Preparations, n.e.c. (Salt for food use 
only).

                         Animal Feeds, and Food

                    (Process and Feedstock Use Only)

    2047  Dog, Cat and Other Pet Food.
    2048  Prepared Feeds and Feed Ingredients for Animals and Fowls, Not 
Elsewhere Classified.

                              Natural Fiber

    0724  Cotton Ginning.
    2141  Tobacco Stemming and Redrying.
    2299  Textile Goods, n.e.c. (wool tops, combing and converting).
    3111  Leather Tanning and Finishing.

                Food Quality Maintenance--Food Packaging

    2641  Paper Coating and Glazing (food related only).
    2643  Bags, Except Textile (food related only).
    2645  Die Cut Paper and Paperboard (food related only).
    2646  Pressed and Molded Pulp Goods (food related only).
    2649  Converted Paper Products (food related only).
    2651  Folding Paperboard Boxes (food related only).
    2653  Corrugated and Solid Fiber Boxes (food related only).
    2654  Sanitary Food Containers.
    2655  Fiber Cans, Tubes, Drums, and Similar Products (food related 
only).
    3079  Miscellaneous Plastic Products (food related only).
    3221  Glass Containers (food related only).
    3411  Metal Cans (food related only).
    3412  Metal Shipping Barrels, Drums, Kegs, and Pails (food related 
only).
    3466  Metal Crowns and Closures (Food Related Only).
    3497  Metal Foil and Leaf (food related only).
    Petroleum wax, synthetic petroleum wax and polyethylene wax (food 
grade only) as food containers.

                       Marketing and Distribution

    4221  Farm Product Warehousing and Storage.
    4222  Refrigerated Warehousing.
    514  Groceries and Related Products.
    5153  Farm Product Raw Materials--Grain.
    54  Food Stores.

                            Energy Production

    (1) Agricultural production on set-aside acreage or acreage diverted 
from the production of a commodity (as provided under the Agricultural 
Act of 1949) to be devoted to the production of any commodity for 
conversion into alcohol or hydrocarbons for use as motor fuel or other 
fuels;
    (2) Sugar refining for production of alcohol; and
    (3) Distillation of fuel-grade alcohol from food grains and other 
biomass by facilities in existence on June 30, 1980 which do not have 
the installed capability to burn coal lawfully, for a period ending June 
29, 1985.

(Pub. L. 95-621, Nov. 8, 1978, 92 Stat. 3350; 15 U.S.C. 3301 et seq.)

[44 FR 28786, May 17, 1979, as amended at 45 FR 5298, Jan. 23, 1980; 45 
FR 45887, 45888, July 8, 1980; 45 FR 50550, July 30, 1980; 47 FR 25320, 
June 11, 1982; 48 FR 43670, Sept. 26, 1983; 49 FR 37733, Sept. 26, 1984]



Sec. 2900.4  Natural gas requirements.

    For purposes of Section 401(c), NGPA, the natural gas requirements 
for each Essential Agricultural Use Establishment, whether such 
Essential Agricultural Use Establishment is in existence on the 
effective date of this rule or comes into existence thereafter, are 
certified to be 100 percent of Current Natural Gas Requirements.



Sec. 2900.6  Effective date.

    This rule shall become effective on May 14, 1979.



PART 2901--ADMINISTRATIVE PROCEDURES FOR ADJUSTMENTS OF NATURAL GAS CURTAILMENT PRIORITY--Table of Contents




Sec.
2901.1  Purpose and scope.
2901.2  Definitions.
2901.3  Oral presentation.
2901.4  Interpretations.
2901.5  Modifications and rescissions.
2901.6  Exceptions and exemptions.
2901.7  Review of denials.
2901.8  Judicial review.
2901.9  Effective date.


[[Page 49]]


    Authority: Secs. 502, 507. Pub. L. 95-621, 92 Stat. 3397, 3405, Nov. 
9, 1978.

    Source: 44 FR 55803, Sept. 28, 1979, unless otherwise noted.



Sec. 2901.1  Purpose and scope.

    The purpose of this part 2901 is to provide procedures for the 
making of certain adjustments to the Secretary of Agriculture's 
Essential Agricultural Uses and Requirements regulations in accordance 
with section 502(c) of the Natural Gas Policy Act of 1978, in order to 
prevent special hardship, inequity, or an unfair distribution of 
burdens. The procedures in this part 2901 apply to any person seeking an 
interpretation of, modification of, rescission of, exception of, or 
exemption from the Essential Agricultural Uses and Requirements 
regulations in part 2900 of this chapter.



Sec. 2901.2  Definitions.

    (a) Person means any individual, firm, sole proprietorship, 
partnership, association, company, joint venture or corporation.
    (b) Director means the Director of the Office of Energy, U.S. 
Department of Agriculture.
    (c) Secretary means the Secretary of the U.S. Department of 
Agriculture.
    (d) Adjustment means an interpretation, modification, rescission of, 
exception to or exemption from the Essential Agricultural Uses and 
Requirements regulations, part 2900 of this chapter.
    (e) NGPA means the Natural Gas Policy Act of 1978, Pub. L. 95-621.
    (f) Petitioner means any person seeking an adjustment under this 
part 2901.



Sec. 2901.3  Oral presentation.

    Any person seeking an adjustment under this part 2901 shall be given 
an opportunity to make an oral presentation of data, views and arguments 
in support of the request for an adjustment, provided that a request to 
make an oral presentation is submitted in writing with the request for 
the adjustment. An official of the Department of Agriculture shall 
preside at such oral presentation.



Sec. 2901.4  Interpretations.

    (a) Request for an interpretation. (1) Any person seeking an 
interpretation of the Essential Agricultural Uses and Requirements 
regulations in part 2900 shall file a formal written request with the 
Director. The request should contain a full and complete statement of 
all relevant facts pertaining to the circumstances, act or transaction 
that is the subject of the request and to the action sought, and should 
state the special hardship, inequity, or unfair distribution of burdens 
that will be prevented by the interpretation sought and why the 
interpretation is consistent with the purposes of NGPA. The Director 
shall publish a notice in the Federal Register advising the public that 
a request for an interpretation has been received and that written 
comments will be accepted with respect thereto, if received within 20 
days of the notice. The Federal Register notice will provide that copies 
of the request for interpretation from which confidential information 
has been deleted in accordance with paragraph (a)(2) of this section may 
be obtained from the petitioner.
    (2) If the petitioner wishes to claim confidential treatment for any 
information contained in the request or other documents submitted under 
this part 2901, such person shall file together with the document a 
second copy of the document from which has been deleted the information 
for which such person wishes to claim confidential treatment. The 
petitioner shall indicate in the original document that it is 
confidential or contains confidential information and may file a 
statement specifying the justification for non-disclosure of the 
information for which non-disclosure is sought. The Director shall 
consider such requests, and subject to the Freedom of Information Act, 5 
U.S.C. 552 and other applicable laws and regulations, shall treat such 
information as confidential.
    (b) Investigations. The Director may initiate an investigation of 
any statement in a request and utilize in his evaluation any relevant 
facts obtained in such investigation. The Director may accept 
submissions from third persons relevant to any request for 
interpretation provided that the petitioner

[[Page 50]]

is afforded an opportunity to respond to all such submissions. In 
evaluating a request for interpretation, the Director may consider any 
other source of information.
    (c) Applicability. Any interpretation issued hereunder shall be 
issued on the basis of the information provided on the request, as 
supplemented by other information brought to the attention of the 
Director during the consideration of the request. The interpretation 
shall, therefore, depend for its authority on the accuracy of the 
factual statement and may be relied upon only to the extent that the 
facts of the actual situation correspond to those upon which the 
interpretation was based.
    (d) Issuance of an interpretation. Upon consideration of the request 
for interpretation and other relevant information received or obtained 
by the Director, the Director may issue a written interpretation. A copy 
of the written interpretation shall be provided to FERC and the 
Secretary of Energy. Notice of the issuance of the written 
interpretation shall be published in the Federal Register. The granting 
of a request for issuance of an interpretation shall be considered final 
agency action for purposes of judicial review under Sec. 2901.8.
    (e) Denial of an interpretation. An interpretation shall be 
considered denied for purpose of review of such denial under Sec. 2901.7 
only if:
    (1) The Director notifies the petitioner in writing that the request 
is denied and that an interpretation will not be issued; or
    (2) The Director does not respond to a request for an 
interpretation, by (i) issuing an interpretation, or (ii) giving notice 
of when an interpretation will be issued within 45 days of the date of 
receipt of the request, or within such extended time as the Director may 
prescribe by written notice within the 45-day period.
    (f) For purposes of this part 2901 the word interpretation shall not 
be deemed to include a simple clarification of an actual or purported 
ambiguity in part 2900. The Director reserves the right to determine 
whether a request involves simple clarification and shall advise the 
requester of his decision.



Sec. 2901.5  Modifications and rescissions.

    (a) Request for modification or rescission. (1) Any person seeking a 
modification or a rescission of the Essential Agricultural Uses and 
Requirements regulations of part 2900 shall file a formal written 
request with the Director. The request shall contain a full and complete 
statement of all relevant facts pertaining to the circumstance, act or 
transaction that is the subject of the request and to the action sought. 
The request should state the special hardship, inequity or unfair 
distribution of burdens that will be prevented by making the 
modification or rescission.
    (2) If the petitioner wishes to claim confidential treatment for any 
information contained in the request or other documents submitted under 
this part 2901, such person shall file together with the document a 
second copy of the document from which has been deleted the information 
for which such person wishes to claim confidential treatment. The 
petitioner shall indicate in the original document that it is 
confidential or contains confidential information and may file a 
statement specifying the justification for non-disclosure of the 
information for which non-disclosure is sought. The Director shall 
consider such requests, and subject to the Freedom of Information Act, 5 
U.S.C. 552 and other applicable laws and regulations, shall treat such 
information as confidential.
    (3) The request shall be filed as a petition for rulemaking and 
treated in accordance with the procedures, as applicable, of 7 CFR part 
1, subpart B.
    (b) Institution of rulemaking. Upon consideration of the request for 
modification or rescission and other relevant information received or 
obtained by the Director, the Director may institute rulemaking 
proceedings in accordance with the Administrative Procedures Act 5 
U.S.C. 551 et seq. and applicable regulations.
    (c) Denial of a modification or rescission. If the Director (1) 
denies the request for modification or rescission in writing by 
notifying the petitioner that he does not intend to institute rulemaking 
proceedings as proposed and stating the reasons therefor, or (2) does 
not respond to a request for a

[[Page 51]]

modification or rescission in accordance with paragraph (b) of this 
section or (3) notifies the petitioner in writing that the matter is 
under continuing consideration and that no decision can be made at that 
time because of the inadequacy of available information, changing 
circumstances or other reasons as set forth therein, within 45 days of 
the date of the receipt thereof, or within such extended time as the 
Director may prescribe by written notice within that 45-day period, the 
request shall be considered denied for the purpose of review of such 
denial under Sec. 2901.7.



Sec. 2901.6  Exceptions and exemptions.

    (a) Request for exception or exemption. (1) Any person seeking an 
exception or exemption from the Essential Agricultural Uses and 
Requirements regulations in part 2900 shall file a formal written 
request with the Director. The request shall contain a full and complete 
statement of all relevant facts pertaining to the circumstance, act, or 
transaction that is the subject of the request and to the action sought. 
The request should state the special hardship, inequity or unfair 
distribution of burdens that will be prevented by making the exception 
or exemption. The Director shall publish a notice in the Federal 
Register advising the public that a request for an exception or 
exemption has been received and that written comments will be accepted 
with respect thereto if received within 20 days of the notice. The 
Federal Register notice will provide that copies of the request from 
which confidential information has been deleted in accordance with 
paragraph (a)(2) of this section may be obtained from the petitioner. 
The Petitioner shall be afforded an opportunity to respond to such 
submissions.
    (2) If the petitioner wishes to claim confidential treatment for any 
information contained in the request or other documents submitted under 
this part 2901, such person shall file together with the document a 
second copy of the document from which has been deleted the information 
for which such person wishes to claim confidential treatment. The 
petitioner shall indicate in the original document that it is 
confidential or contains confidential information and may file a 
statement specifying the justification for non-disclosure of the 
information for which non-disclosure is sought. The Director shall 
consider such requests, and subject to the Freedom of Information Act, 5 
U.S.C. 552 and other applicable laws and regulations, shall treat such 
information as confidential.
    (b) Decision and order. Upon consideration of the request for an 
exception or exemption and other relevant information received or 
obtained during the proceedings, the Director shall issue an order 
granting or denying the request. The Director shall publish a notice in 
the Federal Register of the issuance of a decision and order on the 
request. The granting of a request for an exception or exemption shall 
be considered final agency action for purposes of judicial review under 
Sec. 2901.8.
    (c) Denial of an exception or exemption. A request for an exception 
or exemption shall be considered denied for purposes of review of such 
denial under Sec. 2901.7 only if:
    (1) The Director has notified the petitioner in writing that the 
request is denied under paragraph (b) of this section; or
    (2) The Director does not respond to a request for an exception or 
exemption by (i) granting the request for an exception or exemption 
under paragraph (b) of this section or (ii) giving notice of when a 
decision will be made within 45 days of the receipt of the request, or 
with such extended time as the Director may prescribe by written notice 
within the 45-day period.



Sec. 2901.7  Review of denials.

    (a) Request for review. (1) Any person aggrieved or adversely 
affected by a denial of a request for any interpretation under 
Sec. 2901.4 may request a review of the denial by the Secretary, within 
30 days from the date of the denial.
    (2) Any person aggrieved or adversely affected by a denial of a 
request for a modification or rescission under Sec. 2901.5, may request 
a review of the denial by the Secretary within 30 days from the date of 
the denial.
    (3) Any person aggrieved or adversely affected by a denial of a 
request for an exception or an exemption under

[[Page 52]]

Sec. 2901.6, may request a review of the denial by the Secretary within 
30 days from the date of the denial.
    (b) Procedures. Any request for review under Sec. 2901.7(a) shall be 
in writing and shall set forth the specific ground upon which the 
request is based. There is no final agency action for purposes of 
judicial review under Sec. 2901.8 until that request has been acted 
upon. If the request for review has not been acted upon within 30 days 
after it is received, the request shall be deemed to have been denied. 
That denial shall then constitute final agency action for the purpose of 
judicial review under Sec. 2901.8.



Sec. 2901.8  Judicial review.

    Any person aggrieved or adversely affected by a final agency action 
taken on a request for an adjustment under this section may obtain 
judicial review in accordance with section 506 of the Natural Gas Policy 
Act of 1978.



Sec. 2901.9  Effective date.

    This rule shall become effective on October 29, 1979.

[[Page 53]]



                         CHAPTER XXX--OFFICE OF
                      THE CHIEF FINANCIAL OFFICER,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
3010

[Reserved]

3011            Availability of information to the public...          55
3015            Uniform Federal assistance regulations......          56
3016            Uniform administrative requirements for 
                    grants and cooperative agreements to 
                    State and local governments.............         106
3017            Governmentwide debarment and suspension 
                    (nonprocurement) and governmentwide 
                    requirements for drug-free workplace 
                    (grants)................................         134
3018            New restrictions on lobbying................         156
3019            Uniform administrative requirements for 
                    grants and agreements with institutions 
                    of higher education, hospitals, and 
                    other non-profit organizations..........         168
3052            Audits of States, local governments, and 
                    non-profit organizations................         195

[[Page 55]]



PART 3011--AVAILABILITY OF INFORMATION TO THE PUBLIC--Table of Contents




Sec.
3011.1  General statement.
3011.2  Public inspection and copying.
3011.3  Indexes.
3011.4  Initial requests for records.
3011.5  Appeals.
3011.6  Fee schedule.

    Authority: 5 U.S.C. 301 and 522; 7 CFR 1.3.

    Source: 54 FR 51869, Dec. 19, 1989, unless otherwise noted.



Sec. 3011.1  General statement.

    This part is issued in accordance with 7 CFR 1.3 of the Department 
of Agriculture regulations governing the availability of records (7 CFR 
1.1--1.23 and Appendix A) under the Freedom of Information Act (5 U.S.C. 
552, as amended). These regulations supplement the Department's 
regulations by providing guidance for any person wishing to request 
records from the Office of Finance and Management (OFM).



Sec. 3011.2  Public inspection and copying.

    (a) Background. 5 U.S.C. 552(a)(2) requires each agency to maintain 
and make available for public inspection and copying certain kinds of 
records.
    (b) Procedure. To gain access to OFM records that are available for 
public inspection, contact the Freedom of Information Act Officer by 
writing to the address shown in Sec. 3011.4(b) of this title.



Sec. 3011.3  Indexes.

    5 U.S.C. 552(a)(2) also requires that each agency maintain and make 
available for public inspection and copying current indexes providing 
identifying information for the public with regard to any records which 
are made available for public inspection and copying. OFM does not 
maintain any materials within the scope of these requirements.



Sec. 3011.4  Initial requests for records.

    (a) Background. The Freedom of Information Act Officer is authorized 
to:
    (1) Grant or deny requests for OFM records,
    (2) Make discretionary release of OFM records when the benefit to 
the public in releasing the document outweighs any harm likely to result 
from disclosure,
    (3) Reduce or waive fees to be charged where determined to be 
appropriate.
    (b) Procedures. This part provides the titles and mailing address of 
officials who are authorized to release records to the public. The 
normal working hours of these offices are 8:30 a.m. to 5:00 p.m., local 
time, Monday through Friday, excluding holidays, during which public 
inspection and copying of certain kinds of records is permitted. Persons 
wishing to request records from the Office of Finance and Management may 
do so by submitting each initial written request for OFM records to the 
appropriate OFM official shown below:
    (1) For records held at the Washington, DC Headquarters units, 
submit initial requests to the Freedom of Information Act Officer, 
Office of Finance and Management, USDA, 14th and Independence Ave., SW., 
Room 117-W, Administration Building, Washington, DC 20250-9000.
    (2) For records held at the National Finance Center in New Orleans, 
Louisiana, submit initial requests to the Freedom of Information Act 
Officer, National Finance Center, OFM, USDA, 13800 Old Gentilly Road, 
Building 350, (P.O. Box 60,000, New Orleans, LA 70160), New Orleans, 
Louisiana 70129.

If the requester is unable to determine the official to whom the request 
should be addressed, it should be submitted to the Headquarters Freedom 
of Information Act Officer who will refer such requests to the 
appropriate officials.



Sec. 3011.5  Appeals.

    Any person whose initial request is denied in whole or in part may 
appeal that denial, in accordance with 7 CFR 1.6(e) and 1.8, to the 
Director, Office of Finance and Management, USDA, Room 117-W, 
Administration Building, 14th and Independence Ave., Washington, DC 
20250-9000.



Sec. 3011.6  Fee schedule.

    Departmental regulations provide for a schedule of reasonable 
standard charges for document search and duplication. See 7 CFR 1.2(b). 
Fees to be charged are set forth in 7 CFR part 1, subpart A, Appendix A.

[[Page 56]]



PART 3015--UNIFORM FEDERAL ASSISTANCE REGULATIONS--Table of Contents




                           Subpart A--General

Sec.
3015.1  Purpose and scope of this part.
3015.2  Applicability.
3015.3  Conflicting policies and deviations.
3015.4  Special restrictive terms.

                      Subpart B--Cash Depositories

3015.10  Physical segregation and eligibility.
3015.11  Separate bank accounts.
3015.12  Moneys advanced to recipients.
3015.13  Minority and women-owned banks.

                    Subpart C--Bonding and Insurance

3015.15  General.
3015.16  Construction and facility improvement.
3015.17  Fidelity bonds.
3015.18  Source of bonds.

           Subpart D--Record Retention and Access Requirements

3015.20  Applicability.
3015.21  Retention period.
3015.22  Starting date of retention period.
3015.23  Microfilm.
3015.24  Access to records.
3015.25  Restrictions to public access.

        Subpart E--Waiver of ``Single'' State Agency Requirements

3015.30  Waiver of ``single'' State agency requirements.

                     Subpart F--Grant Related Income

3015.40  Scope.
3015.41  General program income.
3015.42  Proceeds from sale of real property and from sale of equipment 
          and supplies acquired for use.
3015.43  Royalties and other income earned from a copyrighted work.
3015.44  Royalties or equivalent income earned from patents or from 
          inventions.
3015.45  Other program income.
3015.46  Interest earned on advances of grant funds.

                   Subpart G--Cost-Sharing or Matching

3015.50  Scope.
3015.51  Acceptable contributions and costs.
3015.52  Qualifications and exceptions.
3015.53  Valuation of donated services.
3015.54  Valuation of donated supplies and loaned equipment or space.
3015.55  Valuation of donated equipment, buildings, and land.
3015.56  Appraisal of real property.

          Subpart H--Standards for Financial Management Systems

3015.60  Scope.
3015.61  Financial management standards.

Subpart I  [Reserved]

               Subpart J--Financial Reporting Requirements

3015.80  Scope and applicability.
3015.81  General.
3015.82  Financial status report.
3015.83  Federal cash transactions report.
3015.84  Request for advance or reimbursement.
3015.85  Outlay report and request for reimbursement for construction 
          programs.

         Subpart K--Monitoring and Reporting Program Performance

3015.90  Scope.
3015.91  Monitoring by recipients.
3015.92  Performance reports.
3015.93  Significant developments.
3015.94  Site visits.
3015.95  Waivers, extensions and enforcement actions.

                     Subpart L--Payment Requirements

3015.100  Scope.
3015.101  General.
3015.102  Payment methods.
3015.103  Withholding payments.
3015.104  Requesting advances or reimbursements.
3015.105  Payments to subrecipients.

          Subpart M--Programmatic Changes and Budget Revisions

3015.110  Scope and applicability.
3015.111  Cost principles.
3015.112  Approval procedures.
3015.113  Programmatic changes.
3015.114  Budgets--general.
3015.115  Budget revisions.
3015.116  Construction and nonconstruction work under the same grant, 
          subgrant, or cooperative agreement.

   Subpart N--Grant and Subgrant Closeout, Suspension and Termination

3015.120  Closeout.
3015.121  Amounts payable to the Federal government.
3015.122  Violation of terms.
3015.123  Suspension.
3015.124  Termination.
3015.125  Applicability to subgrants.

Subparts O-P [Reserved]

[[Page 57]]

              Subpart Q--Application for Federal Assistance

3015.150  Scope and applicability.
3015.151  Authorized forms.
3015.152  Preapplication for Federal assistance.
3015.153  Notice of preapplication review action.
3015.154  Application for Federal assistance (nonconstruction programs).
3015.155  Application for Federal assistance (construction programs).
3015.156  Application for Federal assistance (short form).
3015.157  Authorized form for nongovernmental organizations.
3015.158  Competition in the awarding of discretionary grants and 
          cooperative agreements.

                           Subpart R--Property

3015.160  Scope and applicability.
3015.161  Additional requirements.
3015.162  Title to real property, equipment and supplies.
3015.163  Real property.
3015.164  Statutory exemptions for equipment and supplies.
3015.165  Rights to require transfer of equipment.
3015.166  Use of equipment.
3015.167  Replacement of equipment.
3015.168  Disposal of equipment.
3015.169  Equipment management requirements.
3015.170  Damage, loss, or theft of equipment.
3015.171  Unused supplies.
3015.172  Federal share of real property, equipment, and supplies.
3015.173  Using or returning the Federal share.
3015.174  Subrecipient's share.
3015.175  Intangible personal property.

                         Subpart S--Procurement

3015.180  Scope and applicability.
3015.181  Standards of conduct.
3015.182  Open and free competition.
3015.183  Access to contractor records.
3015.184  Equal employment opportunity.

                       Subpart T--Cost Principles

3015.190  Scope.
3015.191  Governments.
3015.192  Institutions of higher education.
3015.193  Other non-profit organizations.
3015.194  For-profit organizations.
3015.195  Subgrants and cost-type contracts.
3015.196  Costs allowable with approval.

                        Subpart U--Miscellaneous

3015.200  Acknowledgement of support on publications and audiovisuals.
3015.201  Use of consultants.
3015.202  Limits on total payments to the recipient.
3015.203  [Reserved]
3015.204  Federal Register publications.
3015.205  General provisions for grants and cooperative agreements with 
          institutions of higher education, other nonprofit 
          organizations, and hospitals.

    Subpart V--Intergovernmental Review of Department of Agriculture 
                         Programs and Activities

3015.300  Purpose.
3015.301  Definitions.
3015.302  Applicability.
3015.303  Secretary's general responsibilities.
3015.304  Federal interagency coordination.
3015.305  State selection of programs and activities.
3015.306  Communication with State and local elected officials.
3015.307  State comments on proposed Federal financial assistance and 
          direct Federal development.
3015.308  Processing comments.
3015.309  Accommodation of intergovernmental concerns.
3015.310  Interstate situations.
3015.311  Simplification, consolidation, or substitution of State plans.
3015.312  Waivers.

Appendix A to Part 3015--Definitions
Appendix B to Part 3015--OMB Circular A-128, ``Audits of State and Local 
          Governments''

    Authority: 5 U.S.C. 301; 31 U.S.C. 901-903; 7 CFR 2.28, unless 
otherwise noted.

    Source: 46 FR 55639, Nov. 10, 1981, unless otherwise noted.



                           Subpart A--General



Sec. 3015.1  Purpose and scope of this part.

    (a)(1) This part specifies the set of principles for determining 
allowable costs under USDA grants and cooperative agreements to State 
and local governments, universities, non-profit and for-profit 
organizations as set forth in OMB Circulars A-87, A-21, A-122, and 48 
CFR 31.2, respectively. This part also contains the general provisions 
that apply to all grants and cooperative agreements made by USDA.
    (2) Additionally, this part establishes intergovernmental review 
provisions

[[Page 58]]

required by Executive Order 12372 for any programs listed in the Federal 
Register as covered, and policy on competition in awarding discretionary 
grants and cooperative agreements.
    (3) Rules for grants and cooperative agreements to State and local 
governments are found in part 3016 of this chapter.
    (4) Rules for grants and cooperative agreements to institutions of 
higher education, hospitals, and other non-profit organizations are 
found in part 3019 of this chapter.
    (b) These rules supersede and take precedence over any individual 
USDA agency regulations and directives dealing with the administration 
of grants and cooperative agreements to the extent such regulations and 
directives are inconsistent with this part, unless such inconsistency is 
based on a statutory provision or an exception has been obtained from 
OMB. (See Sec. 3015.3.) Definitions for the terms used in this part are 
set forth in Appendix A. Definitions for the implementation of standard 
audit requirements for State and local governments and Indian Tribal 
governments are contained in Subpart I--Audits.
    (c) The purpose of this part is to simplify, standardize, and 
improve the administration of USDA grants and cooperative agreements.
    (d) Responsibility for developing and interpreting the material for 
this part and in keeping it up-to-date is delegated to the Office of the 
Chief Financial Officer.

[46 FR 55639, Nov. 10, 1981, as amended at 62 FR 45949, Aug. 29, 1997; 
65 FR 49479, Aug. 14, 2000]



Sec. 3015.2  Applicability.

    (a) Grants and cooperative agreements. This part applies to USDA 
grants and cooperative agreements. For each substantive provision in 
this part, either the words of the provision itself or other words in 
the same subpart tell whether the provision applies to subgrants. 
Exemptions to this part may be applicable to certain kinds of 
recipients. (See paragraph (d) of this section.)
    (b) Terminology applicable to this part. This part's substantive 
rules are the same for grants and cooperative agreements. Many of the 
rules are also the same for subgrants. Therefore, certain simplified 
terminology is used in the text. Specifically in all portions of this 
part:
    (1) Each provision that applies to grants also applies to 
cooperative agreements, even though the latter term does not appear in 
the provisions.
    (2) Each provision that applies to recipients of grants applies to 
recipients of cooperative agreements, even though the latter term does 
not appear in the provision.
    (3) The term recipient refers equally to recipients of grants and 
recipients of cooperative agreements.
    (4) The term awarding agency refers equally to a USDA agency that 
awards a grant and to one that awards a cooperative agreement.
    (5) The term subgrant refers equally to certain awards under grants 
and to the same kinds of awards under cooperative agreements.
    (c) Public institutions of higher education and hospitals. Grants, 
cooperative agreements and subgrants awarded to institutions of higher 
education and hospitals operated by a government are subject only to the 
provisions of this part that apply to non-governmental organizations.
    (d) Recipients to which this part does not automatically apply. This 
part does not automatically apply to the kinds of recipients listed 
below unless other conditions set forth in the grant, cooperative 
agreement, subgrant, or specific subpart in this part make all or 
specified portions apply:
    (1) Foreign governments or organizations,
    (2) International organizations, such as the United Nations,
    (3) Agencies or instrumentalities of the Federal government,
    (4) Individuals,
    (5) State and local governments, and
    (6) Institutions of higher education, hospitals and other non-profit 
organizations.
    (e) Collaborative arrangements. (1) Where permitted by the terms of 
the award, a recipient may enter into collaborative arrangements with 
other organizations to jointly carry out activities with grant or 
cooperative agreement funds. In this kind of situation,

[[Page 59]]

the arrangement between the recipient and each collaborating 
organization is subject to the rules in this part that apply to 
subgrants awarded by the recipients. (See the example shown in 
Sec. 3015.195.)
    (2) This paragraph (e) does not apply to arrangements where the 
organizations receive an award jointly. In this case, they are not a 
recipient and subrecipient but, as the award notice states, joint 
recipients.

[46 FR 55639, Nov. 10, 1981, as amended at 53 FR 8044, Mar. 11, 1988; 65 
FR 49480, Aug. 14, 2000]



Sec. 3015.3  Conflicting policies and deviations.

    (a) Statutory provisions. Federal statutes that apply to some USDA 
grant programs may contain provisions that conflict with this part. 
Those statutory provisions take precedence over this part.
    (b) Nonstatutory provisions. USDA awarding agencies occasionally 
develop grant provisions that are inconsistent with this part. USDA 
attempts to keep these provisions to a minimum by internal procedures 
that require these provisions to be justified to appropriate officials 
of USDA and OMB. If the conflicting provisions are of long-term and 
general applicability, O&F may require that the awarding agency (1) 
publish the conflicting provision as a notice in the Federal Register 
and (2) give the public an opportunity to comment before making the 
regulations final.
    (c) Nonstatutory provisions-subgrants. If a provision of a subgrant 
conflicts with this part, the recipient is considered as violating the 
provisions of the grant, unless the subgrant provision is authorized in 
writing, by the awarding agency.
    (d) OMB exceptions. In some cases, OMB grants exceptions from the 
requirements of the Circulars, when permissible under existing laws. In 
those instances where a program receives an exception to a particular 
provision of a Circular, the exception takes precedence over this part.



Sec. 3015.4  Special restrictive terms.

    (a) Occasionally an awarding agency, or a recipient awarding a 
subgrant, may find that a particular recipient:
    (1) Is financially unstable,
    (2) Has a history of poor performance, or
    (3) Has a management system that does not meet the standards in this 
part.

In these cases the awarding agency may impose special conditions that 
are more restrictive than otherwise permitted by this part. If so, the 
awarding agency must tell the recipient in writing why it is imposing 
the special conditions and what corrective action is needed.
    (b) At the time an awarding agency imposes a special grant condition 
under paragraph (a) of this section, the awarding agency, through O&F, 
shall notify OMB and other interested parties.
    (c) At the time a recipient imposes a special restrictive subgrant 
condition under paragraph (a) of this section, it must notify the 
awarding agency, giving full particulars. The awarding agency, through 
O&F, shall then notify OMB and other interested parties.
    (d) A special restrictive grant or subgrant condition under 
paragraph (a) of this section is considered consistent with this part.



                      Subpart B--Cash Depositories



Sec. 3015.10  Physical segregation and eligibility.

    Except as provided in Sec. 3015.11, awarding agencies shall not 
impose grant or subgrant conditions which:
    (a) Require the recipient to use a separate bank account for the 
deposit of grant or subgrant funds, or
    (b) Establish any eligibility requirements for banks or other 
financial institutions in which recipients deposit grant or subgrant 
funds.



Sec. 3015.11  Separate bank accounts.

    A separate bank account shall be required when applicable letter of 
credit agreements provide that funds will not be drawn until the 
recipient's checks are presented to the bank for payment.

[[Page 60]]



Sec. 3015.12  Moneys advanced to recipients.

    Any moneys advanced to recipients which are subject to the control 
or regulation of the United States or any of its officers, agents, or 
employees (public moneys as defined in Treasury Circular 176, as 
amended), must be deposited in a bank with Federal Deposit Insurance 
Corporation (FDIC) insurance coverage and the balance exceeding the FDIC 
coverage must be collaterally secured.



Sec. 3015.13  Minority and women-owned banks.

    Consistent with the national goal of expanding opportunities for 
minority business enterprises, recipients, and subrecipients are 
encouraged to use minority and women-owned banks. Upon request, awarding 
agencies will furnish a listing of minority and women-owned banks to 
recipients.



                    Subpart C--Bonding and Insurance



Sec. 3015.15  General.

    In administering grants, subgrants, and cooperative agreements, 
recipients shall observe their regular requirements and practices with 
respect to bonding and insurance. No additional bonding and insurance 
requirements, including fidelity bonds, shall be imposed by the 
provisions of the grant, subgrant, or cooperative agreement except as 
provided in Secs. 3015.16 through 3015.18.



Sec. 3015.16  Construction and facility improvement.

    (a) Scope. This section covers requirements for bid guarantees, 
performance bonds, and payment bonds when the recipients will contract 
or subcontract for construction or facility improvement (including 
alterations and renovations of real property) under a grant or subgrant.
    (b) Bids and contracts or subcontracts of $100,000 or less. Unless 
otherwise required by law, the recipients shall follow its own 
requirements and practices relating to bid guarantees, performance 
bonds, and payment bonds.
    (c) Bids and contracts or subcontracts exceeding $100,000. Unless 
otherwise required by law, the recipient may follow its own regular 
policy and requirements if the USDA awarding agency has decided that the 
Federal government's interest will be adequately protected. If this 
decision has not been made, the minimum requirements shall be as 
follows:
    (1) A bid guarantee from each bidder equivalent to 5 percent of the 
bid price;
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price; and
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price.



Sec. 3015.17  Fidelity bonds.

    (a) If the recipient is not a unit of government, the awarding 
agency may require the recipient to carry adequate fidelity bond 
coverage where the absence of coverage for the grant-supported activity 
is considered as created an unacceptable risk.
    (b) If the subrecipient is not a unit of government, the awarding 
agency or the recipient may require that the subrecipient carry adequate 
fidelity bond coverage where the absence of coverage for the subgrant-
supported activity is considered as creating an unacceptable risk.



Sec. 3015.18  Source of bonds.

    Any bonds required under Sec. 3015.16(c) (1) through (3) or 
Sec. 3015.17 shall be obtained from companies holding certificates of 
authority as acceptable sureties (31 CFR part 223). A list of these 
companies is published annually by the Department of the Treasury in its 
Circular 570.



           Subpart D--Record Retention and Access Requirements



Sec. 3015.20  Applicability.

    (a) This subpart applies to all financial records, supporting 
documents, statistical records and other records of recipients, which 
are:
    (1) Required to be maintained by the provisions of a USDA grant or 
cooperative agreement, or

[[Page 61]]

    (2) Otherwise reasonably considered as pertinent to a USDA grant or 
cooperative agreement.
    (b) This subpart does not apply to the records of contractors and 
subcontractors under grants, subgrants and cooperative agreements. For a 
requirement to place a provision concerning these records in certain 
kinds of contracts, see Subpart S of this part.



Sec. 3015.21  Retention period.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
records shall be kept for 3 years from the starting date specified in 
Sec. 3015.22.
    (b) If any litigation, claim, negotiation, audit or other action 
involving the records has been started before the end of the 3-year 
period, the records shall be kept until all issues are resolved, or 
until the end of the regular 3-year period, whichever is later.
    (c) In order to avoid dual recordkeeping, awarding agencies may make 
special arrangements for recipients to keep any records which are 
continuously needed for joint use. The awarding agency shall request a 
recipient to transfer records to its custody when the awarding agency 
decides that the records possess long-term retention value. When the 
records are transferred to or maintained by the awarding agency the 3-
year retention requirement shall not apply to the recipient.
    (d) Records for nonexpendable property acquired in whole or in part, 
with Federal funds shall be retained for three years after its final 
disposition.



Sec. 3015.22  Starting date of retention period.

    (a) General. The retention period starts from the date of the 
submission of the final expenditure report or, where USDA grant support 
is continued or renewed at annual or other intervals, the 3-year 
retention period for the records of each funding period starts on the 
day the recipient submits to USDA its annual or final expenditure report 
for that period. If an expenditure report has been waived, the 3-year 
retention period starts on the day the report would have been due. 
Exceptions to this paragraph are contained in paragraphs (b) through (d) 
of this section.
    (b) Equipment records. The 3-year retention period for the equipment 
records required by Subpart R starts from the date of the equipment's 
disposition, replacement, or transfer at the direction of the awarding 
agency.
    (c) Records for income transactions after grant or subgrant support. 
(1) In cases where USDA requires that program income (as defined in 
Appendix A) be applied to costs incurred after expiration or termination 
of grant or subgrant support, the 3-year retention period for these cost 
records starts from the end of the recipient's fiscal year in which the 
costs are incurred.
    (2) Where USDA requires the disposition of copyright royalties or 
other program income earned after expiration or termination of grant or 
subgrant support, the 3-year retention period for those income records 
starts from the end of the recipient's fiscal year in which the income 
was earned. (See Subpart F, Sec. 3015.44.)
    (d) Indirect cost rate proposals, cost allocation plans, etc.--(1) 
Applicability. This paragraph applies to the following types of 
documents and their supporting records:
    (i) Indirect cost rate computations or proposals;
    (ii) Cost allocation plans; and
    (iii) Any similar accounting computations of the rate at which a 
particular group of costs is chargeable (such as computer usage 
chargeback rates or composite fringe benefit rates).
    (2) If submitted for negotiation. If the Federal government requires 
submission of the proposal; plan, or other computation for negotiation 
of the rate chargeable for particular costs, then the 3-year retention 
period for the plan, proposal or other computation and the supporting 
records starts from the date of such submission.
    (3) If not submitted for negotiation. If the Federal government does 
not require submission of the proposal, plan, or other computation for 
negotiation of the rate chargeable for particular costs, then the 3-year 
retention period for the proposal, plan, or other computation and the 
supporting records starts from the end of the fiscal year covered by 
such proposal, plan, or other computation.

[[Page 62]]



Sec. 3015.23  Microfilm.

    Copies made by microfilming, photocopying, or similar methods may be 
substituted for the original records.



Sec. 3015.24  Access to records.

    (a) Records of recipients. USDA and the Comptroller General of the 
United States, or any of their authorized representatives, shall have 
the right of access to any books, documents, papers, or other records of 
the recipient which are pertinent in a specific USDA award in order to 
make audit, examination, excerpts, and transcripts.
    (b) Records of subrecipients. USDA and the Comptroller General of 
the United States, and the recipient, or any of their authorized 
representatives, shall have the right of access to any books, documents, 
papers, or other records of the subrecipient which are pertinent to a 
specific USDA grant or cooperative agreement, in order to make audit, 
examination, excerpts, and transcripts.
    (c) Expiration of right of access. The rights of access in this 
section shall not be limited to the required retention period but shall 
last as long as the records are kept.



Sec. 3015.25  Restrictions to public access.

    Unless required by law, no awarding agency shall impose grant or 
subgrant conditions which limit public access to records covered by this 
subpart, except when the awarding agency determines that such records 
must be kept confidential and would have been excepted from disclosure 
pursuant to USDA's ``Freedom of Information'' regulations if the records 
had belonged to USDA (7 CFR 1.1-1.16).



        Subpart E--Waiver of ``Single'' State Agency Requirements



Sec. 3015.30  Waiver of ``single'' State agency requirements.

    Section 204 of the Intergovernmental Cooperation Act of 1968 
authorizes Federal agencies to waive ``single'' State agency 
requirements on request of the Governor or other duly constituted State 
authorities.
    (a) Approval authority. The awarding agency has approval authority 
for waiver requests, and shall handle them as quickly as feasible. 
Approval should be given whenever possible.
    (b) Refusal procedures. When it is necessary to refuse a request for 
waiver of the ``single'' State agency requirements under section 204, 
the awarding agency shall, through O&F, advise OMB that the request 
cannot be granted. Such advice should indicate the reasons for the 
denial of the request. Notification, through O&F, to OMB shall occur 
prior to informing the State of the refusal.



                     Subpart F--Grant Related Income



Sec. 3015.40  Scope.

    This subpart contains policies and requirements related to program 
income and interest and other investment income earned on advances of 
grant funds. Appendix A defines the term ``program income.'' There are 
five categories of program income covered in this subpart. Each is 
treated in a separate section. The categories are:
    (a) General program income;
    (b) Proceeds from sale of real property and from sale of equipment 
and supplies acquired for use;
    (c) Royalties and other income earned from a copyrighted work;
    (d) Royalties or equivalent income earned from patents or 
inventions; and
    (e) Income after the period of grant or subgrant support not 
otherwise treated.



Sec. 3015.41  General program income.

    (a) Applicability. This section applies to ``general program 
income'' as defined in Appendix A.
    (b) Use. (1) General program income shall be retained by the 
recipient and used in accordance with one or a combination of the 
alternatives in paragraphs (c), (d), and (e) of this section, as 
follows: The alternative in paragraph (c) may always be used by 
recipients and must be used if neither of the other two alternatives is 
permitted by the provisions of the grant award. The alternatives in 
paragraph (d) or (e) of this section may be used only if expressly 
permitted by the provisions of

[[Page 63]]

the grant award. In specifying alternatives that may be used, the 
provisions of the grant award may distinguish between income earned by 
the recipient and income earned by subrecipients and between the 
sources, kinds, or amounts of income.
    (2) The provisions of a subgrant award may restrict the use of 
general program income earned by the subrecipient to only one or some of 
the alternatives permitted by the provisions of the grant, but the 
alternative in paragraph (c) of this section shall always be permitted.
    (c) Deduction alternative. (1) Under this alternative, the income is 
used for allowable costs of the project or program. If there is a cost-
sharing or matching requirement, costs supported by the income may not 
count toward satisfying that requirement. Therefore, the maximum 
percentage of Federal cost-sharing is applied to the net amount 
determined by deducting the income from total allowable costs and third 
party in-kind contributions. The income shall be used for current costs 
unless the awarding agency authorizes the income to be used in a later 
period.
    (2) To illustrate this alternative, assume a project in which the 
recipient incurs $100,000 of allowable costs and receives no third party 
in-kind contributions. If the recipient earns $10,000 in general program 
income and this alternative applies, that $10,000 must be deducted from 
the $100,000 before applying the maximum percentage of Federal cost-
sharing. If that percentage is 90 percent, the most that could be paid 
to the recipient would therefore be $81,000 (90 percent times $90,000).
    (d) Cost-sharing or matching alternative. (1) Under this 
alternative, the income is used for allowable costs of the project or 
program but, in this case, the costs supported by the income may count 
toward satisfying a cost-sharing or matching requirement. Therefore, the 
maximum percentage of Federal cost-sharing is applied to total allowable 
costs and third party in-kind contributions. The income shall be used 
for current costs unless the awarding agency authorizes its use in a 
later period.
    (2) To illustrate this alternative, assume the same situation as in 
paragraph (c)(2) of this section. Under this alternative, the 90 percent 
maximum percentage of Federal cost-sharing would be applied to the full 
$100,000, and $90,000 could therefore be paid to the recipient.
    (e) Additional costs alternative. Under this alternative, the income 
is used for costs which are in addition to the allowable costs of the 
project or program but which nevertheless further the objectives of the 
Federal statute under which the grant was made. Provided that the costs 
supported by the income further the broad objectives of that statute, 
they need not be of a kind that would be permissible as charges to 
Federal funds. Examples of purposes for which the income may be used 
are:
    (1) Expanding the project or program.
    (2) Continuing the project or program after grant or subgrant 
support ends.
    (3) Supporting other projects or programs that further the broad 
objectives of the statute.
    (4) Obtaining equipment or other assets needed for the project or 
program or for other activities that further the statute's objectives.



Sec. 3015.42  Proceeds from sale of real property and from sale of equipment and supplies acquired for use.

    The following kinds of program income shall be governed by Subpart R 
of this part:
    (a) Proceeds from the sale of real property purchased or constructed 
under a grant or subgrant.
    (b) Proceeds from the sale of equipment and supplies created or 
purchased under a grant or subgrant and intended primarily for use in 
the grant or subgrant-supported project or program rather than for sale 
or rental.



Sec. 3015.43  Royalties and other income earned from a copyrighted work.

    (a) This section applies to royalties, license fees, and other 
income earned by a recipient from a copyrighted work developed under the 
grant or subgrant. Income of that kind is covered by this section 
whether a third party or the recipient acts as the publisher, seller, 
exhibitor, or performer of the copyrighted work. In some cases the 
recipient incurs costs to earn the income but does not charge these 
costs to USDA

[[Page 64]]

grant funds, to required cost-sharing or matching funds, or to other 
program income. Costs of that kind may be deducted from the gross income 
in order to determine how much must be treated as program income.
    (b) The provisions of the grant award govern the disposition of 
income subject to this section. If the provisions of the grant award do 
not treat this kind of income, there are no USDA requirements governing 
its disposition. A recipient is not prohibited from imposing 
requirements of its own on the disposition of this kind of income which 
is earned by its subrecipients provided those requirements are in 
addition to, and not inconsistent with, any requirements imposed by the 
provisions of the grant award.



Sec. 3015.44  Royalties or equivalent income earned from patents or from inventions.

    Disposition of royalties or equivalent income earned on patents or 
inventions arising out of activities assisted by a grant or subgrant 
shall be governed by the provisions of the grant or subgrant agreement. 
If the agreement does not provide for the disposition of the royalties 
or equivalent income, the disposition shall be in accordance with the 
recipient's own policies.



Sec. 3015.45  Other program income.

    (a) This section applies to program income not treated elsewhere in 
this part which subsequently results from an activity supported by a 
grant or subgrant but which does not accrue until after the period of 
grant or subgrant support. An example is proceeds from the sale or 
rental of a residual inventory of merchandise created or purchased by a 
grant-supported workshop during the period of support.
    (b) The provisions of the grant award govern the disposition of 
income subject to this section. If the provisions do not treat this kind 
of income, there are no USDA requirements governing its disposition. A 
recipient may impose requirements of its own on the disposition of this 
kind of income which is earned by its subrecipients provided those 
requirements are in addition to and not inconsistent with any 
requirements imposed by the provisions of the grant award.



Sec. 3015.46  Interest earned on advances of grant funds.

    (a) Except when exempted by Federal statute (see paragraph (b) of 
this section for the principal exemption), recipients shall remit to the 
Federal government any interest or other investment income earned on 
advances of USDA grant funds. This includes any interest or investment 
income earned by subrecipients and cost-type contractors on advances to 
them that result from advances of USDA grant funds to the recipient. 
Unless the recipient receives other instructions from the responsible 
USDA awarding agency, the recipient shall remit the amount due by check 
or money order payable to the awarding agency. This requirement may not 
be administratively waived.
    (b) In accordance with the Intergovernmental Cooperation Act of 1968 
(42 U.S.C. 4213), States, as defined in the Act, shall not be 
accountable to the Federal government for interest or investment income 
earned by the State itself, or by its subrecipents, where this income is 
attributable to grants-in-aid, as defined in the Act.\1\
---------------------------------------------------------------------------

    \1\ ``State'' is defined in the Act to include any agency or 
instrumentality of a State, and the definition does not exclude a 
hospital or institution of higher education which is such an agency or 
instrumentality. ``Grant-in-aid'' is defined in the Act to exclude 
payments under research and development contracts or grants which are 
awarded directly and on similar terms to all qualifying organizations, 
whether public or private. (42 U.S.C. 4201)
---------------------------------------------------------------------------

    (c) Recipients are cautioned that they are subject to the provisions 
of Subpart L for minimizing the time between the transfer of advances 
and their disbursement. Those provisions apply even if there is no 
accountability to the Federal government for interest or other 
investment income earned on the advances.



                   Subpart G--Cost-Sharing or Matching



Sec. 3015.50  Scope.

    This subpart contains rules reflecting Federal requirements for 
cost-sharing

[[Page 65]]

or matching. These rules apply whether cost-sharing or matching is 
required by Federal statute, awarding agency regulations, or by other 
provisions established by the specific grant agreement.



Sec. 3015.51  Acceptable contributions and costs.

    A cost-sharing or a matching requirement may be satisfied after 
qualifications and exceptions are met in Sec. 3015.52 and by satisfying 
either or both of the following:
    (a) Allowable costs incurred by the recipient or by any subrecipient 
under the grant or subgrant. This includes allowable costs supported by 
non-Federal grants or by cash donations from non-Federal third parties. 
Allowable costs shall be determined in accordance with the cost 
principles set forth in Subpart T.
    (b) The value of third party in-kind contributions applicable to the 
same period when a cost-sharing or matching requirement applies.



Sec. 3015.52  Qualifications and exceptions.

    (a) Costs supported by other Federal grants. (1) A cost-sharing or a 
matching requirement shall not be met by costs supported by another 
Federal grant, except as provided by Federal statute. This exception 
however, does not apply to costs supported by general program income 
earned from a contract awarded under another Federal grant.
    (2) For the purpose of this part, funds provided under General or 
Countercyclical Revenue Sharing Programs (31 U.S.C. 1221 et seq. and 42 
U.S.C. 6721 et seq.) are not considered Federal grants. Therefore, 
allowable costs supported by these funds may be used to satisfy a cost-
sharing or a matching requirement.
    (b) Costs or contributions applied towards other Federal cost-
sharing requirements. Recipient costs or the value of third party in-
kind contributions shall not count towards satisfying a cost-sharing or 
matching requirement of a USDA grant if they are or will be counted 
towards satisfying a cost-sharing or matching requirement of another 
Federal grant, a Federal procurement contract, or any other award of 
Federal funds.
    (c) Costs financed by general program income. Costs financed by 
general program income as defined in Appendix A shall not count towards 
satisfying a cost-sharing or matching requirement of a USDA grant 
supporting the activity unless the provisions of the grant award 
expressly permit the income to be used for cost-sharing or matching 
purposes. (This is the alternative for use of general program income 
described in Sec. 3015.41).
    (d) Services or property financed by income earned by contractors. 
Contractors under a grant or subgrant may earn income from the 
activities carried out under the contract in addition to the amounts 
earned from the party awarding the contract. No costs of services or 
property supported by this income may count toward satisfying a cost-
sharing or matching requirement unless other provisions of the grant 
award expressly permit this kind of income to be used to meet the 
requirement.
    (e) Records. In order to count cost and third party in-kind 
contributions towards satisfying a cost-sharing or a matching 
requirement, there must be verification and accurate documentation from 
the records of recipients or cost-type contractors. These records shall 
show how the value placed on third party in-kind contributions was 
decided. Special standards and procedures for calculating these 
contributions are discussed in paragraph (f) of this section. Volunteer 
services, to the extent possible, shall be supported by the same pay 
procedures and rates employed by the organization when paying for 
similar work performed by its personnel.
    (f) Special standards for third party in-kind contributions--(1) 
Contributions to recipients or cost-type contractors. A third party in-
kind contribution to a recipient or cost-type contractor may count 
towards satisfying a cost-sharing or matching requirement only where, if 
the recipient or cost-type contractor were to pay for it, the payment 
would be an allowable cost.
    (2) Contributions to fixed-price contractors. A third party in-kind 
contribution to a fixed-price contractor may count

[[Page 66]]

towards satisfying a cost-sharing or matching requirement only if it 
results in:
    (i) An increase in the services or property provided under the 
contract (without additional cost to the recipient or subrecipient), or
    (ii) A cost savings to the recipient or subrecipient.



Sec. 3015.53  Valuation of donated services.

    (a) Volunteer services. Unpaid services provided to a recipient by 
an individual shall be valued at rates consistent with the rates 
normally paid for similar work in the recipient organization. If there 
is no similar work in the recipient organization, the rate of pay for 
volunteer services should be consistent with those regular rates paid 
for similar work in the same labor market. In either case, a reasonable 
amount for fringe benefits may be included in the valuation.
    (b) Employees of other organizations. When an employer, other than a 
recipient or cost-type contractor, furnishes the services of an employee 
without cost to perform the employee's normal line of work, the services 
shall be valued at the employee's regular rate of pay, exclusive of the 
employer's fringe benefits and overhead cost. If the services are in a 
different line of work, paragraph (a) of this section shall apply.



Sec. 3015.54  Valuation of donated supplies and loaned equipment or space.

    (a) If a third party donates supplies, the contributions shall not 
exceed the cost of the supplies to the donor or the market value of the 
supplies, at the time of the donation, whichever is less.
    (b) If a third party donates the use of equipment or space in a 
building but retains the title, the contribution shall be valued at the 
fair rental rate of the equipment or space.



Sec. 3015.55  Valuation of donated equipment, buildings, and land.

    When a third party donates equipment, buildings or land, and the 
title is given to the recipient, the treatment of this donated property 
shall depend upon the purpose of the grant or subgrant as follows:
    (a) Awards for capital expenditures. If the purpose of the grant or 
subgrant is to assist the recipient in acquiring property, such as 
equipment, buildings, and land, then the market value of that property 
at the time of donation may be counted as cost-sharing or matching.
    (b) Other awards. If the nature of the grant or subgrant is not for 
the purpose of acquiring property, the following rules shall apply:
    (1) If approval is obtained from the awarding agency, the market 
value at the time of donation of the equipment or buildings and the fair 
rental rate of the donated land may be counted as cost-sharing or 
matching. In the case of a subgrant, the provisions of the USDA grant 
should require that the approval be obtained from the awarding agency as 
well as the recipient. In all cases, the approval may be given only if a 
purchase of the equipment or rental of the land would be approved as an 
allowable direct cost.
    (2) If approval is not obtained under paragraph (b)(1) of this 
section, no amount shall be counted for donated land. Instead, only 
depreciation or use allowances may be counted for donated equipment and 
buildings and treated as costs incurred by the recipient. They are 
computed and allocated (usually as indirect costs) in accordance with 
the cost principles specified in Subpart T of this part. They will thus 
be handled in the same way as depreciation or use allowances for 
purchased equipment and buildings. The amount of depreciation or use 
allowances for donated equipment and buildings is based on the 
property's market value at the time it was donated.



Sec. 3015.56  Appraisal of real property.

    In some cases, it will be necessary to establish the market value of 
land or a building or the fair rental rate of land or of space in a 
building. In these cases, the awarding agency must require that the 
market value or fair rental rate be set by an independent appraiser (or 
by a representative of the U.S. General Services Administration, if 
available) and that the value or rate be certified by a responsible 
official of the party to

[[Page 67]]

which the property or its use is donated. This requirement must also be 
imposed by the recipient on subgrants.



          Subpart H--Standards for Financial Management Systems



Sec. 3015.60  Scope.

    This subpart contains standards for financial management systems of 
recipients. No additional financial management standards or requirements 
shall be imposed by awarding agencies. Awarding agencies will, however, 
provide recipients with suggestions and assistance on establishing or 
improving financial management systems when such assistance is needed or 
requested.



Sec. 3015.61  Financial management standards.

    The following standards shall be met by recipients and subrecipients 
in managing their financial management system.
    (a) Financial reporting. Complete, accurate, and current disclosure 
of the financial results of each USDA sponsored project or program shall 
be made in accordance with the financial reporting requirements set 
forth in the grant or subgrant. When a USDA awarding agency requires 
reporting on an accrual basis, the recipient shall not be required to 
establish an accrual accounting system, but shall develop such accrual 
data for its reports on the basis of an analysis of the documentation on 
hand.
    (b) Accounting records. The source and application of funds shall be 
readily identified by the continuous maintenance of updated records. 
Records, as such, shall contain information pertaining to grant or 
subgrant awards, authorizations, obligations, unobligated balances, 
assets, outlays, and income. When the recipient is a governmental 
entity, the records shall also contain liabilities.
    (c) Internal control. Effective control over and accountability for 
all USDA grant or subgrant funds, real and personal property assets 
shall be maintained. Recipients shall adequately safeguard all such 
property and shall ensure that it is used solely for authorized 
purposes. In cases where projects are not 100 percent Federally funded, 
recipients must have effective internal controls to assure that 
expenditures financed with Federal funds are properly chargeable to the 
grant supported project.
    (d) Budgetary control. The actual and budgeted amounts for each 
grant or subgrant shall be compared. If appropriate, or required by the 
awarding agency, financial information shall be related to performance 
and unit cost data. When unit cost data is required, estimates based on 
available documentation may be accepted whenever possible.
    (e) Advance payments. There shall be specific procedures established 
to minimize the time elapsing between the advance of Federal grant or 
subgrant funds and their subsequent disbursement by the recipient. When 
advances are made by a letter of credit method, the recipients shall 
make drawdowns as close as possible to the time of making the 
disbursements. This same procedure shall be followed by recipients who 
advance cash to subrecipients to ensure that timely fiscal transactions 
and reporting requirements are conducted.
    (f) Allowable costs. Established procedures shall be used for 
determining the reasonableness, allowability, and allocability of costs 
in accordance with the cost principles prescribed by Subpart T of this 
part and the provisions of the grant award.
    (g) Source documentation. Accounting records shall be supported by 
source documentation. These documentations include, but are not limited 
to, cancelled checks, paid bills, payrolls, contract and subgrant award 
documents.
    (h) Audit resolution. A systematic method shall be employed by each 
recipient to assure timely and appropriate resolution of audit findings 
and recommendations.

Subpart I  [Reserved]



               Subpart J--Financial Reporting Requirements



Sec. 3015.80  Scope and applicability.

    (a) This subpart prescribes requirements and forms for recipients to 
report financial information to USDA

[[Page 68]]

and to request grant payments when a letter of credit is not used.
    (b) This subpart need not be applied by recipients in dealing with 
their subrecipients. Recipients are encouraged not to impose on 
subrecipients more burdensome requirements than USDA imposes on them.



Sec. 3015.81  General.

    (a) Except as provided in paragraphs (d) and (e) of this section, 
recipients shall use only the forms specified in Secs. 3015.82 through 
3015.85, and such other forms as may be authorized by OMB for:
    (1) Submitting grant financial reports to awarding agencies, or
    (2) Requesting grant payments when letters of credit or automatic 
prescheduled Treasury check advances are not used.
    (b) Recipients shall follow all applicable standard instructions 
issued by OMB for use in connection with the forms specified in 
Secs. 3015.82 through 3015.85. Awarding agencies may not issue 
substantive supplementary instructions that are inconsistent with this 
subpart or impose additional requirements on recipients without the 
approval of O&F and OMB. However, awarding agencies may shade out or 
instruct the recipient to disregard any line item that the awarding 
agency finds unnecessary for its decision-making purposes.
    (c) Recipients shall not be required to submit more than one 
original and two copies of the forms required under this subpart.
    (d) Awarding agencies may provide computer outputs to recipients to 
expedite or contribute to the accuracy of reporting. Awarding agencies 
may accept the required information from recipients in machine readable 
form or computer printouts instead of prescribed formats.
    (e) When an awarding agency determines that a recipient's accounting 
system does not meet the standards for financial management systems 
contained in Subpart H of this part, it may require more frequent 
financial reports or more detail (or both) upon written notice to the 
recipient (without regard to Sec. 3015.4) until such time as the 
standards are met.
    (f) Awarding agencies may waive any report required by this subpart, 
if not needed.
    (g) Awarding agencies may extend the due date for any financial 
report upon receiving a justified request from the recipient. The 
recipient should not wait until the due date if an extension is to be 
requested, but should submit the request as soon as the need becomes 
known. Failure by a recipient to submit a report by its due date may 
result in severe enforcement actions by USDA. These may include 
withholding of further grant payments, suspension or termination of the 
grant, etc. Therefore recipients are urged to submit reports on time.



Sec. 3015.82  Financial status report.

    (a) Form. Recipients shall use Standard Form 269, Financial Status 
Report, to report the status of funds for all nonconstruction projects 
or programs.
    (b) Accounting basis. Unless specified in the provisions of the 
grant or subgrant each recipient shall report program outlays and 
program income on the same accounting basis, i.e., cash or accrual, 
which it uses in its accounting system.
    (c) Frequency. The awarding agency may prescribe the frequency of 
the report for each project or program. However, the report shall not be 
required more frequently than quarterly except as provided in 
Secs. 3015.4, 3015.81(e), or by statute. If the awarding agency does not 
specify the frequency of the report, it shall be submitted annually. 
Upon expiration or termination of the grant or cooperative agreement, if 
a period of time remains not covered by a periodic report (i.e., a 
quarterly, semi-annual or annual report), a final report shall be 
required.
    (d) Due date. When reports are required on a quarterly or semiannual 
basis, they shall be due 30 days after the reporting period. When 
required on an annual basis, they shall be due 90 days after the end of 
the grant or agreement period. In addition, final reports as defined in 
Sec. 3015.82(c) shall be due 90 days after the expiration or termination 
of grant or agreement support, except in those instances where an 
extension has been granted.

[[Page 69]]

    (e) Final reports. (1) Final reports (i.e., the last report 
submitted) must not show any unpaid obligations.
    (2) If the recipient will still have unpaid obligations when the 
final report is due, the recipient shall submit a provisional final 
report (showing the unpaid obligations) by the due date, and a true 
final report when all obligations have been paid. When submitting a 
provisional final report, the recipient shall tell the awarding agency 
when it expects to submit a true final report.
    (3) As provided in Sec. 3015.81(f), awarding agencies may waive 
provisional final reports.



Sec. 3015.83  Federal cash transactions report.

    (a) Form. (1) For grants or cooperative agreements paid by letters 
of credit (or Treasury check advances) through any USDA payment office, 
the recipient shall submit to USDA a Standard Form 272, Federal Cash 
Transactions Report, and, when necessary, its continuation sheet, SF-
272a. Recipients under the Regional Disbursing Office (RDO) system shall 
not be required to submit a SF-272. For these recipients, awarding 
agencies shall use information contained in the Request for Payment to 
monitor recipient cash balances and to get disbursement information.
    (2) The SF-272 will be used by USDA to monitor cash advanced to 
recipients and to obtain disbursement or outlay information from 
recipients for each grant or cooperative agreement. The format of the 
report may be adapted, as appropriate, when reporting is to be 
accomplished with the assistance of automatic data processing equipment, 
provided that the identical information is submitted.
    (b) Forecasts of Federal cash requirements. Awarding agencies may 
require that forecasts of Federal cash requirements be provided in the 
``Remarks'' section of the report.
    (c) Cash in hands of subrecipients or contractors. When considered 
necessary and feasible by the responsible USDA awarding agency, 
recipients may be required to:
    (1) Show in the ``Remarks'' section of the report the amount of cash 
advances exceeding three days needs in the hands of their subrecipients 
or contractors, and
    (2) Provide short narrative explanations or actions taken by the 
recipient to reduce such excess balances.
    (d) Frequency and due date. Recipients shall submit the report no 
later than 15 working days following the end of each quarter. However, 
the USDA payment office may require recipients receiving advances of one 
million dollars or more per year to submit a report within 15 working 
days following the end of each month. Awarding agencies may waive the 
requirement for submission of the SF-272 when monthly advances do not 
exceed $10,000 per recipient, provided that such advances are monitored 
through other forms contained in this subpart, or if, in the awarding 
agency's opinion, the recipient's accounting controls are adequate to 
minimize excessive Federal advances.



Sec. 3015.84  Request for advance or reimbursement.

    (a) Advance payments. Recipients of nonconstruction grants or 
cooperative agreements shall request Treasury check advance payments on 
Standard Form 270, Request for Advance or Reimbursement. This form is 
not used for letter of credit drawdowns or predetermined automatic 
advance payments.
    (b) Reimbursements. Recipients of nonconstruction grants or 
cooperative agreements shall request reimbursement on Standard Form 270, 
Request for Advance or Reimbursement (for reimbursement request under 
construction grants or cooperative agreements, see Sec. 3015.85).
    (c) The frequency for submitting payment requests on SF-270 is 
treated in Sec. 3015.104.



Sec. 3015.85  Outlay report and request for reimbursement for construction programs.

    (a) Construction grants paid by reimbursement method. (1) Requests 
for reimbursement under construction grants shall be submitted on 
Standard Form 271, Outlay Report and Request for Reimbursement for 
Construction Programs. Awarding agencies may, however, prescribe the 
Request for Advance or Reimbursement form specified in Sec. 3015.84 
instead of this form.

[[Page 70]]

    (2) The frequency for submitting reimbursement requests is treated 
in Sec. 3015.104.
    (b) Construction grants paid by letter of credit or Treasury check 
advance. (1) When a construction grant or a cooperative agreement is 
paid by letter of credit or Treasury check advances, the recipient shall 
report its outlays to the awarding agency using Standard Form 271, 
Outlay Report and Request for Reimbursement for Construction Programs. 
The awarding agency will provide any necessary special instructions. 
However, frequency and due date shall be governed by Sec. 3015.82 (c) 
and (d).
    (2) When a construction grant or cooperative agreement is paid by 
Treasury check advances based on periodic requests from the recipient, 
the advances shall be requested on the form specified in Sec. 3015.84.
    (3) The awarding agency may substitute the Financial Status Report 
specified in Sec. 3015.82 for the Outlay Report and Request for 
Reimbursement.
    (c) Accounting basis. The accounting basis for the Outlay Report and 
Request for Reimbursement for Construction Programs shall be governed by 
Sec. 3015.82(b).



         Subpart K--Monitoring and Reporting Program Performance



Sec. 3015.90  Scope.

    This subpart establishes procedures for monitoring and reporting 
program performance of recipients. These procedures place responsibility 
on recipients to manage the day-to-day operations of their grant and 
subgrant supported activities.



Sec. 3015.91  Monitoring by recipients.

    Recipients shall monitor the performance of grant and subgrant-
supported activities to assure that performance goals are being 
achieved. Recipient monitoring shall cover each program, function, or 
activity.



Sec. 3015.92  Performance reports.

    (a) Nonconstruction. The awarding agency shall, if it decides that 
performance information available from subsequent applications contains 
sufficient information to meet its programmatic needs, require the 
recipient to submit a performance report only upon expiration or 
termination of grant support. Unless waived by the awarding agency this 
report will be due on the same date as the final Financial Status Report 
(as provided in Sec. 3015.82 (d) and (e)).
    (1) Recipients shall submit annual peformance reports unless the 
awarding agency requires quarterly or semi-annual reports or unless 
covered under paragraph (a) of this section. Annual reports shall be due 
90 days after the grant year; quarterly or semi-annual reports shall be 
due 30 days after the reporting period. The final performance report 
shall be due 90 days after the expiration or termination of grant 
support. If a justified request is submitted by a recipient, the 
awarding agency may extend the due date for any performance report. 
Additionally, requirements for unnecessary performance reports may be 
waived by the awarding agency.
    (2) Performance reports shall contain, for each grant, brief 
information on the following:
    (i) A comparison of actual accomplishments to the goals established 
for the period. Where the output of the project can be readily expressed 
in numbers, a computation of the cost per unit of output may be required 
if that information will be useful.
    (ii) The reasons for slippage if established goals were not met.
    (iii) Additional pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (3) Recipients shall not be required to submit more than the 
original and two copies of performance reports.
    (4) Recipients shall adhere to the standards in paragraph (a) of 
this section in prescribing performance reporting requirements for 
subrecipients.
    (b) Construction. For the most part, on-site technical inspections 
and certified percentage-of-completion data are relied on heavily by 
awarding agencies to monitor progress under construction grants and 
subgrants. The awarding agency shall require additional formal 
performance reports only when considered necessary, and never more 
frequently than quarterly.

[[Page 71]]



Sec. 3015.93  Significant developments.

    Events may occur between the scheduled performance reporting dates 
which have significant impact upon the grant or subgrant supported 
activity. In such cases, the recipient shall inform the awarding agency 
as soon as the following types of conditions become known:
    (a) Problems, delays, or adverse conditions which will materially 
impair the ability to meet the objective of the award. This disclosure 
shall include a statement of the action taken, or contemplated, and any 
assistance needed to resolve the situation.
    (b) Favorable developments which enable meeting time schedules and 
goals sooner or at less cost than anticipated or producing more 
beneficial results than originally planned.



Sec. 3015.94  Site visits.

    The awarding agency shall make site visits as frequently as 
practicable to:
    (a) Review program accomplishments and manage control systems.
    (b) Provide such technical assistance as may be required.



Sec. 3015.95  Waivers, extensions and enforcement actions.

    (a) Reports from recipients. USDA may waive any performance report 
required by this subpart if not needed.
    (b) Reports from subrecipients. The recipient may waive any 
performance report from a subrecipient when not needed. The recipient 
may extend the due date for any performance report from a subrecipient 
if the recipient will still be able to meet its performance reporting 
obligations to the USDA awarding agency.



                     Subpart L--Payment Requirements



Sec. 3015.100  Scope.

    This subpart prescribes the basic standards and methods under which 
a USDA awarding agency will make grant payments to recipients, and 
recipients will make subgrant payments to their subrecipients.



Sec. 3015.101  General.

    Methods and procedures for making payments to recipients shall 
minimize the time elapsing between the transfer of funds and the 
recipient's disbursements.



Sec. 3015.102  Payment methods.

    (a) Non-construction. (1) Letters of credit will be used to pay USDA 
recipients when all the following conditions exist:
    (i) There is or will be a continuing relationship between the 
recipient and the USDA awarding agency for at least a 12 month period 
and the total amount of advances to be received within that period from 
the awarding agency is $120,000 or more per year.
    (ii) The recipient has established or demonstrated to the USDA 
awarding agency the willingness and ability to establish procedures that 
will minimize the time elapsing between the transfer of funds from the 
Treasury and their disbursement by the recipient.
    (iii) The recipient's financial management system meets the 
standards for fund control and accountability prescribed in Subpart H of 
this part.
    (2) Advances by Treasury check will be used, in accordance with 
Treasury Circular No. 1075, when the recipient does not meet the 
requirements in paragraph (a)(1)(i) of this section but does meet the 
requirements in paragraphs (a)(1) (ii) and (iii) of this section.
    (3) Reimbursement by Treasury check shall be the preferred method 
when the recipient does not meet the requirements specified in either 
paragraph (a)(1)(ii) or paragraph (a)(1)(iii) of this section. This 
method may also be used when USDA financial assistance makes up only a 
minor portion of the program and where the major portion of the program 
is accomplished through private financing or Federal loans.
    (b) Construction. (1) Reimbursement by Treasury check shall be the 
preferred method when the recipient does not meet the requirements 
specified in Sec. 3015.102(a)(1) (ii) or (iii), and may be used for any 
USDA construction grant unless USDA has entered into an agreement with 
the recipient to use a letter of credit for all USDA grants, including 
construction grants.

[[Page 72]]

    (2) When the reimbursement by Treasury check method is not used, 
Sec. 3015.102(a) (1) and (2) shall apply to the construction grants. 
Implementing procedures under Sec. 3015.102(a) (1) and (2) will be the 
same for construction grants as for nonconstruction grants awarded to 
the same recipient, insofar as possible.
    (3) USDA awarding agencies will not use the percentage-of-completion 
method to pay its construction grants. The recipient may use that method 
to pay its construction contractor, but if it does, USDA payments to the 
recipient will nevertheless be based on the recipient's actual rate of 
disbursements.



Sec. 3015.103  Withholding payments.

    (a) Unless otherwise required by Federal statute, payments for 
proper charges incurred by recipients will not be withheld at any time 
during the grant period unless (1) the recipient has failed to comply 
with the program objectives, grant award conditions, or Federal 
reporting requirements, or (2) the recipient is indebted to the United 
States and collection of the indebtedness will not impair accomplishment 
of the objectives of any grant program sponsored by the United States, 
or (3) the grant is suspended pursuant to Subpart N of this part.
    (b) Payments withheld for failure of a recipient to comply with 
reporting requirements, but without suspension of the grant, will be 
released to the recipient upon subsequent compliance. When a grant is 
suspended, payment adjustments will be made in accordance with Subpart N 
of this part. When a debt is to be collected, USDA awarding agencies may 
withhold payments or require appropriate accounting adjustments to 
recorded cash balances for which the recipient is accountable to the 
Federal government, in order to liquidate the indebtedness.



Sec. 3015.104  Requesting advances or reimbursements.

    (a) Advances. If advance payments are by Treasury check and are not 
prescheduled, the recipient shall submit its payment requests at least 
monthly. Less frequent requests are not permitted for they result in 
advances covering excessive periods of time. Recipient requests for 
advances shall not be made in excess of the Federal share of reasonable 
estimates of outlays for the month covered. These estimates shall be 
made on a cash basis, even if the recipient uses an accrual accounting 
system.
    (b) Reimbursements. If payments are made through reimbursement or by 
Treasury check:
    (1) Requests for reimbursements may be submitted monthly or more 
frequently if authorized to do so by the awarding agency. Ordinarily, 
payment will be made within 30 days after receipt of a proper request 
for reimbursement.
    (2) The recipient shall not request reimbursement for the Federal 
share of amounts withheld from contractors to ensure satisfactory 
completion of work until after it makes those payments.
    (c) Forms. The forms for requesting advances or reimbursements are 
identified in Subpart J of this part.



Sec. 3015.105  Payments to subrecipients.

    Recipients shall observe the requirements of this subpart in making 
(or withholding) payments to subrecipients, with the following 
exceptions:
    (a) Advance payment by Treasury check may be used instead of letter 
of credit;
    (b) The forms specified in Subpart J of this part for requesting 
advances and reimbursements are not required to be used by 
subrecipients; and
    (c) The reimbursement by check method may be used to pay any 
construction subgrant.



          Subpart M--Programmatic Changes and Budget Revisions



Sec. 3015.110  Scope and applicability.

    (a) Scope. This subpart deals with prior approval requirements for 
post-award programmatic changes and budget revisions by recipients.
    (b) Exemption of mandatory or formula grants. Sections 3015.113 
through 3015.115 do not apply to programmatic changes or budget 
revisions made by recipients under State plans or other grants which the 
awarding agency is

[[Page 73]]

required by law to award if the applicant meets all applicable 
requirements for entitlement.
    (c) Exemption of certain subgrants. Sections 3015.113 through 
3015.115 do not apply to subgrants from States to their local 
governments under a mandatory or formula grant, if the local government 
is not required to apply for the subgrant on a project basis. Generally, 
such exempt subgrants will occur under a State plan which provides for 
local administration of a State-wide program under State supervision.



Sec. 3015.111  Cost principles.

    (a) The cost principles prescribed by subpart T of this part require 
prior approval of certain types of costs. Except when waived, those 
prior approval requirements apply to all grants and subgrants, whether 
or not Secs. 3015.113 through 3015.115 apply.
    (b) Procedures for prior approvals required by the cost principles 
are in Sec. 3015.196. Procedures for prior approvals required by this 
subpart are in Sec. 3015.112.



Sec. 3015.112  Approval procedures.

    (a) For grants or cooperative agreements. When requesting a prior 
approval required by this subpart, recipients shall address their 
requests to the responsible official of the awarding agency. Approvals 
shall not be valid unless they are in writing and signed by either the 
responsible officer, the head of the awarding agency, or the head of the 
awarding agency's regional office.
    (b) For subgrants. Recipients shall be responsible for reviewing 
requests from their subrecipients for the approvals required by this 
subpart and for giving or denying the approval. A recipient shall not 
approve any action which is inconsistent with the purpose or terms of 
the Federal grant or cooperative agreement. If an action by a 
subrecipient will result in a change in the overall grant project or 
budget requiring approval from the awarding agency, the recipient shall 
obtain that approval before giving its approval to the subrecipient. 
Approvals shall not be valid unless they are in writing and signed by an 
authorized official of the recipient organization.
    (c) Timing. Within 30 days from the date of receipt of a request for 
approval, the approval authority shall review the request and notify the 
recipient of its decision. If the request for approval is still under 
consideration at the end of 30 days, the approval authority shall inform 
the recipient in writing as to when to expect the decision.



Sec. 3015.113  Programmatic changes.

    (a) Scope. This section contains requirements for prior approval of 
departures, other than budget revisions, from approved project plans. In 
addition to the requirements in this section, awarding agencies may 
require prior approval for other kinds of programmatic changes to an 
approved cooperative agreement, grant, or subgrant project.
    (b) Changes to project scope or objectives. The recipient shall 
obtain prior approval for any change to the scope or objectives of the 
approved project. (For construction projects, any material change in 
approved space utilization or functional layout shall be considered a 
change in scope).
    (c) Changes in key people. This section applies to grants, 
subgrants, and cooperative agreements for research. This section does 
not apply to other types of grants, subgrants, or cooperative agreements 
unless other terms of the award make it apply. The recipient shall 
obtain prior approval:
    (1) To continue the project during any continuous period of more 
than three months without the active direction of an approved project 
director or principal investigator;
    (2) For its selection of a replacement for the project director of 
principal investigator;
    (3) For its selection of a replacement for any other persons named 
and expressly designated as key project people in the grant, subgrant, 
or cooperative agreement award document; or
    (4) To permit the project director or principal investigator (or 
anyone covered by paragraph (c)(3) of this section) to devote 
substantially less effort to the project than was anticipated when the 
award was made.

[[Page 74]]

    (d) Transferring work and providing financial assistance to others. 
Recipients shall obtain prior approval for transferring to another party 
the actual performance of the substantive programmatic work, and for 
providing any form of financial assistance to another party.
    (e) Audiovisual activities. (1) Except to the extent explicitly 
included in the project plan approved at the time of award, using grant 
support for any of the following requires prior approval:
    (i) Producing an audiovisual.
    (ii) Buying ownership of any of the rights in the work embodied in 
the audiovisual. (This does not apply to merely buying a license in any 
of the rights. For the remainder of this section, buying ownership of 
the rights is referred to simply as buying or purchasing an 
audiovisual).
    (iii) Presenting or distributing to the general public an 
audiovisual that was produced or bought with grant support.
    (2) Prior approval is not required for:
    (i) Any audiovisual activity under a subgrant.
    (ii) Any audiovisual whose direct production or purchase cost to the 
recipient is $5,000 or less.
    (iii) The production or purchase of an audiovisual as a research 
instrument or for documenting experimentation or findings, if the 
audiovisual is not intended for presentation or distribution to the 
general public.
    (3) Following are examples of presentation or distribution of an 
audiovisual to the general public.
    (i) Broadcast on commercial, cable, or educational television, or 
radio.
    (ii) Showing in commercial motion picture theaters.
    (iii) Showing in public places such as airports, waiting rooms, bus 
or railroad depots, and vacation resorts.
    (iv) Showing to civic associations, schools (except when used as a 
teaching tool in a classroom setting), clubs, fraternal organizations, 
or similar lay groups.



Sec. 3015.114  Budgets--general.

    (a) Research and non-research project budgets. For research and non-
research projects which involve cost-sharing or matching, approved 
budgets shall ordinarily consist of a single set of figures covering 
total project cost (the sum of the awarding agency's share and the 
recipient's share). However, the awarding agency may specify that the 
recipient's share not be included in the approved budget. In no case, 
however, shall the approved budget be in the form of a separate set of 
figures for each share.
    (b) Subdivision by programmatic segments. Some grants, subgrants, 
and cooperative agreements contain two or more programmatic segments 
(such as discrete programs, projects, functions, or types of 
activities). In these cases, the awarding agency may require that the 
approved budget be subdivided to show the anticipated cost of each 
programmatic segment.



Sec. 3015.115  Budget revisions.

    (a) Nonconstruction projects. (1) Except as provided in paragraph 
(a)(2) of this section, the recipient of a grant, subgrant, or 
cooperative agreement having an approved budget shall obtain prior 
approval for any budget revision which will:
    (i) Involve transfer of amounts budgeted for indirect costs to 
absorb increases in direct costs, or
    (ii) Involve transfer of amounts previously budgeted for training 
allowances (direct payments to trainees), or
    (iii) Result in a need for the award of additional funds, e.g., an 
increase in the base upon which indirect costs are calculated which will 
increase allocable indirect costs and result in a claim for a 
supplementary award.
    (2) Any or all of the prior approval requirements in paragraph (a) 
of this section may be waived by the awarding agency.
    (3) Except as provided in Sec. 3015.116 other budget changes under 
nonconstruction grants do not require approval.
    (b) Construction projects. Unless provided otherwise by the terms of 
the grant, subgrant, or cooperative agreement, revisions to construction 
project budgets do not require approval.

[[Page 75]]



Sec. 3015.116  Construction and nonconstruction work under the same grant, subgrant, or cooperative agreement.

    When a grant, subgrant, or cooperative agreement provides support 
for both construction and nonconstruction work, the awarding agency may 
require prior approval for any fund or budget transfers between the two 
types of work.



   Subpart N--Grant and Subgrant Closeout, Suspension and Termination



Sec. 3015.120  Closeout.

    (a) Each grant or subgrant shall be closed out as soon as possible 
after expiration or notice of termination.
    (b) The following shall apply when closing out USDA grants:
    (1) Upon request from the recipient, any allowable reimbursable cost 
not covered by previous payments shall be promptly paid by USDA.
    (2) Any unobligated balance of cash advanced to the recipient shall 
be immediately refunded to the awarding agency or managed in accordance 
with USDA instructions.
    (3) Within a maximum period of 90 days following the date of 
expiration or termination of a grant, all financial performance and 
related reports required by the terms of the agreement shall be 
submitted to the awarding agency by the recipient. USDA reserves the 
option of extending the due date for any report and may waive any report 
that it considers to be unnecessary.
    (4) The provisions formally expressed and agreed to within the grant 
arrangement shall dictate the settlement of any upward or downward 
adjustments of the Federal share of costs.
    (c)(1) A grant closeout shall not affect the retention period for, 
or Federal rights of access to, grant records. (See Subpart D of this 
part).
    (2) The closeout of a grant does not affect the recipient's 
responsibilities regarding property under Subpart R of this part or with 
respect to any program income the recipient is still accountable for 
under Subpart F of this part.
    (3) Final audits (See Attachment L, Circular A-102 and Attachment K 
of Circular A-110) are not a required part of the grant or subgrant 
closeout procedures. Normally, a final audit should not be needed unless 
there are problems with a grant or subgrant that require audit 
attention. If a USDA agency considers a final audit to be necessary, it 
shall contact the OIG Region within which the recipient or subrecipient 
is located and inform OIG of the situation. OIG shall be responsible for 
assuring that necessary final audits are performed and for any necessary 
coodination with other Federal cognizant audit agencies, recipients or 
State and local auditors. Audits performed in accordance with Subpart I 
may serve as final audits providing such audits meet the needs of the 
requesting agency.
    (4) If a grant is closed out without audit, the awarding agency 
reserves the right to disallow and recover an appropriate amount after 
fully considering any recommended disallowances resulting from an audit 
which may be conducted later.



Sec. 3015.121  Amounts payable to the Federal government.

    The following outstanding sums for each grant shall be considered as 
a debt or debts owed by the recipient to the Federal government. They 
shall, if not paid upon demand, be subject to recovery by the awarding 
agency from the recipient or its successor or assignees by set off or 
other action provided by law:
    (a) Any grant funds paid to the recipient by the Federal government 
which exceed the amount the recipient is finally determined to be 
entitled to under the provisions of the grant award;
    (b) Any interest or other investment income earned on advances of 
grant funds which is due the Federal government;
    (c) Any royalties or other special classes of program income which, 
under the provisions of the grant award, are required to be returned to 
the Federal government;
    (d) Any amount the Federal government is entitled to under Subpart R 
of this part; and

[[Page 76]]

    (e) Under the provisions of the grant award, any other amounts 
finally determined to be due to the Federal government.



Sec. 3015.122  Violation of terms.

    (a) Whenever it is determined that the recipient has materially 
failed to comply with the provisons of the grant award, the awarding 
agency may suspend or terminate, in accordance with Secs. 3015.123 and 
3015.124, any grant in whole, or in part, at any time before the date of 
completion, or take such other remedies as may be legally available and 
appropriate.
    (b) A grant may be suspended or terminated in the current period for 
failure to submit a report still due from a prior period. This action is 
applicable when a project or program is supported over two or more 
funding periods.



Sec. 3015.123  Suspension.

    (a) When a recipient has materially failed to comply with the 
provisions prescribed in the grant agreement, the awarding agency may, 
after reasonable notice to the recipient, suspend the grant in whole or 
in part. A suspension notice shall be issued by the awarding agency 
stating the reasons for the suspension, any corrective action required 
of the recipient, and the effective date. Suspension may go into effect 
immediately if the awarding agency deems it necessary to protect its 
interest and if a delayed effective date would be unreasonable 
considering the awarding agency's responsibilities to protect the 
Federal government's interest. Suspension shall remain in effect until 
the recipient has taken corrective action satisfactory to the awarding 
agency, or given evidence that such corrective action will be taken, or 
until the awarding agency terminates the grant.
    (b) Unless specifically authorized by the awarding agency in the 
notice of suspension or subsequently expressed in an amendment to it, 
new obligations incurred by the recipient during the suspension period 
shall not be allowed. Necessary and otherwise allowable costs which the 
recipient could not reasonably avoid during the suspension period will 
be allowed, if they result from obligations properly incurred by the 
recipient before the effective date of the suspension and not in 
anticipation of suspension or termination. If the awarding agency 
approves, third party in-kind contributions applicable to the suspension 
period may be allowed in satisfaction of cost-sharing or matching 
requirements.
    (c) During the suspension period, appropriate adjustments to 
payments under the suspended grant will be made by not giving credit to 
the recipient for disbursements made in payment of unauthorized 
obligations incurred during the suspension period or by withholding 
subsequent payments.



Sec. 3015.124  Termination.

    (a) Termination for cause. The awarding agency may terminate any 
grant or other agreement in whole, or in part, at any time before the 
date of expiration, whenever it is determined that the recipient has 
materially failed to comply with the conditions of the agreement. The 
awarding agency shall promptly notify the recipient in writing of the 
determination and reasons for the termination, together with the 
effective date.
    (b) Termination by mutual agreement. Except as provided in paragraph 
(a) of this section, grants may be terminated in whole, or in part, only 
as follows:
    (1) When the awarding agency and recipient agree upon the 
termination conditions, including the effective date and, in the case of 
partial termination, the portion to be terminated.
    (2) By written notification by the recipient to the awarding agency 
setting forth the reasons for termination, the effective date, and in 
the case of partial termination, the portion to be terminated. In the 
case of a partial termination, if the awarding agency decides that the 
remaining portion of the grant will not accomplish the purposes for 
which the grant was made, the awarding agency may terminate the award in 
its entirety under either paragraph (a) or paragraph (b)(1) of this 
section.
    (c) Termination settlements. Upon termination of a grant, the 
recipient shall not incur any new obligations for the terminated portion 
of the agreement after the effective date, and shall cancel as many 
outstanding obligations as

[[Page 77]]

possible. The awarding agency, however, shall allow full credit to the 
recipient for the Federal share of the non-cancellable obligations 
properly incurred by the recipient prior to termination.



Sec. 3015.125  Applicability to subgrants.

    Recipient subgrants shall be subjected to the same standards 
regarding closeout, suspension, and termination of subgrants as 
prescribed in this subpart for awarding agencies.

Subparts O-P [Reserved]



              Subpart Q--Application for Federal Assistance



Sec. 3015.150  Scope and applicability.

    (a) This subpart prescribes forms and instructions to be used by 
governmental organizations (except hospitals, non-profit organizations, 
and institutions of higher education operated by a government) in 
applying to USDA for discretionary grants. This subpart is not 
applicable, however, to mandatory or formula grants or programs which do 
not require applicants to apply to USDA for funds on a project basis.
    (b) This subpart permits awarding agencies to prescribe the form of 
applications by nongovernmental organizations (including hospitals, non-
profit organizations and institutions of higher education operated by a 
government), but prescribes the use of a standard facesheet for certain 
of these applications.
    (c) This subpart applies only to applications for grants or 
cooperative agreements and is not required to be applied by recipients 
in dealing with applicants for subgrants. However, recipients are 
encouraged not to adopt more detailed or burdensome application 
requirements for subgrants.
    (d) This subpart also prescribes standards for competition to be 
used by USDA agencies in awarding discretionary cooperative agreements 
and grants. (This subpart is not applicable to cooperative agreements 
awarded pursuant to the provisions of sections 1472(b) and 1473C of the 
National Agricultural Research, Extension and Teaching Policy Act of 
1977, as amended.)

[46 FR 55639, Nov. 10, 1981, as amended at 51 FR 17172, May 9, 1986]



Sec. 3015.151  Authorized forms.

    (a) Sections 3015.152 through 3015.156 specify the forms that 
governmental organizations shall use to apply to USDA for a 
discretionary grant.
    (b) Governments need not submit more than the original and two 
copies of application forms. When less will suffice, the awarding agency 
shall notify potential applicants.
    (c) When a government agency amends a previously submitted 
application or applies for additional funding (such as a continuation or 
supplemental award) only the facesheet and any other affected pages are 
required to be submitted. Previously submitted pages whose information 
is still current may be resubmitted, but are not required to be 
resubmitted.



Sec. 3015.152  Preapplication for Federal assistance.

    (a) When a government submits a preapplication, it shall use the 
Preapplication for Federal Assistance form prescribed by Circular A-102. 
The purposes of these preapplications shall be to:
    (1) Establish communication between the potential applicant and the 
awarding agency;
    (2) Determine the potential applicant's eligibility;
    (3) Identify projects which have little or no chance for Federal 
funding before applicants incur significant costs for preparing an 
application.
    (b) Preapplication is always required if the potential applicant is 
a government and the proposed project (1) is for construction, land 
acquisition, or land development, and (2) would require more than 
$100,000 of Federal funding. If these conditions are not present, 
potential applicants need not submit preapplications unless required to 
do so by the awarding agency. Any government may submit a preapplication 
even when not required.

[[Page 78]]



Sec. 3015.153  Notice of preapplication review action.

    Awarding agencies shall inform governmental applicants of the 
results of their review of preapplications by using the Notice of 
Preapplication Review Action form prescribed by Circular A-102. If the 
review cannot be completed within 45 days, the awarding agency shall 
inform the applicant, in writing, when it will complete the review.



Sec. 3015.154  Application for Federal assistance (nonconstruction programs).

    Governments shall use the Application for Federal Assistance 
(Nonconstruction Programs) form prescribed by OMB Circular A-102 in 
applying for discretionary grants unless a form specified in 
Sec. 3015.155 or Sec. 3015.156 is to be used.



Sec. 3015.155  Application for Federal assistance (construction programs).

    Governments shall use the Application for Federal Assistance (for 
Construction Programs) form prescribed by Circular A-102 in applying for 
any grant whose purpose is solely or primarily construction, land 
acquisition, or land development.



Sec. 3015.156  Application for Federal assistance (short form).

    Governments shall use the Application for Federal Assistance (Short 
Form) form prescribed by Circular A-102 in applying for any single-
purpose, one-time grant of less than $10,000 not requiring Circular A-95 
clearinghouse review, an environmental impact statement, or the 
relocation of persons, businesses, or farms. Awarding agencies may, at 
their discretion, authorize or require this form for applications for 
larger amounts.



Sec. 3015.157  Authorized form for nongovernmental organizations.

    Nongovernmental organizations shall use application forms prescribed 
by the awarding agency. The facesheet of these applications shall be 
Standard Form 424.



Sec. 3015.158  Competition in the awarding of discretionary grants and cooperative agreements.

    (a) Standards for competition. Except as provided in paragraph (d) 
of this section, awarding agencies shall enter into discretionary grants 
and cooperative agreements only after competition. An awarding agency's 
competitive award process shall adhere to the following standards:
    (1) Potential applicants must be invited to submit proposals through 
publications such as the Federal Register, professional trade journals, 
agency or program handbooks, the Catalog of Federal Domestic Assistance, 
or any other appropriate means of solicitation. In so doing, awarding 
agencies should consider the broadest dissemination of project 
solicitations in order to reach the highest number of potential 
applicants.
    (2) Proposals are to be evaluated objectively by independent 
reviewers in accordance with written criteria set forth by the awarding 
agency. Reviewers should make written comments, as appropriate, on each 
application. Independent reviewers may be from the private sector, 
another agency, or within the awarding agency, as long as they do not 
include anyone who has approval authority for the applications being 
reviewed or anyone who might appear to have a conflict of interest in 
the role of reviewer of applications. A conflict of interest might arise 
when the reviewer or the reviewer's immediate family members have been 
associated with the applicant or applicant organization within the past 
two years as an owner, partner, officer, director, employee, or 
consultant; has any financial interest in the applicant or applicant 
organization; or is negotiating for, or has any arrangement, concerning 
prospective employment.
    (3) An unsolicited application, which is not unique and innovative, 
shall be competed under the project solicitation it comes closest to 
fitting. Awarding agency officials will determine the solicitation under 
which the application is to be evaluated. When the awarding agency 
official decides that the unsolicited application does not fall under a 
recent, current, or planned solicitation, a noncompetitive award

[[Page 79]]

may be made, if appropriate to do so under the criteria of this section. 
Otherwise, the application should be returned to the applicant.
    (b) Project solicitations. A project solicitation by the awarding 
agency shall include or reference the following, as appropriate:
    (1) A description of the eligible activities which the awarding 
agency proposes to support and the program priorities;
    (2) Eligible applicants;
    (3) The dates and amounts of funds expected to be available for 
awards;
    (4) Evaluation criteria and weights, if appropriate, assigned to 
each;
    (5) Methods for evaluating and ranking applications;
    (6) Name and address where proposals should be mailed and submission 
deadline(s);
    (7) Any required forms and how to obtain them;
    (8) Applicable cost principles and administrative requirements;
    (9) Type of funding instrument intended to be used (grant or 
cooperative agreement); and
    (10) The Catalog of Federal Domestic Assistance number and title.
    (c) Approval of applications. The final decision to award is at the 
discretion of the awarding/approving official in each agency. The 
awarding/approving official shall consider the ranking, comments, and 
recommendations from the independent review group, and any other 
pertinent information before deciding which applications to approve and 
their order of approval. Any appeals by applicants regarding the award 
decision shall be handled by the awarding agency using existing agency 
appeal procedures or good administrative practice and sound business 
judgment.
    (d) Exceptions. The awarding/approving official may make a 
determination in writing that competition is not deemed appropriate for 
a particular transaction. Such determination shall be limited to 
transactions where it can be adequately justified that a noncompetitive 
award is in the best interest of the Government and necessary to the 
accomplishment of the goals of the program. Reasons for considering 
noncompetitive awards may include, but are not necessarily limited to, 
the following:
    (1) Nonmonetary awards of property or services;
    (2) Awards of less than $75,000;
    (3) Awards to fund continuing work already started under a previous 
award;
    (4) Awards which cannot be delayed due to an emergency or a 
substantial danger to health or safety;
    (5) Awards when it is impracticable to secure competition; or
    (6) Awards to fund unique and innovative unsolicited applications.

[51 FR 17172, May 9, 1986]



                           Subpart R--Property



Sec. 3015.160  Scope and applicability.

    (a) Except as explained in paragraphs (c), (d), and (e) of this 
section, this subpart applies to real property, equipment (including 
ADP) and supplies whose acquisition is supported by a grant.
    (b) Also contained in this subpart are standards covering 
inventions, patents, and copyrights arising out of activities supported 
by a grant.
    (c) This subpart does not apply to:
    (1) Property for which only depreciation or use allowances are 
charged;
    (2) Property donated entirely as a third party in-kind contribution; 
or
    (3) Equipment or supplies acquired primarily for sale or rental, 
rather than for use.
    (d) This subpart applies to equipment or supplies acquired by a 
contractor under a grant or subgrant only if, by terms of the contract, 
title vests in the recipient or subrecipient.
    (e) For research grants that are subject to an institutional cost-
sharing agreement, real property, equipment, and supplies shall be 
subject to this subpart only if at least some part of the acquisition 
cost is supported as a direct cost by Federal grant funds.



Sec. 3015.161  Additional requirements.

    Provided they observe the requirements of this subpart, recipients 
may follow their own property management policies and procedures. Unless 
specifically required by Federal statutes or Executive Orders, awarding 
agencies

[[Page 80]]

may not impose on recipients property requirements (including property 
reporting requirements) not authorized by this subpart.



Sec. 3015.162  Title to real property, equipment and supplies.

    Subject to the obligations and conditions specified in this subpart, 
title to real property, equipment, and supplies acquired under a grant 
or subgrant shall vest, upon acquisition, in the recipient or 
subrecipient, respectively. In certain cases, money due the Federal 
government upon disposition of real property may be authorized to be 
used for allowable costs rather than paid to USDA. (See Sec. 3015.173.)



Sec. 3015.163  Real property.

    Except as stated otherwise by Federal statutes, real property 
applicable to this subpart shall be subject to the following 
requirements, in addition to any other requirements imposed by the 
provisions of the grant award:
    (a) Use. The property shall be used for the originally authorized 
purpose as long as needed for that purpose. When no longer so needed, 
the awarding agency may approve the use of the property for other 
purposes. These uses shall be limited to:
    (1) Projects or programs supported by other Federal grants or 
assistance agreements.
    (2) Activities not supported by other Federal grants or assistance 
agreements but having purposes consistent with those of the legislation 
under which the original grant was made.
    (b) Transfer of title. In accordance with paragraph (a) of this 
section, approval may be requested from the awarding agency to transfer 
title to an eligible third party for continued use for authorized 
purposes. If approval is permissible under Federal statutes, and is 
given, the terms of the transfer shall provide that the transferee shall 
assume all the rights and obligations of the transferor set forth in 
this subpart or in other terms of the grant or subgrant.
    (c) Disposition. When the real property is no longer to be used as 
provided in paragraphs (a) and (b) of this section, the disposition 
instructions of the awarding agency shall be followed. Those 
instructions will provide for one of the following alternatives:
    (1) The property shall be sold and the Federal government shall have 
a right to an amount computed by multiplying the Federal share of the 
property times the proceeds from sale (after deducting actual and 
reasonable selling and fix-up expenses, if any, from the sales 
proceeds). Proper sales procedures shall be followed which provide for 
competition to the extent practicable and result in the highest possible 
return.
    (2) The recipient shall have the option either of selling the 
property in accordance with paragraph (c)(1) of this section or of 
retaining title. If title is retained, the Federal government shall have 
a right to an amount computed by multiplying the market value of the 
property by the Federal share of the property.
    (3) The recipient shall transfer the title to either the Federal 
government or an eligible non-Federal party named by the awarding 
agency. The recipient shall be entitled to be paid an amount computed by 
multiplying the market value of the property by the non-Federal share of 
the property. In cases where the property belonged to a subrecipient, 
see Sec. 3015.172 for the subrecipient's share.



Sec. 3015.164  Statutory exemptions for equipment and supplies.

    (a) In certain circumstances some Federal statutes permit title to 
equipment or supplies acquired with grant funds to vest in the recipient 
without further obligation to the Federal government or on such terms 
and conditions set forth in the grant award, as deemed appropriate. The 
Federal Grant and Cooperative Agreement Act of 1977, Pub. L. 95-224, is 
an example of such a statute. It provides this authority for equipment 
and supplies purchased with the funds of grants (and Federal contracts 
and cooperative agreements) for the conduct of basic or applied 
scientific research at non-profit institutions of higher education or at 
non-profit organizations whose primary purpose is the conduct of 
scientific research.
    (b) If equipment is subject to a statute of the kind described in 
paragraph (a) of this section, it shall be exempt

[[Page 81]]

from the requirements in the remaining sections of this subpart. 
However, when an equipment item has a unit acquisition cost of $1,000 or 
more, it shall be subject to Sec. 3015.165 concerning rights to require 
transfer, and, while subject to such a right, to the rules on 
replacement in Sec. 3015.167.
    (c) If supplies are subject to a statute of the kind described in 
paragraph (a) of this section, they shall be exempt from all provisions 
of the remainder of this subpart which would otherwise apply.



Sec. 3015.165  Rights to require transfer of equipment.

    (a) USDA right. The awarding agency shall have the right to require 
the transfer of equipment (including title) for items of equipment 
having a unit cost of $1,000 or more to the Federal government or to an 
eligible non-Federal party named by the awarding agency. Normally, USDA 
agencies will only exercise this right if the project or program for 
which the equipment was acquired is transferred from one recipient to 
another. The following conditions shall govern this right:
    (1) The property shall be appropriately identified in the grant 
award.
    (2) In order for the awarding agency to exercise the right, 
disposition instructions must be issued no later than 120 days after the 
end of USDA grant support for the project or program for which the 
equipment was acquired. Furthermore:
    (i) If the equipment is eligible for the exemptions in Sec. 3015.164 
and ceases to be needed for the project or program for which it was 
acquired while the project or program is still being performed by the 
recipient, the disposition instructions must have been received by the 
recipient while the equipment was still needed for that project or 
program.
    (ii) If the equipment is not eligible for those exemptions, 
disposition instructions must have been received by the recipient before 
other permissible disposition of the equipment took place in accordance 
with Sec. 3015.168.
    (3) If the right is exercised, the recipient shall be entitled to be 
paid any reasonable, resulting shipping or storage costs incurred, plus 
an amount computed by multiplying the market value of the equipment by 
the non-Federal share of the equipment.
    (b) Right of parties awarding subgrants. A recipient may reserve for 
itself, when awarding a subgrant, rights similar to those found in 
paragraph (a) of this section which covers items of equipment having a 
unit acquisition cost of $1,000 or more which are acquired under that 
subgrant. Without the approval of the awarding agency, the right may be 
exercised only if the project or program for which the equipment was 
acquired is transferred to another subrecipient and only for the purpose 
of transferring the equipment to the new subrecipient for continued use 
in the project or program.
    (c) Equipment lists. If at any time an awarding agency is 
considering exercising its right to require transfer of equipment, it 
may require the recipient to furnish it with a list of all items of 
equipment that are subject to the right. As such, the awarding agency 
will decide which items, if any, should be transferred.



Sec. 3015.166  Use of equipment.

    (a) Basic rule. Whenever the equipment is not transferred under the 
provisions set forth in Sec. 3015.165, it shall be used by the recipient 
in the project or program for which it was acquired as long as needed, 
whether or not the project or program continues to be supported by 
Federal funds. When the equipment is no longer needed for the original 
project or program the recipient shall use the equipment, if needed, in 
other projects or programs currently or previously funded by the Federal 
government, in the following order of priority:
    (1) Projects or programs currently or previously funded by the same 
USDA awarding agency.
    (2) Projects or programs currently or previously funded by any USDA 
awarding agency.
    (3) Projects or programs currently or previously funded by other 
Federal agencies.
    (b) Shared use. When equipment is used less than full time in the 
original project or program, the recipient shall make it available for 
use in other

[[Page 82]]

projects or programs currently or previously funded by the Federal 
government. Provided, such other use will not interfere with the work on 
the original project or program. First preference for such use, however, 
shall be given to other projects or programs funded by the same USDA 
awarding agency.
    (c) Use by other recipients. When the recipient can no longer use 
the equipment as required by paragraph (a) of this section, it may 
voluntarily make the equipment available for use on projects or programs 
currently or previously funded by the Federal government which the 
recipient is supporting through subgrants or through non-Federal grants. 
A subrecipient may also voluntarily make the equipment available for use 
in projects or programs currently or previously funded by the Federal 
government which are being conducted or supported by the recipient.
    (d) Other uses. Unless the awarding agency provides otherwise, while 
equipment is being used as described in the preceding paragraphs of this 
section, it may also be used part-time for other purposes. The use as 
described in the previous paragraphs, however, shall be given priority 
over other uses.



Sec. 3015.167  Replacement of equipment.

    (a) If needed, equipment may be exchanged for replacement equipment. 
Replacement of equipment may be done either through trade-in or through 
sale and application of the proceeds to the acquisition cost of 
replacement equipment. In either case, the transaction must be one which 
a prudent person would make in like circumstances.
    (b) If an additional outlay to acquire the replacement equipment is 
charged as a direct cost to either Federal funds or required cost-
sharing or matching under a Federal award, the replacement equipment 
shall be subject to whatever property requirements or exemptions are 
applicable to that award. If the award is a grant from USDA, the full 
acquisition cost of the replacement equipment shall determine which 
provisions of this subpart apply.
    (c) For any replacement not covered by paragraph (b) of this 
section, the provisions of this subpart applicable to the equipment 
replaced shall carry over to the replacement equipment. None of the 
provisions of this subpart shall carry over if (1) the Federal share of 
the equipment replaced was 10 percent or less or (2) the product of that 
share times the amount received for trade-in or sale is $100 or less.



Sec. 3015.168  Disposal of equipment.

    When original or replacement equipment is no longer to be used in 
projects or programs currently or previously sponsored by the Federal 
government, disposal of the equipment shall be made as follows:
    (a) Equipment with a unit acquisition cost of less than $1,000 may 
be sold, retained or otherwise disposed of with no further obligation to 
the Federal government.
    (b) All other equipment may be retained or sold. The Federal 
government shall have a right to an amount calculated by multiplying the 
current market value or proceeds from sale by the Federal share of the 
equipment (see Sec. 3015.172). If part of the Federal share of the 
equipment came from an award under which the exemptions in Sec. 3015.164 
were applicable, the amount due shall be reduced pro rata. In any case, 
if the equipment is sold, $100 or 10 percent of the total sales 
proceeds, whichever is greater, may be deducted and retained from the 
amount otherwise due for selling and handling expenses. If the 
recipient's project or program for which or under which the equipment 
was acquired is still receiving grant support from the same Federal 
program and if the awarding agency approves, the net amount due may be 
used for allowable costs of that project or program. Otherwise, the net 
amount must be returned to the awarding agency by check or money order.



Sec. 3015.169  Equipment management requirements.

    Recipient procedures for managing equipment shall, as a minimum, 
meet the following requirements (including replacement equipment) until 
such actions as transfer, replacement or disposal takes place:
    (a) Property records shall be maintained accurately. (Subpart D of 
this

[[Page 83]]

part contains retention and access requirements for these records.) The 
records shall include for each item of equipment the following:
    (1) A description of the equipment including manufacturer's serial 
numbers.
    (2) An identification number, such as the manufacturer's serial 
number.
    (3) Identification of the grant under which the recipient acquired 
the equipment.
    (4) The information needed to calculate the Federal share of the 
equipment (see Sec. 3015.172).
    (5) Acquisition date and unit acquisition cost.
    (6) Location, use and condition of the equipment and the date the 
information was reported.
    (7) All pertinent information on the ultimate transfer, replacement, 
or disposal of the equipment.
    (b) Every two years, at a minimum, a physical inventory shall be 
conducted and the results reconciled with the property records to verify 
the existence, current utilization, and continued need for the 
equipment. Any discrepancies between quantities determined by the 
physical inspection and those shown in the accounting records shall be 
investigated to determine the causes of the differences.
    (c) In order to insure adequate safeguards to prevent loss, damage 
or theft of equipment, a control system shall be used. Any loss, damage 
or theft of equipment shall be investigated and fully documented. The 
awarding agency may require a report of the circumstances involving the 
loss, damage, or theft of equipment.
    (d) In order to keep the equipment in good condition, adequate 
maintenance procedures shall be implemented.
    (e) Where equipment is to be sold and the Federal government is to 
have a right to part or all of the proceeds, selling procedures shall be 
established which will provide for competition to the extent practicable 
and result in the highest possible return.



Sec. 3015.170  Damage, loss, or theft of equipment.

    (a) Applicability. This section applies to equipment with a unit 
acquisition cost of $1,000 or more that, before disposal (see 
Sec. 3015.168), is damaged beyond repair, lost, or stolen.
    (b) Recipient at fault--(1) Applicability. This paragraph applies 
if:
    (i) At the time of the damage, loss, or theft, the recipient does 
not have a control system in effect as required by Sec. 3015.169, and
    (ii) The damage, loss, or theft is not due to an act of God.
    (2) Equipment replaced. If the equipment is replaced, the 
replacement is governed by Sec. 3015.167. When that happens, the market 
value of the original equipment at the time it was damaged, lost, or 
stolen is used instead of the amount received for trade-in or sale.
    (3) Equipment not replaced. If the equipment is not replaced, the 
Federal government has a right to an amount calculated by multiplying 
the Federal share in the equipment by its market value at the time of 
damage, loss, or theft. The amount is reduced pro rata if part of the 
Federal share of the equipment comes from an award under which the 
exemption in Sec. 3015.164 applied.
    (4) Other remedies. The provisions in this paragraph (b) are in 
addition to other remedies available to the awarding agency if a 
recipient acquires equipment with grant support but fails to establish 
the control system required by Sec. 3015.169.
    (c) Recipient not at fault--(1) Applicability. This paragraph 
applies if:
    (i) At the time of the damage, loss, or theft, the recipient does 
have a control system in effect as required by Sec. 3015.169(c) or
    (ii) The damage, loss, or theft is due to an act of God.
    (2) Recipient not compensated. If the recipient is not compensated 
for the damage, loss, or theft, through insurance or some other means, 
there is no obligation to USDA for the equipment.
    (3) Recipient compensated. If the recipient is compensated for the 
damage, loss, or theft and replaces the equipment, Sec. 3015.167 applies 
to the replacement equipment. If the recipient is compensated but does 
not replace the equipment, Sec. 3015.168 applies as though the recipient 
had sold the equipment. (All of Sec. 3015.168 applies including the rule 
permitting the amount due the Federal government to be reduced by 10

[[Page 84]]

percent of the proceeds or $100, whichever is greater.) The amount 
received for trade-in or sale is considered the lesser of (i) the amount 
of compensation or (ii) the market value of the equipment at the time it 
was damaged, lost, or stolen.
    (d) Waivers. The awarding agency may waive in whole or in part any 
provision of this section.



Sec. 3015.171  Unused supplies.

    (a) If unused supplies exceeding $1,000 in total aggregate market 
value are left over upon termination or expiration of the grant or 
subgrant for which they were acquired and the supplies are not needed 
for any project or program currently or previously funded by the Federal 
government, the grant shall be credited by an amount computed by 
multiplying the Federal share of the supplies times the current market 
value or, if the supplies are sold, the proceeds from sale. If the 
supplies are sold, 10 percent of the proceeds may be deducted and 
retained from the credit, for selling and handling expenses.
    (b) For possible exemptions from this section, see Sec. 3015.164.



Sec. 3015.172  Federal share of real property, equipment, and supplies.

    This subpart contains principles necessary to determine the Federal 
(or non-Federal) share of real property, equipment or supplies.
    (a) General. (1) Except as explained in the following paragraphs of 
this section, the Federal share of the property shall be the same 
percentage as the Federal share of the acquiring party's total cost 
under the grant during the grant or subgrant year (or other funding 
period) to which the acquisition cost of the property was charged. For 
this purpose, ``costs under the grant'' means allowable costs which are 
either supported by the grant or counted toward satisfying a cost-
sharing or matching requirement of the grant.
    (2) If the property is acquired by a subrecipient, the Federal share 
of the subrecipient's costs under the grant and hence of the property 
shall be calculated by multiplying the Federal share of the recipient's 
costs by the latter's share of the subrecipient's costs. (For example, 
if the Federal share of the recipient's costs is 50 percent and the 
subgrant bears only 50 percent of a subrecipient's costs, then the 
Federal share of that subrecipient's costs (and of the property acquired 
by that subrecipient) is 25 percent.)
    (3) The provisions of some grant awards set different maximum 
percentages of Federal financial participation for different categories 
of costs. In these cases, for the purposes of this section, the costs in 
each category are considered as costs under a separate grant. If two 
categories have the same maximum percentage of Federal participation and 
costs in one category are permitted to count toward satisfying a cost-
sharing or matching requirement of the other, they are a single category 
for the purposes of this rule. Also, all categories with a 100 percent 
rate are considered a single category for the purposes of this rule.
    (b) Property acquired only partly under a grant. (1) Sometimes only 
a part of the acquisition cost of an item of property is supported as a 
direct cost by the grant or counted as a direct cost towards a cost-
sharing or matching requirement. Occasionally, the amount paid for the 
property is only a part of its value. The remainder is donated as an in-
kind contribution by the party that provided the property.
    (2) To determine the Federal share of such property, first calculate 
the Federal share of the acquiring party's total costs under the grant 
as explained in paragraph (a) of this section. Next multiply that share 
by the percentage of the property's acquisition cost (or its market 
value, if the item was partly donated) which was supported as a direct 
cost by the grant or counted as a direct cost towards a cost-sharing or 
matching requirement.
    (c) Replacement equipment. To calculate the Federal share of 
replacement equipment the following procedures shall be followed:
    (1) Step 1: Determine the Federal share (percentage) of the 
equipment replaced.
    (2) Step 2: Determine the percentage of the replacement equipment's 
costs that was covered by the amount received for trade-in or the sale 
proceeds from the equipment replaced.

[[Page 85]]

    (3) Step 3: Multiply the step 1 percentage by the step 2 percentage.
    (4) Step 4: If an additional outlay for the replacement equipment 
was charged as a direct cost either to USDA grant funds or to required 
cost-sharing or matching funds, calculate the Federal share attributable 
to that additional outlay as explained in paragraph (b)(2) of this 
section. Add that additional percentage to the step 3 percentage.



Sec. 3015.173  Using or returning the Federal share.

    (a) This section applies when, under Sec. 3015.163, 3015.168 or 
3015.170, the Federal government has a right to an amount of money upon 
disposal or loss, theft, or damage of property.
    (b) If the recipient's project or program for which the property was 
acquired is still receiving grant support from the same Federal program, 
the awarding agency may authorize use of the net money due for allowable 
costs of that project or program.
    (c) Otherwise, the net amount must be returned to the awarding 
agency by check or money order.



Sec. 3015.174  Subrecipient's share.

    Where this subpart requires a sharing of the market value or sale 
proceeds of property acquired under a subgrant, the non-Federal share 
shall be proportionally divided between the recipient and the 
subrecipient. The subrecipient shall be entitled to the amount it would 
have received or retained if the award to it had been made directly by 
the Federal government. The remainder of the non-Federal share shall 
belong to the recipient.



Sec. 3015.175  Intangible personal property.

    (a) Inventions and Patents. (1) If the recipient is a small business 
or nonprofit organization (including universities and other institutions 
of higher education), the allocation of rights in inventions produced 
under a grant or cooperative agreement shall be determined in accordance 
with the provisions of sections 200 through 206 of Pub. L. 96-517 (35 
U.S.C. 200-206) and OMB Circular A-124.
    (2) For all other recipients, the allocation of rights in inventions 
shall be determined in accordance with the ``Government Patent Policy'' 
(President's Memorandum for Heads of Executive Departments and Agencies, 
February 18, 1983) and OMB Circular A-124.
    (b) Copyrights--(1) Applicability. This section applies to the 
copyright in any original work of authorship prepared with grant 
support. Additionally, if ownership of a copyright or of any of the 
exclusive rights comprising a copyright are purchased with grant 
support, this section applies to the purchased copyright or rights.
    (2) Basic rules. (i) USDA reserves a royalty-free, nonexclusive, and 
irrevocable license to exercise, and to authorize others to exercise, 
the rights for Federal Government purposes. Subject to this license, the 
owner is free to exercise, preserve, or transfer all its rights. The 
recipient shall ensure that no agreement is entered into for 
transferring the rights which would conflict with the nonexclusive 
license of USDA.
    (ii) One way that USDA may exercise its nonexclusive license is to 
authorize exercise of the rights in another project or activity that 
receives or has received grant support from the Federal Government.
    (iii) A recipient awarding a subgrant is allowed to impose subgrant 
terms reserving a nonexclusive license for itself, similar to the one 
reserved by this section for USDA, with respect to any copyright or 
rights subject to this section that arise under the subgrant.

[48 FR 35875, Aug. 8, 1983]



                         Subpart S--Procurement



Sec. 3015.180  Scope and applicability.

    (a) This subpart contains information for complying with Attachment 
0, ``Procurement Standards'', of OMB Circulars A-102 and A-110. Circular 
A-102 covers grant and cooperative agreement programs with State and 
local governments and Indian Tribal governments. Circular A-110 covers 
grant and cooperative agreement programs with institutions of higher 
education, hospitals, and other nonprofit organizations. Copies of both 
Circulars may be obtained from O&F.

[[Page 86]]

    (b) This subpart applies to recipient procurements (by purchase, 
rental, or barter) of supplies, equipment, and services (including 
construction).
    (c) This subpart applies only to procurements that are supported in 
whole or in part by a grant or cooperative agreement.
    (d) This subpart does not apply to procurements of land, existing 
land improvements or structures, or any other existing real property.
    (e) The Attachment 0 of Circulars A-102 and A-110 apply to 
procurements under subgrants as well as grants.



Sec. 3015.181  Standards of conduct.

    (a) Recipients shall maintain a written code or standards of conduct 
governing the performance of their officers, employees or agents engaged 
in awarding and administering contracts supported by Federal funds:
    (1) No employee, officer or agent shall participate in the 
selection, award, or administration of contracts using Federal funds 
where to his knowledge, such employee, officer or agent or his immediate 
family, partners or organizations has a financial interest in, is 
negotiating with, or has any arrangements concerning prospective 
employment with the proposed contractor.
    (2) The recipient's officers, employees or agents shall neither 
solicit nor accept gratuities, favors, or anything of monetary value 
from contractors or proposed contractors.
    (3) Provisions shall be made for disciplinary actions against the 
recipient's officers, employees, or agents or by contractors or their 
agents violating the standards of conduct.
    (b) Awarding agencies may review the written standards of conduct to 
determine if they meet the minimum standards of Attachment 0 of OMB 
Circulars A-110 and A-102. Recipients will be notified of deficiencies 
and make corrective action.



Sec. 3015.182  Open and free competition.

    All procurement transactions, regardless of whether by sealed bids 
or by negotiation and without regard to dollar value shall be conducted 
in a manner that provides maximum open and free competition.



Sec. 3015.183  Access to contractor records.

    The Attachment 0 requires recipients to include in specified kinds 
of contracts a provision for access to the contractor's records by the 
recipient and the Federal government. The following applies to the 
provision:
    (a) The provision must require the contractor to place the same 
provision in any subcontract which would have to have the provision were 
it awarded by the recipient.
    (b) The provision must require retention of records for three years 
after final payment is made under the contract or subcontract and all 
pending matters are closed. The provision must also require that, if any 
audit, litigation, or other action involving the records is started 
before the end of the three year period, the records must be retained 
until all issues arising out of the action are resolved or until the end 
of the three year period, whichever is later.
    (c) In contracts and subcontracts under a subgrant, the provision 
must require that access to the records be provided to the recipient as 
well as the subrecipient and the Federal government.



Sec. 3015.184  Equal employment opportunity.

    (a) The Attachment 0 requires recipients to include in contracts in 
excess of $10,000 a provision requiring compliance with Executive Order 
11246, concerning equal employment opportunity as amended by Executive 
Order 11375, and as supplemented in Department of Labor regulations (41 
CFR Chapter 60).
    (b) If construction is to be assisted by a grant or subgrant, the 
Executive Order and the Department of Labor supplementing regulations 
apply, unless an exemption is granted by or under those regulations. 
Recipients shall observe all applicable requirements of the Order and 
regulations and include in their nonexempt construction contracts the 
specific clauses prescribed by 41 CFR 60-1.4(b) and, if applicable, 41 
CFR 60-4.3.

[[Page 87]]



                       Subpart T--Cost Principles



Sec. 3015.190  Scope.

    This subpart makes the allowable costs incurred by the recipient the 
maximum amount of money a recipient is entitled to receive from USDA. In 
addition, this subpart identifies the principles to be used in 
determining allowable costs. These cost principles shall apply to 
transactions and activities conducted under grants, subgrants, 
cooperative agreements, cost-type contracts and cost-type subcontracts 
under grants.
    (a) Allowable costs. Grant funds may be used only for allowable 
costs of the activities for which the grant was awarded. This means that 
the total amount of money that the recipient is entitled to receive from 
USDA may not exceed the allowable costs incurred by the recipient for 
those activities.
    (b) The following rules apply in computing maximum allowable costs:
    (1) Third party in-kind contributions. Because they are not 
allowable costs of the party that receives them, the value of third 
party in-kind contributions received may not be included in determining 
maximum allowable costs. However, as provided in Subpart G of this part, 
third party in-kind contributions may count towards satisfying a cost-
sharing or matching requirement of the Federal grant.
    (2) Costs supported by another grant. Allowable costs incurred by 
the recipient and supported by another Federal grant (or by a non-
Federal grant) awarded to the recipient may not be included in 
determining maximum allowable costs. The basic intent of this rule is to 
prevent double compensation. It does not, however, prevent proration of 
costs that are allowable under two or more awards.
    (3) Costs used to match another Federal grant. A cost that the 
recipient uses to meet a cost-sharing or matching requirement of one 
Federal grant may not count towards determining maximum allowable costs 
under another Federal grant, unless specifically authorized by a Federal 
statute.
    (4) Costs supported by general program income. A grant may not pay 
for a cost which is supported by general program income earned by the 
recipient or by a subrecipient under the grant. Therefore, these costs 
may not be included in determining maximum allowable costs.
    (5) Use of money due Federal government. In accordance with 
Sec. 3015.173, an awarding agency, under certain circumstances, may 
authorize a recipient to use certain money due the Federal government 
for allowable costs of the project or programs, instead of returning the 
money to the Federal Government. Costs supported by the money may not be 
included as part of the maximum allowable costs charged to USDA.
    (6) Subgrant and contract costs. The recipient's allowable costs 
include allowable outlays, if any, to its subrecipients and contractors. 
If the recipient pays a subrecipient more than the allowable costs 
incurred by the subrecipient, the excess is not an allowable cost of the 
recipient and may not be included as part of the maximum allowable costs 
charged to USDA. However, for cost-type contracts a reasonable fee or 
profit paid by the recipient to the contractor, in addition to the 
contractor's allowable costs, may be included in this maximum unless 
prohibited by the provisions of the grant award.



Sec. 3015.191  Governments.

    (a) OMB Circular No. A-87, and any subsequent amendments to this 
Circular published in the Federal Register by OMB, shall be used in 
determining the allowable costs of activities conducted by governments.
    (b) Additional amendments to the Circular, unless otherwise 
prescribed by OMB, shall go into effect at the start of a government's 
first fiscal year following the amendment's publication in the Federal 
Register.



Sec. 3015.192  Institutions of higher education.

    (a) OMB Circular No. A-21, including any amendments to the Circular 
published in the Federal Register by OMB, shall be used in determining 
the allowable costs of activities conducted by institutions of higher 
education (other than for-profit institutions).
    (b) Additional amendments to the Circular, unless otherwise 
prescribed by OMB, shall go into effect at the start of an institution's 
first fiscal

[[Page 88]]

year following the amendment's publication in the Federal Register.



Sec. 3015.193  Other non-profit organizations.

    (a) OMB Circular No. A-122, including any subsequent amendments to 
the Circulars published in the Federal Register by OMB, shall be used in 
determining the allowable costs of activities conducted by nonprofit 
organizations under grants, cooperative agreements, cost reimbursement 
contracts, and other contracts in which costs are used in pricing, 
administration, or settlement. It does not apply to colleges or 
universities which are covered by Circular A-21; State, local and 
federally recognized Indian Tribal governments which are covered by 
Circular A-87, or hospitals.
    (b) Future amendments to the Circular, unless otherwise prescribed 
by OMB, shall go into effect at the time the initial award is made to 
the recipient.



Sec. 3015.194  For-profit organizations.

    The principles to be used when determining the allowable costs of 
activities conducted by for-profit organizations are contained in the 
Federal Acquisition Regulation at 48 CFR Subpart 31.2. Exception: 
Independent research and development costs including any indirect costs 
allocable to them are unallowable. Independent research and development 
are defined in the Federal Acquisition Regulation at 48 CFR 31.205-18.

[60 FR 44124, Aug. 24, 1995]



Sec. 3015.195  Subgrants and cost-type contracts.

    USDA cost principles applicable to a cost-type contractor or a 
subrecipient will not necessarily be the same as those applicable to the 
recipient. For example, where a State government awards a subrecipient 
or cost-type contract to an institution of higher education, OMB 
Circular A-21 would apply to the costs incurred by the institution of 
higher education even though OMB Circular A-87 would apply to the costs 
incurred by the State.



Sec. 3015.196  Costs allowable with approval.

    Each set of cost principles specifically identifies certain costs 
that, in order to be allowable, must be approved by the awarding agency. 
Other costs do not require approval. The following procedures govern 
approval of these costs:
    (a) When costs are allocated in accordance with a government-wide 
cost allocation plan or when treated as indirect costs, acceptance of 
the costs as part of the indirect cost rate or cost allocation plan 
shall constitute approval.
    (b)(1) All direct costs must be approved in advance by the awarding 
agency.
    (2) When costs are specified in the budget, approval of the budget 
shall constitute approval of the cost.
    (3) Specific prior approval in writing from the awarding agency is 
required if the costs are not specified in the budget, or if there is no 
approved budget. For this purpose the prior approval procedures of 
Subpart M shall be followed, except that, for formula or mandatory 
grants, the awarding agency's written approval may be signed by any 
authorized official of the awarding agency.
    (c) The awarding agency may waive or conditionally waive the 
requirement for its approval of the costs. A waiver, as such, shall be 
applicable only to the requirement for approval. If it is determined, by 
audit or otherwise, that the costs do not meet other requirements or 
tests for allowability specified by the applicable cost principles, such 
as reasonableness and necessity, the costs may be disallowed.
    (d) In the case of subgrants and cost-type contracts, no approval 
shall be given which is inconsistent with the purpose or the provisions 
of the Federal grant.



                        Subpart U--Miscellaneous



Sec. 3015.200  Acknowledgement of support on publications and audiovisuals.

    (a) Definitions. Appendix A defines ``audiovisual,'' ``production of 
an audiovisual,'' and ``publication.''

[[Page 89]]

    (b) Publications. Recipients shall have an acknowledgement of 
awarding agency support placed on any publications written or published 
with grant support and, if feasible, on any publication reporting the 
results of, or describing, a grant-supported activity.
    (c) Audiovisuals. Recipients shall have an acknowledgement of 
awarding agency support placed on any audiovisual which is produced with 
grant support and which has a direct production cost to the recipient of 
over $5,000. Unless the other provisions of the grant award make it 
apply, this requirement does not apply to:
    (1) Audiovisuals produced under mandatory or formula grants or under 
subgrants.
    (2) Audiovisuals produced as research instruments or for documenting 
experimentation or findings and not intended for presentation or 
distribution to the general public.
    (d) Waivers. Awarding agencies may waive any requirement of this 
section.



Sec. 3015.201  Use of consultants.

    (a) Definition. Appendix A defines ``consultant.''
    (b) Applicability. This section applies only to the use of 
consultants whose fees are supported by a grant, subgrant, or cost-type 
contract.
    (c) Basic policy--(1) Prior approval. Awarding agencies shall not 
require prior approval for the use of consultants.
    (2) Exceptions. (i) In unusual cases, using a consultant may 
constitute a transfer of substantive programmatic work, which requires 
prior approval under discretionary grants.
    (ii) Consulting fees paid by an organization to its own employees 
require prior approval.
    (d) Use of an organization's own employees--(1) Faculty members of 
education institutions. Charges representing extra compensation (above 
base salary) paid by an educational institution to a salaried member of 
its faculty for consulting work are allowable only in unusual cases, and 
only if both of the following conditions exist:
    (i) The consultation is across departmental lines or involves a 
separate or remote operation; and
    (ii) The work performed by the consultant is in addition to his or 
her regular departmental load.
    (2) All other cases. In all other cases, consulting fees paid in 
addition to salary by recipients or cost-type contractors to people who 
are also their employees may be supported by a grant, subgrant, or cost-
type contract only in unusual cases, and only if all of the following 
three conditions exist:
    (i) The policies of the recipient or contractor permit such 
consulting fee payments to its own employees regardless of whether 
Federal grant funds are involved;
    (ii) The work involved is clearly outside the scope of the person's 
salaried employment; and
    (iii) It would be inappropriate or not feasible to compensate for 
the additional work by paying additional salary to the employee.
    (3) Requirement for approval. Consulting fees paid under this 
section must have a specific prior approval in writing from the Head of 
the recipient or contractor or from his or her designated 
representative. If the recipient or contractor is a government, the 
approval may be given by the Head (or a designated representative of the 
Head) of the government agency which is primarily responsible for 
administering or carrying out the project or program. If the designated 
representative is personally involved in the project or program under 
consideration, the approval may be given only by the Head. If the Head 
is personally involved in the project or program under consideration, 
prior approval from the awarding agency is required. Such prior approval 
must include a determination that the applicable requirements in 
paragraph (d) (1) or (2) of this section are present.
    (e) Documentation standards. (1) Charges for consulting payments 
must be supported in the records of the recipient or cost-type 
contractor by an invoice from the consultant and a copy of the written 
report (if a report is appropriate) or other documented evidence of the 
work performed from the consultant.
    (2) If any of the following information is not shown on the invoice 
and/or

[[Page 90]]

report from the consultant, the information must be shown in a 
memorandum or other document prepared by the recipient or contractor for 
its files, or noted in handwriting on the consultant's invoice by the 
recipient or contractor. The memorandum, other document, or handwritten 
notation must be signed by an official of the recipient or contractor 
and show:
    (i) The name of the consultant;
    (ii) The nature of the services provided (such as statistical 
analysis of data, participation on project advisory committee, or 
specified medical services to eligible beneficiaries);
    (iii) The relevance of the services to the project or program, if 
not apparent from the nature of the services; and
    (iv) Whichever of the following is applicable:
    (A) (If the fee was based on a rate per day or hours worked) the 
rate and the dates and/or hours worked;
    (B) (If the fee was based on a rate per unit of service provided, 
such as the number of patients examined by a physician) the rate, the 
number of units of service provided, and the beginning and ending dates 
of the overall period of service; or
    (C) (If the fee was determined on some other basis) the basis for 
determining the fee and the beginning and ending dates of the period in 
which services were provided.



Sec. 3015.202  Limits on total payments to the recipient.

    (a) This section summarizes the four most widely applicable limits 
on the total amount of money the recipient is entitled to receive from 
USDA as a result of a grant. It is permissible for the terms of a grant 
to provide one or more additional limits.
    (b) For each grant, the lowest of the applicable limits is the one 
that governs the final settlement upon expiration or termination of the 
grant.
    (c) The following two limits apply to every grant:
    (1) The amount of Federal funds authorized.
    (2) The Federal share of the allowable costs incurred by the 
recipient.
    (d) Grants that require a specified percentage of cost-sharing or 
matching are subject to the limit described in Subpart G.
    (e) For each budget period of an incrementally funded discretionary 
grant, the Federal share of that period's approved budget is a limit.



Sec. 3015.203  [Reserved]



Sec. 3015.204  Federal Register publications.

    (a) Program regulations. Most grant programs have program-specific 
regulations, which are published in the Federal Register and codified in 
the Code of Federal Regulations. In some cases the program-specific 
regulations are promulgated in the form of agency directives or manuals 
which may be obtained from the awarding agency.
    (b) Program announcements. For each program, the awarding agency may 
publish in the Federal Register one or more program announcements. 
Program announcements invite applications for one or more stated program 
objectives. They include at least the following information:
    (1) An estimate of how much money will be available for competing 
awards, and the expected size of the awards, broken down by subprogram 
or priority area when appropriate;
    (2) Who is eligible;
    (3) How to obtain application kits;
    (4) Where to submit applications; and
    (5) The deadline for submitting applications.
    (c) Cooperative agreements. If any or all of the awards are likely 
to be cooperative agreements rather than grants, the program 
announcement so states. In that case, if feasible, the program 
announcement also describes the anticipated substantial Federal 
involvement in performance. (This paragraph does not prevent the award 
of cooperative agreements under a program announcement that mentioned 
only grants. Nor does it prevent the award of grants under a program 
announcement that mentioned only cooperative agreements.)
    (d) Evaluation criteria. The awarding agency publishes its criteria 
for evaluating grant applications either in the program regulations or 
the program announcement. If the criteria are not all equal in 
importance, their relative

[[Page 91]]

weights are also published. The criteria cover at least the following 
factors (except where the nature of the eligible projects makes one or 
more of these factors irrelevant):
    (1) How well qualified the project's personnel will be;
    (2) The adequacy of the applicant's facilities and resources;
    (3) The adequacy of the project plan or methodology;
    (4) The cost-effectiveness of the project; and
    (5) How closely the project objectives fit the objectives for which 
applications were invited.
    (e) Funding priorities. If the awarding agency will give priority to 
one or more particular kinds of projects, the priority (and how it will 
be applied in deciding which applications to fund) is described in the 
program announcement.
    (f) Competing continuations vs. ``new'' projects. If the awarding 
agency will give a preference to competing continuation applications 
over applications for projects not already receiving support under the 
program, or vice versa, the preference is described in the program 
announcement.
    (g) Programs with few potential applicants. In some programs the 
number of potential applicants is relatively small. (For example, in 
some programs only the States are eligible.) In these situations the 
awarding agency may send a copy of the program announcement directly to 
every potential applicant instead of publishing it in the Federal 
Register.
    (h) Register--Other information which is available. In addition to 
the items specified above, each awarding Agency makes available to the 
public the following information and materials for each program:
    (1) A copy of, or reference to, the authorizing statutes for the 
program;
    (2) All guidelines of general applicability for administration of 
the program;
    (3) A description of the procedures the awarding agency will use for 
evaluating applications; and
    (4) Any other information that the awarding agency believes will be 
helpful.
    (i) Consulting with applicants. Each awarding agency publishes as 
much information as practicable to reduce the need for consultation by 
applicants. If the awarding agency does provide consultation, its staff 
members try to give consistent interpretations and fair treatment to all 
requestors.



Sec. 3015.205  General provisions for grants and cooperative agreements with institutions of higher education, other nonprofit organizations, and hospitals.

    (a) Scope. This section sets forth general provisions which apply, 
in whole or in part, to grants and cooperative agreements awarded by 
USDA to institutions of higher education, other nonprofit organizations, 
and hospitals. (General provisions applicable to grants and cooperative 
agreements with State and local governments are set forth in the Office 
of Management and Budget (OMB) Circular A-102, Attachment M and are made 
a condition of each grant or cooperative agreement awarded to such 
recipients). Any statutory provisions that apply to the particular 
agreement at hand, that are not included herein, shall be made a part of 
the award document. All administrative requirements contained in 
subparts A through U of 7 CFR part 3015 shall apply, as appropriate.
    (b) Assurances and compliance. It shall be a condition of every USDA 
grant or cooperative agreement awarded to institutions of higher 
education, other nonprofit organizations and hospitals that the 
recipient assure and certify compliance with the following general 
requirements to the extent applicable:
    (1) It will comply with the following provisions regarding the 
rights and welfare of human subjects:
    (i) The recipient organization is responsible for safeguarding the 
rights and welfare of any human subjects involved in research, 
development, and related activities supported by this agreement. The 
recipient organization may conduct research involving human subjects 
only as described in the proposal and as approved by the recipient 
organization's cognizant Institutional Review Board. Prior to conducting 
such research, the recipient organization shall obtain and document a 
legally sufficient informed consent from

[[Page 92]]

each human subject involved. No such informed consent shall include any 
exculpatory language through which the subject is made to waiver, or to 
appear to waiver, any of his or her legal rights, including any release 
of the recipient organization or its agents from liability for 
negligence.
    (ii) The recipient organization agrees to comply with U.S. 
Department of Health and Human Services' regulations regarding human 
subjects, appearing in 45 CFR part 46 (as amended).
    (iii) It will comply with USDA policy which is to assure that the 
risks do not outweigh either potential benefits to the subjects or the 
expected value of the knowledge sought.
    (iv) Selection of subjects or groups of subjects shall be made 
without regard to sex, race, color, religion, or national origin unless 
these characteristics are factors to be studied.
    (2) It will comply with the Animal Welfare Act, as amended, 7 U.S.C. 
2131, et seq., and the regulations promulgated thereunder by the 
Secretary of Agriculture (9 CFR, Subchapter A) pertaining to the care, 
handling, and treatment of warm-blooded animals held or used for 
research, teaching, or other activities supported by Federal funds. 
Recipient organizations may request registration of facilities and a 
current listing of licensed dealers from the Regional Office of the 
Animal and Plant Health Inspection Service (APHIS), USDA, for the Region 
in which their facility is located. The location of the appropriate 
APHIS Regional Office, as well as information concerning this 
requirement, may be obtained by contacting the Senior Staff Officer, 
Animal Care Staff, USDA/APHIS, Federal Center Building, Hyattsville, 
Maryland 20782.
    (3) It will assume primary responsibility for implementing proper 
conduct or recombinant DNA research and it will comply with the national 
Institute of Health Guidelines for Recombinant DNA Research, as revised.
    (4) It will comply with Section 5 of the International Air 
Transportation Fair Competitive Practices Act of 1974, 49 U.S.C. 1517, 
which requires:
    (i) Any air transportation to, from, between, or within a country, 
other than the U.S., of persons or property, the expense of which will 
be assisted by USDA funding, to be performed on a U.S.-flag carrier if 
service provided by such carrier is ``available.''
    (ii) For the purposes of this requirement:
    (A) Passenger or freight service by a certificated air carrier is 
considered ``available'' even though:
    (1) Comparable or a different kind of service by a noncertificated 
air carrier costs less; or
    (2) Service by a noncertificated air carrier can be paid for in 
excess foreign currency; or
    (3) Service by a noncertificated air carrier is preferred by the 
recipient organization contractor or traveler needing air 
transportation.
    (B) Passenger service by a certificated air carrier is considered to 
be ``unavailable'':
    (1) When the traveler, while enroute, has to wait six hours or more 
for an available U.S. carrier; or
    (2) When any flight by a U.S. carrier interrupted by a stop 
anticipated to be six hours or more for refueling, reloading repairs, 
etc., and no other flight by a U.S. carrier is available during the six-
hour period; or
    (3) When the flight by a U.S. carrier takes 12 or more hours longer 
than a foreign carrier.
    (5) It possesses legal authority to enter into the agreement; that a 
resolution, motion or similar action has been duly adopted or passed as 
an official act of its governing body, authorizing the acceptance of the 
agreement including all understandings and assurances contained therein 
and directing and authorizing the person identified as the official 
representative of the recipient organization to act in connection with 
the agreement and to provide such additional information as may be 
required.
    (6) It will comply with Title VI of the Civil Rights Act of 1964, 42 
U.S.C. 2000d, and in accordance with Title VI of that Act, no person in 
the United States shall, on the ground of race, color, or national 
origin, be excluded from participation in, be denied the benefits of, or 
be otherwise subjected to discrimination under any program or activity

[[Page 93]]

for which the recipient receives Federal financial assistance and will 
immediately take any measures necessary to effectuate this agreement.
    (7) It will establish safeguards to prohibit employees from using 
their positions for a purpose that is or gives the appearance of being 
motivated by a desire for private gain for themselves or others, 
particularly those with whom they have family, business, or other ties.
    (8) It will give USDA, the awarding agency or the Comptroller 
General, through any authorized representative, access to and the right 
to examine all records, books, papers or documents related to the award.
    (9) It will comply with all requirements imposed by the awarding 
agency concerning special requirements of law, program requirements, and 
other administrative requirements.
    (10) It will insure that the facilities under its ownership, lease 
or supervision which shall be utilized in the accomplishment of the 
project are not listed on the Environmental Protection Agency's (EPA) 
list of violating facilities and that it will notify the awarding agency 
of the receipt of any communication from the Director of the EPA, Office 
of Federal Activities, indicating that a facility to be utilized in the 
project is under consideration for listing by the EPA.
    (11) It will comply with the flood insurance purchase requirements 
of the National Flood Insurance Act of 1968, as amended, and the Flood 
Disaster Protection Act of 1973, 42 U.S.C. 4001-4127. Section 102(a) 
requires, on and after March 2, 1975, the purchase of flood insurance in 
communities where such insurance is available as a condition for 
construction or acquisition purposes for use in any area that has been 
identified by the Secretary of the Department of Housing and Urban 
Development as an area having special flood hazards.
    (12) It will assist the awarding agency in its compliance with 
Section 106 of the National Historic Preservation Act of 1966, 16 U.S.C. 
470, Executive Order 11593, and the Archaeological and Historic 
Preservation Act of 1974, 16 U.S.C. 496a-1, et. seq., by (i) consulting 
with the State Historic Preservation Officer on the conduct of 
investigations, as necessary, to identify properties listed in or 
eligible for inclusion in the National Register of Historic Places that 
are subject to adverse effects (see 36 CFR 800.8) by the activity, and 
notifying the awarding agency of the existence of any such properties, 
and by (ii) complying with all requirements established by the awarding 
agency to avoid or mitigate adverse effects upon such properties.
    (13) It will comply with Title IX of the Education Amendments of 
1972, 20 U.S.C. 1681, et. seq., which prohibits discrimination on the 
basis of sex in Federally assisted education programs.
    (14) It will comply with Section 504 of the Rehabilitation Act of 
1973, as amended, 29 U.S.C. 794. Section 504 provides that no otherwise 
qualified handicapped individual shall solely by reason of his handicap, 
be excluded from the participation in, be denied the benefits of, or be 
subjected to discrimination under any program or activity receiving 
Federal financial assistance.
    (15) It will comply with the Age Discrimination Act of 1975, 42 
U.S.C. 6101-6107, which prohibits unreasonable discrimination based on 
age, in programs or activities receiving Federal financial assistance.
    (16) It is in compliance with the Clean Air Act of 1970, 42 U.S.C. 
7401 et seq., which requires federally assisted activities to be in 
conformance with State (Clean Air) Implementation Plan.
    (17) It will establish safeguards to ensure that USDA funds are 
properly spent. In particular, except nonprofit organizations which are 
subject to the lobbying provisions of paragraph B.21. of OMB Circular A-
122, it will assure that funds are not used for partisan or political 
activity purposes.
    (c) USDA awarding agencies shall obtain the required assurances and 
certifications by including the following clause in each grant or 
cooperative agreement awarded to institutions of higher education, other 
nonprofit organizations and hospitals:

    As a condition of this grant or cooperative agreement, the recipient 
assures and certifies that it is in compliance with and will comply in 
the course of the agreement with all applicable laws, regulations, 
Executive

[[Page 94]]

Orders and other generally applicable requirements, including those set 
out in 7 CFR 3015.205(b), which hereby are incorporated in this 
agreement by reference, and such other statutory provisions as are 
specifically set forth herein.

[48 FR 27222, June 14, 1983, as amended at 49 FR 38534, Oct. 1, 1984]



    Subpart V--Intergovernmental Review of Department of Agriculture 
                         Programs and Activities

    Authority: E. O. 12372, July 14, 1982 (47 FR 30959), as amended Apr. 
8, 1983 (48 FR 15887): Sec. 401 of the Intergovernmental Cooperation Act 
of 1968, as amended (31 U.S.C. 6506); sec. 204 of the Demonstration 
Cities and Metropolitan Development Act of 1966, as amended (42 U.S.C. 
3334).

    Source: 48 FR 29112, June 24, 1983, unless otherwise noted.



Sec. 3015.300  Purpose.

    (a) The regulations in this part implement Executive Order 12372, 
``Intergovernmental Review of Federal Programs'', issued July 14, 1982, 
and amended on April 8, 1983. These regulations also implement 
applicable provisions of section 401 of the Intergovernmental 
Cooperation Act of 1968 and section 204 of the Demonstration Cities and 
Metropolitan Development Act of 1966.
    (b) These regulations are intended to foster an intergovernmental 
partnership and a strengthened Federalism by relying on State processes 
and on State, arewide, regional and local coordination for review of 
proposed Federal financial assistance and direct Federal development.
    (c) The regulations are intended to aid the internal management of 
the Department, and are not intended to create any right or benefit 
enforceable at law by a party against the Department or its officers.



Sec. 3015.301  Definitions.

    Department means the U.S. Department of Agriculture.
    Order means Executive Order 12372, issued July 14, 1982, and amended 
April 8, 1983, and titled Intergovernmental Review of Federal Programs.
    Secretary means the Secretary of the U.S. Department of Agriculture 
or an official or employee of the Department acting for the Secretary 
under a delegation of authority.
    State means any of the 50 states, the District of Columbia, the 
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana 
Islands, Guam, American Samoa, the U.S. Virgin Island, or the Trust 
Territory of the Pacific Islands.



Sec. 3015.302  Applicability.

    The Secretary publishes in the Federal Register a list of the 
Department's programs and activities that are subject to these 
regulations and identifies which of these are subject to the 
requirements of section 204 of the Demonstration Cities and Metropolitan 
Development Act.



Sec. 3015.303  Secretary's general responsibilities.

    (a) The Secretary provides opportunities for consultation by elected 
officials of those State and local governments that would provide the 
non-Federal funds for, or that would be directly affected by, proposed 
Federal financial assistance from, or direct Federal development by, the 
Department.
    (b) If a State adopts a process under the Order to review and 
coordinate proposed Federal financial assistance and direct Federal 
development, the Secretary, to the extent permitted by law:
    (1) Uses the State process to determine official views of State and 
local elected officials;
    (2) Communicates with State and local elected officials as early in 
a program planning cycle as is reasonably feasible to explain specific 
plans and actions;
    (3) Makes efforts to accommodate State and local elected officials' 
concerns with proposed Federal financial assistance and direct Federal 
development that are communicated through the State process;
    (4) Allows the States to simplify and consolidate existing Federally 
required State plan submissions;
    (5) Where State planning and budgeting systems are sufficient and 
where

[[Page 95]]

permitted by law, encourages the substitution of State plans for 
Federally required State plans;
    (6) Seeks the coordination of views of affected State and local 
elected officials in one State with those of another State when proposed 
Federal financial assistance or direct Federal development has an impact 
on interstate metropolitan urban centers or other interstate areas; and
    (7) Supports State and local governments by discouraging the 
reauthorization or creation of any planning organization which is 
Federally-funded, which has a limited purpose, and which is not 
adequately representative of, or accountable to, State or local elected 
officials.



Sec. 3015.304  Federal interagency coordination.

    The Secretary, to the extent practicable, consults with and seeks 
advice from all other substantially affected Federal departments and 
agencies in an effort to assure full coordination between such agencies 
and the Department regarding programs and activities covered under these 
regulations.



Sec. 3015.305  State selection of programs and activities.

    (a) A State may select any program or activity published in the 
Federal Register in accordance with Sec. 3015.302 of this subpart for 
intergovernmental review under these regulations. Each State, before 
selecting programs and activities, shall consult with local elected 
officials.
    (b) Each State that adopts a process shall notify the secretary of 
the Department's programs and activities selected for that process.
    (c) A State may notify the Secretary of changes in its selections at 
any time. For each change, the State shall submit to the Secretary an 
assurance that the State has consulted with elected local officials 
regarding the change. The Department may establish deadlines by which 
States are required to inform the Secretary of changes in their program 
selections.
    (d) The Secretary uses a State's process as soon as feasible, 
depending on individual programs and activities, after the Secretary is 
notified of its selections.



Sec. 3015.306  Communication with State and local elected officials.

    (a) The Secretary provides notice to directly affected State, 
areawide, regional, and local entities in a State of proposed Federal 
financial asssistance or direct Federal development if:
    (1) The State has not adopted a process under the Order; or
    (2) The assistance or development involves a program or an activity 
that is not covered under the State process.
    (b) This notice may be made by publication in the Federal Register 
or other appropriate means, which the Department in its discretion deems 
appropriate.
    (c) In order to facilitate communication with State and local 
officials the Secretary has established an office within the Department 
to receive all communications pertinent to this Order. All 
communications should be sent to the Office of Finance and Management, 
Room 143-W, Administration Building, Washington, DC 20250, Attention: 
E.O. 12372.



Sec. 3015.307  State comments on proposed Federal financial assistance and direct Federal development.

    (a) Except in unusual circumstances, the Secretary gives State 
processes or directly affected State, areawide, regional, and local 
officials and entities:
    (1) At least 30 days from the date established by the Secretary to 
comment on proposed Federal financial assistance in the form of 
noncompeting continuation awards; and
    (2) At least 60 days from the date established by the Secretary to 
comment on proposed direct Federal development or Federal financial 
assistance other than noncompeting continuation awards.
    (b) This section also applies to comments in cases in which the 
review, coordination and communication with the Department have been 
delegated.
    (c) Applicants for programs and activities subject to section 204 of 
the Demonstration Cities and Metropolitan Development Act shall allow 
areawide agencies a 60-day opportunity for review and comment.

[[Page 96]]



Sec. 3015.308  Processing comments.

    (a) The Secretary follows the procedures in Sec. 3015.309 if:
    (1) A State office or official is designated to act as a single 
point of contact between a State process and all Federal agencies; and
    (2) That office or official transmits a State process recommendation 
for a program selected under Sec. 3015.305.
    (b)(1) The single point of contact is not obligated to transmit 
comments form State, areawide, regional or local officials and entities 
where there is no State process recommendation.
    (2) If a State process recommendation is transmitted by a single 
point of contact, all comments from State, areawide, regional, and local 
officials and entities that differ from it must also be transmitted.
    (c) If a State has not established a process, or is unable to submit 
a State process recommendation, State, areawide, regional and local 
officials and entities may submit comments either to the applicant or to 
the Department.
    (d) If a program or activity is not selected by a State process, 
State, areawide, regional and local officials and entities may submit 
comments either to the applicant or to the Department. In addition, if a 
State process recommendation for a non-selected program or activity is 
transmitted to the Department by the single point of contact, the 
Secretary follows the procedures of Sec. 3015.309 of this subpart.
    (e) The Secretary considers comments which do not constitute a State 
process recommendation submitted under these regulations and for which 
the Secretary is not required to apply the procedures of Sec. 3015.309 
of this subpart, when such comments are provided by a single point of 
contact by the applicant, or directly to the Department by a commenting 
party.



Sec. 3015.309  Accommodation of intergovernmental concerns.

    (a) If a State process provides a State process recommendation to 
the Department through its single point of contact, the Secretary 
either--
    (1) Accepts the recommendations;
    (2) Reaches a mutually agreeable solution with the State process; or
    (3) Provides the single point of contact with a written explanation 
of the decision, as the Secretary in his or her discretion deems 
appropriate. The Secretary may also supplement the written explanation 
by also providing the explanation to the single point of contact by 
telephone, other telecommunication, or other means.
    (b) In any explanation under paragraph (a)(3) of this section, the 
Secretary informs the single point of contact that:
    (1) The Department will not implement its decision for at least ten 
days after the single point of contact receives the explanation; or
    (2) The Secretary has reviewed the decision and determined that, 
because of unusual circumstances, the waiting period of at least ten 
days is not feasible.
    (c) For purposes of computing the waiting period under paragraph 
(b)(1) of this section, a single point of contact is presumed to have 
received written notification five days after the date of mailing of 
such notification.



Sec. 3015.310  Interstate situations.

    (a) The Secretary is responsible for:
    (1) Identifying proposed Federal financial assistance and direct 
Federal development that have an impact on interstate areas;
    (2) Notifying appropriate officials in States which have adopted a 
process and which selected the Department's program or activity;
    (3) Making efforts to identify and notify the affected State, 
areawide, regional, and local officials and entities in those States 
that have not adopted a process under the Order or do not select the 
Department's program or activity; and
    (4) Responding, pursuant to Sec. 3015.309 of this subpart, if the 
Secretary receives a recommendation from a designated areawide agency 
transmitted by a single point of contact, in cases in which the review, 
coordination, and communication with the Department have been delegated.
    (b) The Secretary uses the procedures in Sec. 3015.309 if a State 
process provides a State process recommendation to the Department 
through a single point of contact.

[[Page 97]]



Sec. 3015.311  Simplification, consolidation, or substitution of State plans.

    (a) As used in this section:
    (1) Simplify means that a State may develop its own format, choose 
its own submission date, and select the planning period for a State 
plan.
    (2) Consolidate means that a State may meet statutory and regulatory 
requirements by combining two or more plans into one document and that 
the State can select the format, submission date, the planning period 
for the consolidated plan.
    (3) Substitute means that a State may use a plan or other document 
that it has developed for its own purposes to meet Federal requirements.
    (b) If not inconsistent with law, a State may decide to try to 
simplify, consolidate, or substitute Federally required State plans 
without prior approval by the Secretary.
    (c) The Secretary reviews each State plan a State has simplified, 
consolidated or substituted and accepts the plan only if its contents 
meet Federal requirements.



Sec. 3015.312  Waivers.

    In an emergency, the Secretary may waive any provision of these 
regulations.

                  Appendix A to Part 3015--Definitions

    Section I  ``Grant'' and ``Cooperative Agreement''

    (a) ``Grant'' unless qualified by ``non-Federal'' means an award by 
the Federal government of money, property instead of money, services, or 
anything of value, to the State or other recipient, with the following 
characteristics:
    (1) The principal purpose of the award is to accomplish a public 
purpose of support or stimulation authorized by Federal statute, rather 
than acquisition, by purchase, lease, or barter, of property or services 
for the direct benefit or use of the Federal government; and
    (2) At the time the award is made, no substantial involvement is 
anticipated between the executive agency, acting for the Federal 
government, and the State or local government or other recipient during 
performance of the contemplated activity.
    (b) ``Cooperative agreement'' has the same meaning as ``grant,'' 
except that, at the time a cooperative agreement is awarded, substantial 
involvement is anticipated between the executive agency, acting for the 
Federal government, and the State or local government or other recipient 
during performance of the contemplated activity.
    (c) ``Grants'' and ``cooperative agreements'' do not include 
technical assistance, which provides services instead of money; revenue 
sharing; loans; loan guarantees; capital contributions to loan funds; 
interest subsidies; insurance; or direct appropriations. (See the 
definition of ``Non-Federal grant'' in Section II of this appendix.)

    Section II  Other Definitions.

    ``Acquisition'' of property includes purchase, construction, or 
fabrication of property. It does not include rental of property or 
alterations and renovations of real property.
    ``Acquisition cost'' of an item of purchased equipment means the net 
invoice price of the equipment. It includes the cost of modifications, 
attachments, accessories, or auxiliary apparatus necessary to make the 
equipment useable for the purpose for which it was acquired. Other 
charges, such as the cost of installation, transportation, taxes, duty, 
or protective in-transit insurance shall be included in or excluded from 
the unit acquisition cost in accordance with the regular accounting 
practices of the organization purchasing the equipment.
    If an item of equipment is acquired by trading in another item and 
paying an additional amount, ``acquisition cost'' means the amount 
received for trade-in plus the additional outlay. (See the definition of 
``amount received for trade-in.'')
    For purposes of the rules on equipment and supplies, ``acquisition 
cost'' of a copy of a work of authorship (such as a book, print of a 
motion picture, or tape of a television program) refers to the cost of 
fabricating or purchasing the individual copy, considered as a material 
object. It does not include the cost of developing, or acquiring rights 
to, the work embodied in the copy.
    ``Advance by Treasury check'' is a payment made by a Treasury check 
to a recipient of a grant or cooperative agreement, before payments are 
made by the recipient of the grant or cooperative agreement. Advances by 
Treasury check are based on either a periodic request from the recipient 
or a predetermined payment schedule.
    ``Amount received for trade-in'' of an item of equipment traded in 
for replacement equipment means the amount that would have been paid for 
the replacement equipment without a trade-in, minus the amount paid with 
the trade-in. The term refers to the actual difference, not necessarily 
the trade-in value, shown on an invoice. For example, suppose that a 
recipient can buy a new machine for $5,000 in cash. The recipient 
actually buys this machine by trading in a used machine and paying 
$3,000 in cash. In this case, the amount received for trade-in

[[Page 98]]

would be $2,000 ($5,000 minus $3,000) regardless of the trade-in 
allowance shown on the invoice.
    ``Approved budget'' means a budget (including any revised budget) 
which has been approved in writing by the awarding agency. (See the 
definition of ``budget.'')
    ``Audiovisual'' means a product containing visual imagery or sound 
or both. Examples of audiovisuals are motion pictures, live or 
prerecorded radio or television programs, slide shows, filmstrips, audio 
recordings, and multimedia presentations.
    ``Awarding agency'' means (1) for grants and cooperative agreements, 
the USDA agency making the award, and (2) for subgrants, the recipient.
    ``Bid guarantee'' means a firm commitment such as a bid bond, 
certified check, or other negotiable instrument, accompanying a bid as 
assurance that the bidder will, if its bid is accepted, execute the 
required contractual documents within the time specified.
    ``Budget'' means the recipient's financial expenditure plan approved 
by the awarding agency to carry out the purposes of the Federally-
supported project. The budget is comprised of both the Federal share and 
any non-Federal share of such plan and any subsequent authorized 
rebudgeting of funds.
    For those programs that do not involve Federal approval of the non-
Federal share of costs, such as research grants, the term ``budget'' 
means the financial expenditure plan approved by the awarding agency 
including any subsequent authorized rebudgeting of funds, for the use of 
Federal funds only. Any expenditures charged to an approved budget 
consisting of Federal and non-Federal shares are deemed to be supported 
by the grant in the same proportion as the percentage of Federal/non-
Federal participation in the overall budget.
    ``Budget period'' means the period specified in the grant or 
cooperative agreement during which Federal funds awarded are authorized 
to be expended, obligated, or firmly committed by the recipient for the 
purposes specified in the agreement.
    ``Closeout'' of a grant or cooperative agreement means the process 
by which an awarding agency determines that all applicable 
administrative actions and all required work of the grant or cooperative 
agreement have been completed by the recipient and the awarding agency.
    ``Consultant'' means a person who gives advice or services for a 
fee, but not as an employee. The term includes guest speakers when not 
acting as employees of the party that engages them. Note that in unusual 
cases it is possible for a person to be both an employee and a 
consultant at the same time. (See Sec. 3015.201.)
    ``Contract'' means a procurement contract awarded under a grant, 
cooperative agreement, or subgrant; and ``subcontract'' means a 
procurement subcontract under such a contract. Procurement contracts and 
subcontracts are ones which place the parties in a buyer-seller 
relationship, regardless of the label used by the parties to describe 
the relationship (e.g., purchase-of-service agreement). The terms 
``contract'' and ``subcontract'' do not include any agreements between 
organizational components of the same legal entity, even if one of the 
components provides property or services to or for the other. (See 
definitions of ``subgrant,'' ``cost-type contract,'' and ``fixed price 
contract.'')
    ``Cost-sharing'' and ``matching'' each mean the value of third party 
in-kind contributions plus that portion of the allowable costs of 
recipients not supported by the Federal Government. (The terms ``cost-
sharing'' and ``matching,'' in this part, are synonymous.)
    ``Cost-type contract'' means a contract or subcontract in which the 
contractor or subcontractor is paid on the basis of the costs it incurs. 
The term includes cost-plus-fixed-fee contracts and subcontracts. 
(However, the term does not include any subcontracts under a ``fixed-
price contract.'')
    ``Discretionary'' grants and cooperative agreements are ones which a 
Federal statute authorizes but does not require USDA to award.
    ``Equipment'' means an article of tangible personal property that 
has a useful life of more than two years and acquisition cost of $500 or 
more. Any recipient may use its own definition of equipment if its 
definition would at least include all items of equipment as defined 
here.
    ``Expenditure report'' means (1) for nonconstruction awards, the 
``Financial Status Report'' (or other equivalent report); (2) for 
construction awards, the ``Outlay Report and Request for Reimbursement 
for Construction Programs'' (or other equivalent report).
    ``Federal funds authorized'' means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount is a limit on the total amount of money that the recipient is 
entitled to receive from the Federal Government as a result of the 
award. In addition to this limit, there are other limits. Refer to 
Sec. 3015.202 for a summary of these.
    ``Federally recognized Indian Tribal government'' means the 
governing body or a governmental agency of any Indian tribe, band, 
nation, or other organized group or community (including any Native 
village as defined in section 3 of the Alaska Native Claims Settlement 
Act, 85 Stat. 688) certified by the Secretary of the Interior as 
eligible for the special programs and services provided by him or her 
through the Bureau of Indian Affairs.
    ``Fidelity bond'' means a bond indemnifying the recipient against 
losses resulting

[[Page 99]]

from the fraud or lack of integrity, honesty or fidelity of one or more 
employees, officers or other persons holding a position of trust.
    ``Fixed-price contract'' means any contract except a cost-type 
contract. The term includes firm-fixed price contracts. It also includes 
contracts under which the contractor is paid at a fixed rate per unit of 
service or unit of labor time. (See the definitions of ``contract'' and 
``cost-type contract.'')
    ``General program income'' means all program income except the 
special categories treated in Secs. 3015.43 through 3015.46. The term 
``general program income'' is limited to amounts that accrue to a 
recipient of grant or cooperative agreement during the period of 
Federally assisted support, or to a subrecipient during the period of 
sub-award support.
    ``Local government'' means a local unit of government including 
specifically, a county, municipality, city, town, township, local public 
authority, school district, special district, intra-state district, 
council of governments (whether or not incorporated as a nonprofit 
corporation under State law), sponsor or sponsoring local organization 
of a watershed project (as defined in 7 CFR 620.2, 40 FR 12472, March 
19, 1974), any other regional or interstate government entity, or any 
agency or instrumentality of a local government.
    ``Mandatory'' or ``formula'' grants and cooperative agreements are 
ones which a Federal statute requires USDA to award if the applicant 
meets specified conditions.
    ``Non-Federal grant'' means an award of financial assistance in the 
form of money which includes no Federal funds, and for which the 
recipient must account to the donor on an actual cost basis. The term 
does not include any award that would be excluded from the definitions 
of ``grant'' and ``cooperative agreement'' if it were made by the 
Federal government.
    ``Obligations'' means the amounts of orders placed, contracts and 
subgrants awarded, services received, and similar transactions during a 
given period, which will require payment during the same or future 
period.
    ``O&F'' means the Office of Operations and Finance, which is an 
organizational component in USDA reporting to the Assistant Secretary 
for Administration.
    ``OMB'' means the Office of Management and Budget in the Executive 
Office of the President.
    ``Outlays'' means charges made to the grant project or program. 
Outlays may be reported on a cash or accrual basis.
    ``Payment bond'' means a bond executed in connection with a 
contract, to assure payment as required by law of all persons supplying 
labor and materials in the execution of the work provided in the 
contract.
    ``Percentage-of-completion method'' refers to a system under which 
payments are made for construction work according to the percentage of 
completion of the work, instead of the recipient's rate of 
disbursements.
    ``Performance bond'' means a bond executed in connection with a 
contract to secure fulfillment of all the contractor's obligations under 
the contract.
    ``Personal property'' means property of any kind except real 
property. It may be tangible--having physical existence, or intangible--
having no physical existence, such as patents, inventions, and 
copyrights.
    ``Production of an audiovisual'' means any of the steps that lead to 
a finished audiovisual, including design, layout, script-writing, 
filming, editing, fabrication, sound recording, or taping. The term does 
not include the placing of captions for the hearing impaired on films or 
videotapes not originally produced for use with the hearing impaired.
    ``Program income'' means gross income earned by a recipient from 
activities supported by a grant or cooperative agreement. (See 
definition of ``supported by a grant or cooperative agreement.'') It 
includes but is not limited to income in the form of fees for services 
performed during the life of the grant, cooperative agreement, or 
subgrant, proceeds from sale of tangible personal or real property, 
usage or rental fees, and patent or copyright royalties. If income meets 
this definition, it shall be considered program income regardless of the 
method used to calculate the amount paid to the recipient whether, for 
example, by a cost-reimbursement method or fixed price arrangement. Nor 
will the income's classification as program income be affected by the 
fact that the recipient earns it from a procurement contract awarded to 
the recipient (1) by the Federal government or (2) by another recipient 
acting under another Federal grant, cooperative agreement, or subgrant.

The following are not considered program income:
    (1) ``Revenues'' raised by a government recipient under its 
governing powers, such as taxes, special assessments, levies, and fines. 
(However, the receipt and expenditure of these revenues shall be 
recorded as a part of the transactions of the Federally-assisted project 
or program when the revenues are specifically earmarked for the project 
in accordance with the terms of the grant, cooperative agreement, or 
subgrant.)
    (2) Tuition and related fees received by an institution of higher 
education for a regularly offered course taught by an employee 
performing under a grant, cooperative agreement, or subgrant.
    (3) Income earned by contractors or subcontractors.
    (4) Internal reimbursements or transfers of funds between 
organizational components of the same legal entity (e.g., between 
agencies of the same government).
    (5) Third party in-kind contributions.

[[Page 100]]

    (6) Gifts or financial assistance from another source, such as (i) a 
non-Federal grant, (ii) another Federal grant, and (iii) charitable 
contributions (whether or not for a restricted purpose), and
    (7) Interest or other investment income earned from investing 
advances of Federal cash. (This kind of income is treated in 
Sec. 3015.46.)
    ``Project period'' means the total time for which the recipient's 
project or program is approved for support including any extensions. 
Project periods may consist of one or more budget periods.
    ``Publication'' means a published book, periodical, pamphlet, 
brochure, flier, or similar item. It does not include any audiovisuals.
    ``Real property'' means land, land improvements, structures, and 
things attached to them so as to become a part of them. Movable 
machinery and other kinds of equipment are not real property. If a 
question comes up about whether certain property should be classified as 
real property, the law of the State or foreign country in which the 
property is located governs.
    ``Recipient'' means a State or local government, Federally 
recognized Indian Tribe, university, non-profit, for profit, or other 
organization that is a recipient of grants or cooperative agreements 
from a USDA agency.
    ``Replacement equipment'' means property acquired to take the place 
of other equipment. To qualify as replacement equipment, it must serve 
the same function as the equipment replaced and must be of the same 
nature or character, although not necessarily the same model, grade, or 
quality.
    ``State'' means any of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory, 
possession, or trust territory of the United States, or any agency or 
instrumentality of a State. The term does not include local governments.
    ``Subgrant'' means an award of money, or property instead of money, 
which:
    (1) Is made under a grant or cooperative agreement by the recipient 
of the grant or cooperative agreement; and
    (2) Is made principally to accomplish a purpose of support of 
stimulation rather than to establish a buyer-seller relationship between 
the two parties.
    Any award which meets that definition is a subgrant even if the 
parties to the award use some other label such as ``grant,'' 
``agreement,'' ``cooperative agreement,'' ``contract,'' ``allotment,'' 
or ``delegation agreement.'' Also, if the award meets that definition, 
it is a subgrant whether or not the awarding agency is expected to be 
substantially involved in its performance. However, the term 
``subgrant'' does not include any type of assistance which is excluded 
from the definitions of ``grant'' and ``cooperative agreement'' by 
Section I(c) of this Appendix.
    ``Supplies'' means all tangible personal property other than 
equipment.
    ``Supported by a grant or cooperative agreement,'' as applied to a 
cost or an activity, means that the cost or the cost of the activity is 
entirely or partly (1) treated as a direct cost under a grant, 
cooperative agreement, subgrant, or cost-type contract, and (2) either 
supported by Federal funds or counted towards a Federal cost-sharing or 
matching requirement.
    ``Suspension'' of an award means temporary withdrawal of the 
recipient's authority to obligate the funds awarded pending corrective 
action by the recipient or a decision to terminate the award.
    ``Termination'' of an award means permanent withdrawal of the 
recipient's authority to obligate previously awarded funds before that 
authority would otherwise expire. It also means the voluntary 
relinquishment of that authority by the recipient.
    ``Termination'' does not include:
    (a) Withdrawal of the unobligated balance upon expiration of award;
    (b) Refusal by the awarding agency to extend an award or to award 
additional funds (such as refusal to make a competing or noncompeting 
continuation, renewal, extension, or supplemental award);
    (c) Annulment, i.e., voiding of an award upon determination that the 
award was obtained fraudulently or was otherwise illegal or invalid from 
inception;
    (d) Withdrawal of surplus Federal funds from a discretionary grant 
or any analogous withdrawal of funds by a recipient from a subrecipient; 
or
    (e) Withdrawal from a mandatory or formula grant of surplus Federal 
funds authorized which the recipient will not obligate during the fiscal 
year, or any analogous withdrawal of funds by a recipient from a 
subrecipient.
    ``Terms'' of a grant, cooperative agreement, subgrant, or contract 
means all rights and duties created by the award, whether stated in 
statute, this part or other regulations, the award document itself, or 
any other document.
    ``Third party'' means, with respect to a grant or cooperative 
agreement, any entity except (1) the Federal government, (2) the 
recipient of the cooperative agreement, and (3) subrecipients under that 
grant or cooperative agreement. Note that contractors of recipients are 
third parties under this definition, although subrecipients are not.
    ``Third party in-kind contributions'' means property or services 
benefiting the federally assisted project or program which are 
contributed by third parties without charge. Note that the term does not 
include any costs incurred by the recipient or subrecipient.
    ``Unliquidated obligations,'' means, for financial reports prepared 
on a cash basis, the

[[Page 101]]

amount of obligations incurred by the recipient that has not been paid. 
For reports prepared on an accrued expenditure basis, they are the 
amount of obligations incurred by the recipient for which an outlay has 
not been recorded.
    ``Unobligated balance'' is the portion of Federal funds authorized 
which has not been obligated by the recipient. It is calculated by 
subtracting the Federal share of the recipient's cumulative obligations 
from the cumulative Federal funds authorized.

Appendix B to Part 3015--OMB Circular A-128, ``Audits of State and Local 
                              Governments''

                    Executive Office of the President

                     Office of Management and Budget

                           Circular No. A-128

                             April 12, 1984

To the Heads of Executive Departments and Establishments.
Subject: Audits of State and Local Governments.

    1. Purpose. This Circular is issued pursuant to the Single Audit Act 
of 1984, Pub. L. 98-502. It establishes audit requirements for State and 
local governments that receive Federal aid, and defines Federal 
responsibilities for implementing and monitoring those requirements.
    2. Supersession. The Circular supersedes Attachment P, ``Audit 
Requirements,'' of Circular A-102, ``Uniform requirements for grants to 
State and local governments.''
    3. Background. The Single Audit Act builds upon earlier efforts to 
improve audits of Federal aid programs. The Act requires State or local 
governments that receive $100,000 or more a year in Federal funds to 
have an audit made for that year. Section 7505 of the Act requires the 
Director of the Office of Management and Budget to prescribe policies, 
procedures and guidelines to implement the Act. It specifies that the 
Director shall designate ``cognizant'' Federal agencies, determine 
criteria for making appropriate charges to Federal programs for the cost 
of audits, and provide procedures to assure that small firms or firms 
owned and controlled by disadvantaged individuals have the opportunity 
to participate in contracts for single audits.
    4. Policy. The Single Audit Act requires the following:
    a. State or local governments that receive $100,000 or more a year 
in Federal financial assistance shall have an audit made in accordance 
with this Circular.
    b. State or local governments that receive between $25,000 and 
$100,000 a year shall have an audit made in accordance with this 
Circular, or in accordance with Federal laws and regulations governing 
the programs they participate in.
    c. State or local governments that receive less than $25,000 a year 
shall be exempt from compliance with the Act and other Federal audit 
requirements. These State and local governments shall be governed by 
audit requirements prescribed by State or local law or regulation.
    d. Nothing in this paragraph exempts State or local governments from 
maintaining records of Federal financial assistance or from providing 
access to such records to Federal agencies, as provided for in Federal 
law or in Circular A-102, ``Uniform requirements for grants to State or 
local governments.''
    5. Definitions. For the purposes of this Circular the following 
definitions from the Single Audit Act apply:
    a. Cognizant agency means the Federal agency assigned by the Office 
of Management and Budget to carry out the responsibilities described in 
paragraph 11 of this Circular.
    b. Federal financial assistance means assistance provided by a 
Federal agency in the form of grants, contracts, cooperative agreements, 
loans, loan guarantees, property, interest subsidies, insurance, or 
direct appropriations, but does not include direct Federal cash 
assistance to individuals. It includes awards received directly from 
Federal agencies, or indirectly through other units of State and local 
governments.
    c. Federal agency has the same meaning as the term `agency' in 
section 551(1) of Title 5, United States Code.
    d. Generally accepted accounting principles has the meaning 
specified in the generally accepted government auditing standards.
    e. Generally accepted government auditing standards means the 
Standards For Audit of Government Organizations, Programs, Activities, 
and Functions, developed by the Comptroller General, dated February 27, 
1981.
    f. Independent auditor means:
    (1) A State or local government auditor who meets the independence 
standards specified in generally accepted government auditing standards; 
or
    (2) A public accountant who meets such independence standards.
    g. Internal controls means the plan of organization and methods and 
procedures adopted by management to ensure that:
    (1) Resource use is consistent with laws, regulations, and policies;
    (2) Resources are safeguarded against waste, loss, and misuse; and
    (3) Reliable data are obtained, maintained, and fairly disclosed in 
reports.
    h. Indian tribe means any Indian tribe, band, nations, or other 
organized group or community, including any Alaskan Native village or 
regional or village corporations (as defined in, or established under, 
the Alaskan

[[Page 102]]

Native Claims Settlement Act) that is recognized by the United States as 
eligible for the special programs and services provided by the United 
States to Indians because of their status as Indians.
    i. Local government means any unit of local government within a 
State, including a county, a borough, municipalitity, city, town, 
township, parish, local public authority, special district, school 
district, intrastate district, council of governments, and any other 
instrumentality of local government.
    j. Major Federal Assistance Program, as defined by Pub. L 98-502, is 
described in the Attachment to this Circular.
    k. Public accountants means those individuals who meet the 
qualification standards included in generally accepted government 
auditing standards for personnel performing government audits.
    l. State means any State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam 
American Samoa, the Commonwealth of the Northern Mariana Islands, and 
the Trust Territory of the Pacific Islands, any instrumentality thereof, 
and any multi-State, regional, or interstate entity that has 
governmental functions and any Indian tribe.
    m. Subrecipient means any person or government department, agency, 
or establishment that receives Federal financial assistance to carry out 
a program through a State or local government, but does not include an 
individual that is a beneficiary of such a program. A subrecipient may 
also be a direct recipient of Federal financial assistance.
    6. Scope of audit. The Single Audit Act provides that:
    a. The audit shall be made by an independent auditor in accordance 
with generally accepted government auditing standards covering financial 
and compliance audits.
    b. The audit shall cover the entire operations of a State or local 
government or, at the option of that government, it may cover 
departments, agencies or establishments that received, expended, or 
otherwise administered Federal financial assistance during the year. 
However, if a State or local government receives $25,000 or more in 
General Revenue Sharing Funds in a fiscal year, it shall have an audit 
of its entire operations. A series of audits of individual departments, 
agencies, and establishments for the same fiscal year may be considered 
a single audit.
    c. Public hospitals and public colleges and universities may be 
excluded from State and local audits and the requirements of this 
Circular. However, if such entities are excluded, audits of these 
entities shall be made in accordance with statutory requirements and the 
provisions of Circular A-110, Uniform requirements for grants to 
universities, hospitals, and other nonprofit organizations.
    d. The auditor shall determine whether:
    (1) The financial statements of the government, department, agency 
or establishment present fairly its financial position and the results 
of its financial operations in accordance with generally accepted 
accounting principles;
    (2) The organization has internal accounting and other control 
systems to provide reasonable assurance that it is managing Federal 
financial assistance programs in compliance with applicable laws and 
regulations; and
    (3) The organization has complied with laws and regulations that may 
have material effect on its financial statements and on each major 
Federal assistance program.
    7. Frequency of audit. Audits shall be made annually unless the 
State or local government has, by January 1, 1987, a constitutional or 
statutory requirement for less frequent audits. For those governments, 
the cognizant agency shall permit biennial audits, covering both years, 
if the government so requests. It shall also honor requests for biennial 
audits by governments that have an administrative policy calling for 
audits less frequent than annual, but only for fiscal years beginning 
before January 1, 1987.
    8. Internal control and compliance reviews. The Single Audit Act 
requires that the independent auditor determine and report on whether 
the organization has internal control systems to provide reasonable 
assurance that it is managing Federal assistance programs in compliance 
with applicable laws and regulations.
    a. Internal control review. In order to provide this assurance the 
auditor must make a study and evaluation of internal control systems 
used in administering Federal assistance programs. The study and 
evaluation must be made whether or not the auditor intends to place 
reliance on such systems. As part of this review, the auditor shall:
    (1) Test whether these internal control systems are functioning in 
accordance with prescribed procedures.
    (2) Examine the recipient's system for monitoring subrecipients and 
obtaining and acting on subrecipient audit reports.
    b. Compliance review. The law also requires the auditor to determine 
whether the organization has complied with laws and regulations that may 
have a material effect on each major Federal assistance program.
    (1) In order to determine which major programs are to be tested for 
compliance, State and local governments shall identify in their accounts 
all Federal funds received and expended and the programs under which 
they were received. This shall include funds received directly from 
Federal agencies and through other State and local governments.

[[Page 103]]

    (2) The review must include the selection and testing of a 
representative number of charges from each major Federal assistance 
program. The selection and testing of transactions shall be based on the 
auditor's professional judgment considering such factors as the amount 
of expenditures for the program and the individual awards; the newness 
of the program or changes in its conditions; prior experience with the 
program, particularly as revealed in audits and other evaluations (e.g., 
inspections, program reviews); the extent to which the program is 
carried out through subrecipients; the extent to which the program 
contracts for goods or services; the level to which the program is 
already subject to program reviews of other forms of independent 
oversight; the adequacy of the controls for ensuring compliance; the 
expectation of adherence or lack of adherence to the applicable laws and 
regulations; and the potential impact of adverse findings.
    (a) In making the test of transactions, the auditor shall determine 
whether:

--The amounts reported as expenditures were for allowable services, and
--The records show that those who received services or benefits were 
          eligible to receive them.

    (b) In addition to transaction testing, the auditor shall determine 
whether:

--Matching requirements, levels of effort and earmarking limitations 
          were met,
--Federal financial reports and claims for advances and reimbursements 
          contain information that is supported by the books and records 
          from which the basic financial statements have been prepared, 
          and
--Amounts claimed or used for matching were determined in accordance 
          with OMB Circular A-87, ``Cost principles for State and local 
          governments,'' and Attachment F of Circular A-102, ``Uniform 
          requirements for grants to State and local governments.''

    (c) The principal compliance requirements of the largest Federal aid 
programs may be ascertained by referring to the Compliance Supplement 
for Single Audits of State and Local Governments, issued by OMB and 
available from the Government Printing Office. For those programs not 
covered in the Compliance Supplement, the auditor may ascertain 
compliance requirements by researching the statutes, regulations, and 
agreements governing individual programs.
    (3) Transactions related to other Federal assistance programs that 
are selected in connection with examinations of financial statements and 
evaluations of internal controls shall be tested for compliance with 
Federal laws and regulations that apply to such transactions.
    9. Subrecipients. State or local governments that receive Federal 
financial assistance and provide $25,000 or more of it in a fiscal year 
to a subrecipient shall:
    a. Determine whether State or local subrecipients have met the audit 
requirements of this Circular and whether subrecipients covered by 
Circular A-110, ``Uniform requirements for grants to universities, 
hospitals, and other nonprofit organizations,'' have met that 
requirement;
    b. Determine whether the subrecipient spent Federal assistance funds 
provided in accordance with applicable laws and regulations. This may be 
accomplished by reviewing an audit of the subrecipient made in 
accordance with this Circular, Circular A-110, or through other means 
(e.g., program reviews) if the subrecipient has not yet had such an 
audit;
    c. Ensure that appropriate corrective action is taken within six 
months after receipt of the audit report in instances of noncompliance 
with Federal laws and regulations;
    d. Consider whether subrecipient audits necessitate adjustment of 
the recipient's own records; and
    e. Require each subrecipient to permit independent auditors to have 
access to the records and financial statements as necessary to comply 
with this Circular.
    10. Relation to other audit requirements. The Single Audit Act 
provides that an audit made in accordance with this Circular shall be in 
lieu of any financial or financial compliance audit required under 
individual Federal assistance programs. To the extent that a single 
audit provides Federal agencies with information and assurances they 
need to carry out their overall responsibilities, they shall rely upon 
and use such information. However, a Federal agency shall make any 
additional audits which are necessary to carry out its responsibilities 
under Federal law and regulation. Any additional Federal audit effort 
shall be planned and carried out in such a way as to avoid duplication.
    a. The provisions of this Circular do not limit the authority of 
Federal agencies to make, or contract for audits and evaluations of 
Federal financial assistance programs, nor do they limit the authority 
of any Federal agency Inspector General or other Federal audit official.
    b. The provisions of this Circular do not authorize any State or 
local government or subrecipient thereof to constrain Federal agencies, 
in any manner, from carrying out additional audits.
    c. A Federal agency that makes or contracts for audits in addition 
to the audits made by recipients pursuant to this Circular shall, 
consistent with other applicable laws and regulations, arrange for 
funding the cost of such additional audits. Such additional audits 
include economy and efficiency audits, program results audits, and 
program evaluations.

[[Page 104]]

    11. Cognizant agency responsibilities. The Single Audit Act provides 
for cognizant Federal agencies to oversee the implementation of this 
Circular.
    a. The Office of Management and Budget will assign cognizant 
agencies for States and their subdivisions and larger local governments 
and their subdivisions. Other Federal agencies may participate with an 
assigned cognizant agency, in order to fulfill the cognizance 
responsibilities. Smaller governments not assigned a cognizant agency 
will be under the general oversight of the Federal agency that provides 
them the most funds whether directly or indirectly.
    b. A cognizant agency shall have the following responsibilities:
    (1) Ensure that audits are made and reports are received in a timely 
manner and in accordance with the requirements of this Circular.
    (2) Provide technical advice and liaison to State and local 
governments and independent auditors.
    (3) Obtain or make quality control reviews of selected audits made 
by non-Federal audit organizations, and provide the results, when 
appropriate, to other interested organizations.
    (4) Promptly inform other affected Federal agencies and appropriate 
Federal law enforcement officials of any reported illegal acts or 
irregularities. They should also inform State or local law enforcement 
and prosecuting authorities, if not advised by the recipient, of any 
violation of law within their jurisdiction.
    (5) Advise the recipient of audits that have been found not to have 
met the requirements set forth in this Circular. In such instances, the 
recipient will be expected to work with the auditor to take corrective 
action. If corrective action is not taken, the cognizant agency shall 
notify the recipient and Federal awarding agencies of the facts and make 
recommendations for followup action. Major inadequacies or repetitive 
substandard performance of independent auditors shall be referred to 
appropriate professional bodies for disciplinary action.
    (6) Coordinate, to the extent practicable, audits made by or for 
Federal agencies that are in addition to the audits made pursuant to 
this Circular; so that the additional audits build upon such audits.
    (7) Oversee the resolution of audit findings that affect the 
programs of more than one agency.
    12. Illegal acts or irregularities. If the auditor becomes aware of 
illegal acts or other irregularities, prompt notice shall be given to 
recipient management officials above the level of involvement. (See also 
paragraph 13(a)(3) below for the auditor's reporting responsibilities.) 
The recipient, in turn, shall promptly notify the cognizant agency of 
the illegal acts or irregularities and of proposed and actual actions, 
if any. Illegal acts and irregularities include such matters as 
conflicts of interest, falsification of records or reports, and 
misappropriations of funds or other assets.
    13. Audit Reports. Audit reports must be prepared at the completion 
of the audit. Reports serve many needs of State and local governments as 
well as meeting the requirements of the Single Audit Act.
    a. The audit report shall state that the audit was made in 
accordance with the provisions of this Circular. The report shall be 
made up of at least:
    (1) The auditor's report on financial statements and on a schedule 
of Federal assistance; the financial statements; and a schedule of 
Federal assistance, showing the total expenditures for each Federal 
assistance program as identified in the Catalog of Federal Domestic 
Assistance. Federal programs or grants that have not been assigned a 
catalog number shall be identified under the caption ``other Federal 
assistance.''
    (2) The auditor's report on the study and evaluation of internal 
control systems must identify the organization's significant internal 
accounting controls, and those controls designed to provide reasonable 
assurance that Federal programs are being managed in compliance with 
laws and regulations. It must also identify the controls that were 
evaluated, the controls that were not evaluated, and the material 
weaknesses identified as a result of the evaluation.
    (3) The auditor's report on compliance containing:
--A statement of positive assurance with respect to those items tested 
          for compliance, including compliance with law and regulations 
          pertaining to financial reports and claims for advances and 
          reimbursements;
--Negative assurance on those items not tested;
--A summary of all instances of noncompliance; and
--An identification of total amounts questioned, if any, for each 
          Federal assistance award, as a result of noncompliance.

    b. The three parts of the audit report may be bound into a single 
report, or presented at the same time as separate documents.
    c. All fraud abuse, or illegal acts or indications of such acts, 
including all questioned costs found as the result of these acts that 
auditors become aware of, should normally be covered in a separate 
written report submitted in accordance with paragraph 13f.
    d. In addition to the audit report, the recipient shall provide 
comments on the findings and recommendations in the report, including a 
plan for corrective action taken or planned and comments on the status 
of corrective action taken on prior findings. If corrective action is 
not necessary, a statement

[[Page 105]]

describing the reason it is not should accompany the audit report.
    e. The reports shall be made available by the State or local 
government for public inspection within 30 days after the completion of 
the audit.
    f. In accordance with generally accepted government audit standards, 
reports shall be submitted by the auditor to the organization audited 
and to those requiring or arranging for the audit. In addition, the 
recipient shall submit copies of the reports to each Federal department 
or agency that provided Federal assistance funds to the recipient. 
Subrecipients shall submit copies to recipients that provided them 
Federal assistance funds. The reports shall be sent within 30 days after 
the completion of the audit, but no later than one year after the end of 
the audit period unless a longer period is agreed to with the cognizant 
agency.
    g. Recipients of more than $100,000 in Federal funds shall submit 
one copy of the audit report within 30 days after issuance to a central 
clearinghouse to be designated by the Office of Management and Budget. 
The clearinghouse will keep completed audits on file and follow up with 
State and local governments that have not submitted required audit 
reports.
    h. Recipients shall keep audit reports on file for three years from 
their issuance.
    14. Audit Resolution. As provided in paragraph 11, the cognizant 
agency shall be responsible for monitoring the resolution of audit 
findings that affect the programs of more than one Federal agency. 
Resolution of findings that relate to the programs of a single Federal 
agency will be the responsibility of the recipient and that agency. 
Alternate arrangements may be made on case-by-case basis by a case-by-
case basis by agreement among the agenices concerned.
    Resolution shall be made within six months after receipt of the 
report by the Federal departments and agencies. Corrective action should 
proceed as rapidly as possible.
    15. Audit workpapers and reports. Workpapers and reports shall be 
retained for a minimum of three years from the date of the audit report, 
unless the auditor is notified in writing by the cognizant agency to 
extend the retention period. Audit workpapers shall be made available 
upon request to the cognizant agency or its designee or the General 
Accounting Office, at the completion of the audit.
    16. Audit Costs. The cost of audits made in accordance with the 
provisions of this Circular are allowable charges to Federal assistance 
programs.
    a. The charges may be considered a direct cost or an allocated 
indirect cost, determined in accordance with the provision of Circular 
A-87, ``Cost principles for State and local governments.''
    b. Generally, the percentage of costs charged to Federal assistance 
programs for a single audit shall not exceed the percentage that Federal 
funds expended represent of total funds expended by the recipient during 
the fiscal year. The percentage may be exceeded, however, if appropriate 
documentation demonstrates higher actual cost.
    17. Sanctions. The Single Audit Act provides that no cost may be 
charged to Federal assistance programs for audits required by the Act 
that are not made in accordance with this Circular. In cases of 
continued inability or unwillingness to have a proper audit, Federal 
agencies must consider other appropropriate sanctions including:

--Withholding a percentage of assistance payments until the audit is 
          completed satisfactorily,
--Withholding or disallowing overhead costs, and
--Suspending the Federal assistance agreement until the audit is made.

    18. Auditor Selection. In arranging for audit services State and 
local governments shall follow the procurement standards prescribed by 
Attachment O of Circular A-102, ``Uniform requirements for grants to 
State and local governments.'' The standards provide that while 
recipients are encouraged to enter into intergovernmental agreements for 
audit and other services, analysis should be made to determine whether 
it would be more economical to purchase the services from private firms. 
In instances where use of such intergovernmental agreements are required 
by State statutes (e.g., audit services) these statutes will take 
precedence.
    19. Small and Minority Audit Firms. Small audit firms and audit 
firms owned and controlled by socially and economically disadvantaged 
individuals shall have the maximum practicable opportunity to 
participate in contracts awarded to fulfill the requirements of this 
Circular. Recipients of Federal assistance shall take the following 
steps to further this goal:
    a. Assure that small audit firms and audit firms owned and 
controlled by socially and economically disadvantaged individuals are 
used to the fullest extent practicable.
    b. Make information on forthcoming opportunities available and 
arrange timeframes for the audit so as to encourage and facilitate 
participation by small audit firms and audit firms owned and controlled 
by socially and economically disadvantaged individuals.
    c. Consider in the contract process whether firms competing for 
large audits intend to subcontract with small audit firms and audit 
firms owned and controlled by socially and economically disadvantaged 
individuals.
    d. Encourage contracting with small audit firms or audit firms owned 
and controlled by

[[Page 106]]

socially and economically disadvantaged individuals which have 
traditionally audited government programs and, in such cases where this 
is not possible, assure that these firms are given consideration for 
audit subcontracting opportunities.
    e. Encourage contracting with consortiums of small audit firms as 
described in paragraph (a) above when a contract is too large for an 
individual small audit firm or audit firm owned and controlled by 
socially and economically disadvantaged individuals.
    f. Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration in the solicitation 
and utilization of small audit firms or audit firms owned and controlled 
by socially and economically disadvantaged individuals.
    20. Reporting. Each Federal agency will report to the Director of 
OMB on or before March 1, 1987, and annually thereafter on the 
effectiveness of State and local governments in carrying out the 
provisions of this Circular. The report must identify each State or 
local government or Indian tribe that, in the opinion of the agency, is 
failing to comply with the Circular.
    21. Regulations. Each Federal agency shall include the provisions of 
this Circular in its regulations implementing the Single Audit Act.
    22. Effective date. This Circular is effective upon publication and 
shall apply to fiscal years of State and local governments that begin 
after December 31, 1984. Earlier implementation is encouraged. However, 
until it is implemented, the audit provisions of Attachment P to 
Circular A-102 shall continue to be observed.
    23. Inquiries. All questions or inquiries should be addressed to 
Financial Management Division, Office of Management and Budget, 
telephone number 202/395-3993.
    24. Sunset review date. This Circular shall have an independent 
policy review to ascertain its effectiveness three years from the date 
of issuance.

David A. Stockman,
    Director.

        Definition of Major Program as Provided in Pub. L. 98-502

    ``Major Federal Assistance Program,'' for State and local 
governments having Federal assistance expenditures between $100,000 and 
$100,000,000, means any program for which Federal expenditures during 
the applicable year exceed the larger of $300,000, or 3 percent of such 
total expenditures.
    Where total expenditures of Federal assistance exceed $100,000,000, 
the following criteria apply:

------------------------------------------------------------------------
 Total expenditures of Federal financial assistance for all     Major
                          programs                             federal
------------------------------------------------------------  assistance
                                                               program
                                                              means any
          More than                    But less than           program
                                                                 that
                                                               exceeds
------------------------------------------------------------------------
$100 million                   $1 billion..................   $3 million
1 billion                      2 billion...................    4 million
2 billion                      3 billion...................    7 million
3 billion                      4 billion...................   10 million
4 billion                      5 billion...................   13 million
5 billion                      6 billion...................   16 million
6 billion                      7 billion...................   19 million
Over 7 billion                 ............................   20 million
------------------------------------------------------------------------


[50 FR 28763, July 16, 1985]



PART 3016--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS--Table of Contents




                           Subpart A--General

Sec.
3016.1  Purpose and scope of this part.
3016.2  Scope of subpart.
3016.3  Definitions.
3016.4  Applicability.
3016.5  Effect on other issuances.
3016.6  Additions and exceptions.

                    Subpart B--Pre-Award Requirements

3016.10  Forms for applying for grants.
3016.11  State plans.
3016.12  Special grant or subgrant conditions for ``high-risk'' 
          grantees.

                   Subpart C--Post-Award Requirements

                        Financial Administration

3016.20  Standards for financial management systems.
3016.21  Payment.
3016.22  Allowable costs.
3016.23  Period of availability of funds.
3016.24  Matching or cost sharing.
3016.25  Program income.
3016.26  Non-Federal audit.

                    Changes, Property, and Subawards

3016.30  Changes.
3016.31  Real property.
3016.32  Equipment.
3016.33  Supplies.
3016.34  Copyrights.
3016.35  Subawards to debarred and suspended parties.
3016.36  Procurement.
3016.37  Subgrants.

[[Page 107]]

              Reports, Records, Retention, and Enforcement

3016.40  Monitoring and reporting program performance.
3016.41  Financial reporting.
3016.42  Retention and access requirements for records.
3016.43  Enforcement.
3016.44  Termination for convenience.

                 Subpart D--After-the-Grant Requirements

3016.50  Closeout.
3016.51  Later disallowances and adjustments.
3016.52  Collection of amounts due.

                         Subpart E--Entitlement

3016.60  Special procurement provisions.
3016.61  Financial reporting.

    Authority: 5 U.S.C. 301; 31 U.S.C. 901-903; 7 CFR 2.28.

    Source: 53 FR 8044, 8087, Mar. 11, 1988, unless otherwise noted.

    Editorial Note: For additional information, see related documents 
published at 49 FR 24958, June 18, 1984, 52 FR 20178, May 29, 1987, and 
53 FR 8028, March 11, 1988.



                           Subpart A--General



Sec. 3016.1  Purpose and scope of this part.

    This part establishes uniform administrative rules for Federal 
grants and cooperative agreements and subawards to State, local and 
Indian tribal governments.



Sec. 3016.2  Scope of subpart.

    This subpart contains general rules pertaining to this part and 
procedures for control of exceptions from this part.



Sec. 3016.3  Definitions.

    As used in this part:
    Accrued expenditures mean the charges incurred by the grantee during 
a given period requiring the provision of funds for: (1) Goods and other 
tangible property received; (2) services performed by employees, 
contractors, subgrantees, subcontractors, and other payees; and (3) 
other amounts becoming owed under programs for which no current services 
or performance is required, such as annuities, insurance claims, and 
other benefit payments.
    Accrued income means the sum of: (1) Earnings during a given period 
from services performed by the grantee and goods and other tangible 
property delivered to purchasers, and (2) amounts becoming owed to the 
grantee for which no current services or performance is required by the 
grantee.
    Acquisition cost of an item of purchased equipment means the net 
invoice unit price of the property including the cost of modifications, 
attachments, accessories, or auxiliary apparatus necessary to make the 
property usable for the purpose for which it was acquired. Other charges 
such as the cost of installation, transportation, taxes, duty or 
protective in-transit insurance, shall be included or excluded from the 
unit acquisition cost in accordance with the grantee's regular 
accounting practices.
    Administrative requirements mean those matters common to grants in 
general, such as financial management, kinds and frequency of reports, 
and retention of records. These are distinguished from programmatic 
requirements, which concern matters that can be treated only on a 
program-by-program or grant-by-grant basis, such as kinds of activities 
that can be supported by grants under a particular program.
    Awarding agency means (1) with respect to a grant, the Federal 
agency, and (2) with respect to a subgrant, the party that awarded the 
subgrant.
    Cash contributions means the grantee's cash outlay, including the 
outlay of money contributed to the grantee or subgrantee by other public 
agencies and institutions, and private organizations and individuals. 
When authorized by Federal legislation, Federal funds received from 
other assistance agreements may be considered as grantee or subgrantee 
cash contributions.
    Contract means (except as used in the definitions for grant and 
subgrant in this section and except where qualified by Federal) a 
procurement contract under a grant or subgrant, and means a procurement 
subcontract under a contract.
    Cost sharing or matching means the value of the third party in-kind 
contributions and the portion of the costs

[[Page 108]]

of a federally assisted project or program not borne by the Federal 
Government.
    Cost-type contract means a contract or subcontract under a grant in 
which the contractor or subcontractor is paid on the basis of the costs 
it incurs, with or without a fee.
    Equipment means tangible, nonexpendable, personal property having a 
useful life of more than one year and an acquisition cost of $5,000 or 
more per unit. A grantee may use its own definition of equipment 
provided that such definition would at least include all equipment 
defined above.
    Expenditure report means: (1) For nonconstruction grants, the SF-269 
Financial Status Report (or other equivalent report); (2) for 
construction grants, the SF-271 Outlay Report and Request for 
Reimbursement (or other equivalent report).
    Federally recognized Indian tribal government means the governing 
body or a governmental agency of any Indian tribe, band, nation, or 
other organized group or community (including any Native village as 
defined in section 3 of the Alaska Native Claims Settlement Act, 85 Stat 
688) certified by the Secretary of the Interior as eligible for the 
special programs and services provided by him through the Bureau of 
Indian Affairs.
    Government means a State or local government or a federally 
recognized Indian tribal government.
    Grant means an award of financial assistance, including cooperative 
agreements, in the form of money, or property in lieu of money, by the 
Federal Government to an eligible grantee. The term does not include 
technical assistance which provides services instead of money, or other 
assistance in the form of revenue sharing, loans, loan guarantees, 
interest subsidies, insurance, or direct appropriations. Also, the term 
does not include assistance, such as a fellowship or other lump sum 
award, which the grantee is not required to account for.
    Grantee means the government to which a grant is awarded and which 
is accountable for the use of the funds provided. The grantee is the 
entire legal entity even if only a particular component of the entity is 
designated in the grant award document.
    Local government means a county, municipality, city, town, township, 
local public authority (including any public and Indian housing agency 
under the United States Housing Act of 1937) school district, special 
district, intrastate district, council of governments (whether or not 
incorporated as a nonprofit corporation under state law), any other 
regional or interstate government entity, or any agency or 
instrumentality of a local government.
    Obligations means the amounts of orders placed, contracts and 
subgrants awarded, goods and services received, and similar transactions 
during a given period that will require payment by the grantee during 
the same or a future period.
    OMB means the United States Office of Management and Budget.
    Outlays (expenditures) mean charges made to the project or program. 
They may be reported on a cash or accrual basis. For reports prepared on 
a cash basis, outlays are the sum of actual cash disbursement for direct 
charges for goods and services, the amount of indirect expense incurred, 
the value of in-kind contributions applied, and the amount of cash 
advances and payments made to contractors and subgrantees. For reports 
prepared on an accrued expenditure basis, outlays are the sum of actual 
cash disbursements, the amount of indirect expense incurred, the value 
of inkind contributions applied, and the new increase (or decrease) in 
the amounts owed by the grantee for goods and other property received, 
for services performed by employees, contractors, subgrantees, 
subcontractors, and other payees, and other amounts becoming owed under 
programs for which no current services or performance are required, such 
as annuities, insurance claims, and other benefit payments.
    Percentage of completion method refers to a system under which 
payments are made for construction work according to the percentage of 
completion of the work, rather than to the grantee's cost incurred.
    Prior approval means documentation evidencing consent prior to 
incurring specific cost.

[[Page 109]]

    Real property means land, including land improvements, structures 
and appurtenances thereto, excluding movable machinery and equipment.
    Share, when referring to the awarding agency's portion of real 
property, equipment or supplies, means the same percentage as the 
awarding agency's portion of the acquiring party's total costs under the 
grant to which the acquisition costs under the grant to which the 
acquisition cost of the property was charged. Only costs are to be 
counted--not the value of third-party in-kind contributions.
    State means any of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency or instrumentality of a 
State exclusive of local governments. The term does not include any 
public and Indian housing agency under United States Housing Act of 
1937.
    Subgrant means an award of financial assistance in the form of 
money, or property in lieu of money, made under a grant by a grantee to 
an eligible subgrantee. The term includes financial assistance when 
provided by contractual legal agreement, but does not include 
procurement purchases, nor does it include any form of assistance which 
is excluded from the definition of grant in this part.
    Subgrantee means the government or other legal entity to which a 
subgrant is awarded and which is accountable to the grantee for the use 
of the funds provided.
    Supplies means all tangible personal property other than equipment 
as defined in this part.
    Suspension means depending on the context, either (1) temporary 
withdrawal of the authority to obligate grant funds pending corrective 
action by the grantee or subgrantee or a decision to terminate the 
grant, or (2) an action taken by a suspending official in accordance 
with agency regulations implementing E.O. 12549 to immediately exclude a 
person from participating in grant transactions for a period, pending 
completion of an investigation and such legal or debarment proceedings 
as may ensue.
    Termination means permanent withdrawal of the authority to obligate 
previously-awarded grant funds before that authority would otherwise 
expire. It also means the voluntary relinquishment of that authority by 
the grantee or subgrantee. Termination does not include: (1) Withdrawal 
of funds awarded on the basis of the grantee's underestimate of the 
unobligated balance in a prior period; (2) Withdrawal of the unobligated 
balance as of the expiration of a grant; (3) Refusal to extend a grant 
or award additional funds, to make a competing or noncompeting 
continuation, renewal, extension, or supplemental award; or (4) voiding 
of a grant upon determination that the award was obtained fraudulently, 
or was otherwise illegal or invalid from inception.
    Terms of a grant or subgrant mean all requirements of the grant or 
subgrant, whether in statute, regulations, or the award document.
    Third party in-kind contributions mean property or services which 
benefit a federally assisted project or program and which are 
contributed by non-Federal third parties without charge to the grantee, 
or a cost-type contractor under the grant agreement.
    Unliquidated obligations for reports prepared on a cash basis mean 
the amount of obligations incurred by the grantee that has not been 
paid. For reports prepared on an accrued expenditure basis, they 
represent the amount of obligations incurred by the grantee for which an 
outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by the 
Federal agency that has not been obligated by the grantee and is 
determined by deducting the cumulative obligations from the cumulative 
funds authorized.



Sec. 3016.4  Applicability.

    (a) General. Subparts A-D of this part apply to all grants and 
subgrants to governments, except where inconsistent with Federal 
statutes or with regulations authorized in accordance with the exception 
provision of Sec. 3016.6, or:
    (1) Grants and subgrants to State and local institutions of higher 
education or State and local hospitals.

[[Page 110]]

    (2) The block grants authorized by the Omnibus Budget Reconciliation 
Act of 1981 (Community Services; Preventive Health and Health Services; 
Alcohol, Drug Abuse, and Mental Health Services; Maternal and Child 
Health Services; Social Services; Low-Income Home Energy Assistance; 
States' Program of Community Development Block Grants for Small Cities; 
and Elementary and Secondary Education other than programs administered 
by the Secretary of Education under Title V, Subtitle D, Chapter 2, 
Section 583--the Secretary's discretionary grant program) and Titles I-
III of the Job Training Partnership Act of 1982 and under the Public 
Health Services Act (Section 1921), Alcohol and Drug Abuse Treatment and 
Rehabilitation Block Grant and Part C of Title V, Mental Health Service 
for the Homeless Block Grant).
    (3) Entitlement grants to carry out the following programs of the 
Social Security Act:
    (i) Aid to Needy Families with Dependent Children (Title IV-A of the 
Act, not including the Work Incentive Program (WIN) authorized by 
section 402(a)19(G); HHS grants for WIN are subject to this part);
    (ii) Child Support Enforcement and Establishment of Paternity (Title 
IV-D of the Act);
    (iii) Foster Care and Adoption Assistance (Title IV-E of the Act);
    (iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and 
XVI-AABD of the Act); and
    (v) Medical Assistance (Medicaid) (Title XIX of the Act) not 
including the State Medicaid Fraud Control program authorized by section 
1903(a)(6)(B).
    (4) A grant for an experimental, pilot, or demonstration project 
that is also supported by a grant listed in paragraph (a)(3) of this 
section;
    (5) Grant funds awarded under subsection 412(e) of the Immigration 
and Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the 
Refugee Education Assistance Act of 1980 (Pub. L. 96-422, 94 Stat. 
1809), for cash assistance, medical assistance, and supplemental 
security income benefits to refugees and entrants and the administrative 
costs of providing the assistance and benefits;
    (6) Grants to local education agencies under 20 U.S.C. 236 through 
241-1(a), and 242 through 244 (portions of the Impact Aid program), 
except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for 
Handicapped Children); and
    (7) Payments under the Veterans Administration's State Home Per Diem 
Program (38 U.S.C. 641(a)).
    (b) Entitlement programs. In USDA, the entitlement programs 
enumerated in this paragraph are subject to subparts A through D and the 
modifications in subpart E of this part.
    (1) Entitlement grants under the following programs authorized by 
The National School Lunch Act:
    (i) National School Lunch Program, General Assistance (section 4 of 
the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) National School Lunch Program, Special Meal Assistance 
(section 11 of the Act),
    (iv) Summer Food Service Program for Children (section 13 of the 
Act), and
    (v) Child and Adult Care Food Program (section 17 of the Act);
    (2) Entitlement grants under the following programs authorized by 
The Child Nutrition Act of 1966:
    (i) Special Milk Program for Children (section 3 of the Act),
    (ii) School Breakfast Program (section 4 of the Act), and
    (iii) Entitlement grants for State Administrative Expense Funds 
(section 7 of the Act); and
    (3) Entitlement grants under the following programs authorized by 
the Food Stamp Act of 1977:
    (i) Food Distribution Program on Indian Reservations (section 4(b) 
of the Act), and
    (ii) State Administrative Expense Funds (section 16 of the Act).

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 65 FR 49480, Aug. 14, 
2000]



Sec. 3016.5  Effect on other issuances.

    All other grants administration provisions of codified program 
regulations, program manuals, handbooks and other nonregulatory 
materials which are inconsistent with this part are superseded, except 
to the extent

[[Page 111]]

they are required by statute, or authorized in accordance with the 
exception provision in Sec. 3016.6.



Sec. 3016.6  Additions and exceptions.

    (a) For classes of grants and grantees subject to this part, Federal 
agencies may not impose additional administrative requirements except in 
codified regulations published in the Federal Register.
    (b) Exceptions for classes of grants or grantees may be authorized 
only by OMB.
    (c) Exceptions on a case-by-case basis and for subgrantees may be 
authorized by the affected Federal agencies.



                    Subpart B--Pre-Award Requirements



Sec. 3016.10  Forms for applying for grants.

    (a) Scope. (1) This section prescribes forms and instructions to be 
used by governmental organizations (except hospitals and institutions of 
higher education operated by a government) in applying for grants. This 
section is not applicable, however, to formula grant programs which do 
not require applicants to apply for funds on a project basis.
    (2) This section applies only to applications to Federal agencies 
for grants, and is not required to be applied by grantees in dealing 
with applicants for subgrants. However, grantees are encouraged to avoid 
more detailed or burdensome application requirements for subgrants.
    (b) Authorized forms and instructions for governmental 
organizations. (1) In applying for grants, applicants shall only use 
standard application forms or those prescribed by the granting agency 
with the approval of OMB under the Paperwork Reduction Act of 1980.
    (2) Applicants are not required to submit more than the original and 
two copies of preapplications or applications.
    (3) Applicants must follow all applicable instructions that bear OMB 
clearance numbers. Federal agencies may specify and describe the 
programs, functions, or activities that will be used to plan, budget, 
and evaluate the work under a grant. Other supplementary instructions 
may be issued only with the approval of OMB to the extent required under 
the Paperwork Reduction Act of 1980. For any standard form, except the 
SF-424 facesheet, Federal agencies may shade out or instruct the 
applicant to disregard any line item that is not needed.
    (4) When a grantee applies for additional funding (such as a 
continuation or supplemental award) or amends a previously submitted 
application, only the affected pages need be submitted. Previously 
submitted pages with information that is still current need not be 
resubmitted.



Sec. 3016.11  State plans.

    (a) Scope. The statutes for some programs require States to submit 
plans before receiving grants. Under regulations implementing Executive 
Order 12372, ``Intergovernmental Review of Federal Programs,'' States 
are allowed to simplify, consolidate and substitute plans. This section 
contains additional provisions for plans that are subject to regulations 
implementing the Executive Order.
    (b) Requirements. A State need meet only Federal administrative or 
programmatic requirements for a plan that are in statutes or codified 
regulations.
    (c) Assurances. In each plan the State will include an assurance 
that the State shall comply with all applicable Federal statutes and 
regulations in effect with respect to the periods for which it receives 
grant funding. For this assurance and other assurances required in the 
plan, the State may:
    (1) Cite by number the statutory or regulatory provisions requiring 
the assurances and affirm that it gives the assurances required by those 
provisions,
    (2) Repeat the assurance language in the statutes or regulations, or
    (3) Develop its own language to the extent permitted by law.
    (d) Amendments. A State will amend a plan whenever necessary to 
reflect:
    (1) New or revised Federal statutes or regulations or
    (2) A material change in any State law, organization, policy, or 
State agency operation. The State will obtain approval for the amendment 
and

[[Page 112]]

its effective date but need submit for approval only the amended 
portions of the plan.



Sec. 3016.12  Special grant or subgrant conditions for ``high-risk'' grantees.

    (a) A grantee or subgrantee may be considered ``high risk'' if an 
awarding agency determines that a grantee or subgrantee:
    (1) Has a history of unsatisfactory performance, or
    (2) Is not financially stable, or
    (3) Has a management system which does not meet the management 
standards set forth in this part, or
    (4) Has not conformed to terms and conditions of previous awards, or
    (5) Is otherwise not responsible; and if the awarding agency 
determines that an award will be made, special conditions and/or 
restrictions shall correspond to the high risk condition and shall be 
included in the award.
    (b) Special conditions or restrictions may include:
    (1) Payment on a reimbursement basis;
    (2) Withholding authority to proceed to the next phase until receipt 
of evidence of acceptable performance within a given funding period;
    (3) Requiring additional, more detailed financial reports;
    (4) Additional project monitoring;
    (5) Requiring the grantee or subgrantee to obtain technical or 
management assistance; or
    (6) Establishing additional prior approvals.
    (c) If an awarding agency decides to impose such conditions, the 
awarding official will notify the grantee or subgrantee as early as 
possible, in writing, of:
    (1) The nature of the special conditions/restrictions;
    (2) The reason(s) for imposing them;
    (3) The corrective actions which must be taken before they will be 
removed and the time allowed for completing the corrective actions; and
    (4) The method of requesting reconsideration of the conditions/
restrictions imposed.



                   Subpart C--Post-Award Requirements

                        Financial Administration



Sec. 3016.20  Standards for financial management systems.

    (a) A State must expand and account for grant funds in accordance 
with State laws and procedures for expending and accounting for its own 
funds. Fiscal control and accounting procedures of the State, as well as 
its subgrantees and cost-type contractors, must be sufficient to--
    (1) Permit preparation of reports required by this part and the 
statutes authorizing the grant, and
    (2) Permit the tracing of funds to a level of expenditures adequate 
to establish that such funds have not been used in violation of the 
restrictions and prohibitions of applicable statutes.
    (b) The financial management systems of other grantees and 
subgrantees must meet the following standards:
    (1) Financial reporting. Accurate, current, and complete disclosure 
of the financial results of financially assisted activities must be made 
in accordance with the financial reporting requirements of the grant or 
subgrant.
    (2) Accounting records. Grantees and subgrantees must maintain 
records which adequately identify the source and application of funds 
provided for financially-assisted activities. These records must contain 
information pertaining to grant or subgrant awards and authorizations, 
obligations, unobligated balances, assets, liabilities, outlays or 
expenditures, and income.
    (3) Internal control. Effective control and accountability must be 
maintained for all grant and subgrant cash, real and personal property, 
and other assets. Grantees and subgrantees must adequately safeguard all 
such property and must assure that it is used solely for authorized 
purposes.
    (4) Budget control. Actual expenditures or outlays must be compared 
with budgeted amounts for each grant or subgrant. Financial information

[[Page 113]]

must be related to performance or productivity data, including the 
development of unit cost information whenever appropriate or 
specifically required in the grant or subgrant agreement. If unit cost 
data are required, estimates based on available documentation will be 
accepted whenever possible.
    (5) Allowable cost. Applicable OMB cost principles, agency program 
regulations, and the terms of grant and subgrant agreements will be 
followed in determining the reasonableness, allowability, and 
allocability of costs.
    (6) Source documentation. Accounting records must be supported by 
such source documentation as cancelled checks, paid bills, payrolls, 
time and attendance records, contract and subgrant award documents, etc.
    (7) Cash management. Procedures for minimizing the time elapsing 
between the transfer of funds from the U.S. Treasury and disbursement by 
grantees and subgrantees must be followed whenever advance payment 
procedures are used. Grantees must establish reasonable procedures to 
ensure the receipt of reports on subgrantees' cash balances and cash 
disbursements in sufficient time to enable them to prepare complete and 
accurate cash transactions reports to the awarding agency. When advances 
are made by letter-of-credit or electronic transfer of funds methods, 
the grantee must make drawdowns as close as possible to the time of 
making disbursements. Grantees must monitor cash drawdowns by their 
subgrantees to assure that they conform substantially to the same 
standards of timing and amount as apply to advances to the grantees.
    (c) An awarding agency may review the adequacy of the financial 
management system of any applicant for financial assistance as part of a 
preaward review or at any time subsequent to award.



Sec. 3016.21  Payment.

    (a) Scope. This section prescribes the basic standard and the 
methods under which a Federal agency will make payments to grantees, and 
grantees will make payments to subgrantees and contractors.
    (b) Basic standard. Methods and procedures for payment shall 
minimize the time elapsing between the transfer of funds and 
disbursement by the grantee or subgrantee, in accordance with Treasury 
regulations at 31 CFR part 205.
    (c) Advances. Grantees and subgrantees shall be paid in advance, 
provided they maintain or demonstrate the willingness and ability to 
maintain procedures to minimize the time elapsing between the transfer 
of the funds and their disbursement by the grantee or subgrantee.
    (d) Reimbursement. Reimbursement shall be the preferred method when 
the requirements in paragraph (c) of this section are not met. Grantees 
and subgrantees may also be paid by reimbursement for any construction 
grant. Except as otherwise specified in regulation, Federal agencies 
shall not use the percentage of completion method to pay construction 
grants. The grantee or subgrantee may use that method to pay its 
construction contractor, and if it does, the awarding agency's payments 
to the grantee or subgrantee will be based on the grantee's or 
subgrantee's actual rate of disbursement.
    (e) Working capital advances. If a grantee cannot meet the criteria 
for advance payments described in paragraph (c) of this section, and the 
Federal agency has determined that reimbursement is not feasible because 
the grantee lacks sufficient working capital, the awarding agency may 
provide cash or a working capital advance basis. Under this procedure 
the awarding agency shall advance cash to the grantee to cover its 
estimated disbursement needs for an initial period generally geared to 
the grantee's disbursing cycle. Thereafter, the awarding agency shall 
reimburse the grantee for its actual cash disbursements. The working 
capital advance method of payment shall not be used by grantees or 
subgrantees if the reason for using such method is the unwillingness or 
inability of the grantee to provide timely advances to the subgrantee to 
meet the subgrantee's actual cash disbursements.
    (f) Effect of program income, refunds, and audit recoveries on 
payment. (1)

[[Page 114]]

Grantees and subgrantees shall disburse repayments to and interest 
earned on a revolving fund before requesting additional cash payments 
for the same activity.
    (2) Except as provided in paragraph (f)(1) of this section, grantees 
and subgrantees shall disburse program income, rebates, refunds, 
contract settlements, audit recoveries and interest earned on such funds 
before requesting additional cash payments.
    (g) Withholding payments. (1) Unless otherwise required by Federal 
statute, awarding agencies shall not withhold payments for proper 
charges incurred by grantees or subgrantees unless--
    (i) The grantee or subgrantee has failed to comply with grant award 
conditions or
    (ii) The grantee or subgrantee is indebted to the United States.
    (2) Cash withheld for failure to comply with grant award condition, 
but without suspension of the grant, shall be released to the grantee 
upon subsequent compliance. When a grant is suspended, payment 
adjustments will be made in accordance with Sec. 3016.43(c).
    (3) A Federal agency shall not make payment to grantees for amounts 
that are withheld by grantees or subgrantees from payment to contractors 
to assure satisfactory completion of work. Payments shall be made by the 
Federal agency when the grantees or subgrantees actually disburse the 
withheld funds to the contractors or to escrow accounts established to 
assure satisfactory completion of work.
    (h) Cash depositories. (1) Consistent with the national goal of 
expanding the opportunities for minority business enterprises, grantees 
and subgrantees are encouraged to use minority banks (a bank which is 
owned at least 50 percent by minority group members). A list of minority 
owned banks can be obtained from the Minority Business Development 
Agency, Department of Commerce, Washington, DC 20230.
    (2) A grantee or subgrantee shall maintain a separate bank account 
only when required by Federal-State agreement.
    (i) Interest earned on advances. Except for interest earned on 
advances of funds exempt under the Intergovernmental Cooperation Act (31 
U.S.C. 6501 et seq.) and the Indian Self-Determination Act (23 U.S.C. 
450), grantees and subgrantees shall promptly, but at least quarterly, 
remit interest earned on advances to the Federal agency. The grantee or 
subgrantee may keep interest amounts up to $100 per year for 
administrative expenses.



Sec. 3016.22  Allowable costs.

    (a) Limitation on use of funds. Grant funds may be used only for:
    (1) The allowable costs of the grantees, subgrantees and cost-type 
contractors, including allowable costs in the form of payments to fixed-
price contractors; and
    (2) Reasonable fees or profit to cost-type contractors but not any 
fee or profit (or other increment above allowable costs) to the grantee 
or subgrantee.
    (b) Applicable cost principles. For each kind of organization, there 
is a set of Federal principles for determining allowable costs. 
Allowable costs will be determined in accordance with the cost 
principles applicable to the organization incurring the costs. The 
following chart lists the kinds of organizations and the applicable cost 
principles.

------------------------------------------------------------------------
           For the costs of a--                Use the principles in--
------------------------------------------------------------------------
State, local or Indian tribal government..  OMB Circular A-87.
Private nonprofit organization other than   OMB Circular A-122.
 an (1) institution of higher education,
 (2) hospital, or (3) organization named
 in OMB Circular A-122 as not subject to
 that circular.
Educational institutions..................  OMB Circular A-21.
For-profit organization other than a        48 CFR part 31. Contract
 hospital and an organization named in OMB   Cost Principles and
 Circular A-122 as not subject to that       Procedures, or uniform cost
 circular.                                   accounting standards that
                                             comply with cost principles
                                             acceptable to the Federal
                                             agency.
------------------------------------------------------------------------



Sec. 3016.23  Period of availability of funds.

    (a) General. Where a funding period is specified, a grantee may 
charge to the award only costs resulting from obligations of the funding 
period unless carryover of unobligated balances is permitted, in which 
case the carryover balances may be charged for costs resulting from 
obligations of the subsequent funding period.

[[Page 115]]

    (b) Liquidation of obligations. A grantee must liquidate all 
obligations incurred under the award not later than 90 days after the 
end of the funding period (or as specified in a program regulation) to 
coincide with the submission of the annual Financial Status Report (SF-
269). The Federal agency may extend this deadline at the request of the 
grantee.



Sec. 3016.24  Matching or cost sharing.

    (a) Basic rule: Costs and contributions acceptable. With the 
qualifications and exceptions listed in paragraph (b) of this section, a 
matching or cost sharing requirement may be satisfied by either or both 
of the following:
    (1) Allowable costs incurred by the grantee, subgrantee or a cost-
type contractor under the assistance agreement. This includes allowable 
costs borne by non-Federal grants or by others cash donations from non-
Federal third parties.
    (2) The value of third party in-kind contributions applicable to the 
period to which the cost sharing or matching requirements applies.
    (b) Qualifications and exceptions--(1) Costs borne by other Federal 
grant agreements. Except as provided by Federal statute, a cost sharing 
or matching requirement may not be met by costs borne by another Federal 
grant. This prohibition does not apply to income earned by a grantee or 
subgrantee from a contract awarded under another Federal grant.
    (2) General revenue sharing. For the purpose of this section, 
general revenue sharing funds distributed under 31 U.S.C. 6702 are not 
considered Federal grant funds.
    (3) Cost or contributions counted towards other Federal costs-
sharing requirements. Neither costs nor the values of third party in-
kind contributions may count towards satisfying a cost sharing or 
matching requirement of a grant agreement if they have been or will be 
counted towards satisfying a cost sharing or matching requirement of 
another Federal grant agreement, a Federal procurement contract, or any 
other award of Federal funds.
    (4) Costs financed by program income. Costs financed by program 
income, as defined in Sec. 3016.25, shall not count towards satisfying a 
cost sharing or matching requirement unless they are expressly permitted 
in the terms of the assistance agreement. (This use of general program 
income is described in Sec. 3016.25(g).)
    (5) Services or property financed by income earned by contractors. 
Contractors under a grant may earn income from the activities carried 
out under the contract in addition to the amounts earned from the party 
awarding the contract. No costs of services or property supported by 
this income may count toward satisfying a cost sharing or matching 
requirement unless other provisions of the grant agreement expressly 
permit this kind of income to be used to meet the requirement.
    (6) Records. Costs and third party in-kind contributions counting 
towards satisfying a cost sharing or matching requirement must be 
verifiable from the records of grantees and subgrantee or cost-type 
contractors. These records must show how the value placed on third party 
in-kind contributions was derived. To the extent feasible, volunteer 
services will be supported by the same methods that the organization 
uses to support the allocability of regular personnel costs.
    (7) Special standards for third party in-kind contributions. (i) 
Third party in-kind contributions count towards satisfying a cost 
sharing or matching requirement only where, if the party receiving the 
contributions were to pay for them, the payments would be allowable 
costs.
    (ii) Some third party in-kind contributions are goods and services 
that, if the grantee, subgrantee, or contractor receiving the 
contribution had to pay for them, the payments would have been an 
indirect costs. Costs sharing or matching credit for such contributions 
shall be given only if the grantee, subgrantee, or contractor has 
established, along with its regular indirect cost rate, a special rate 
for allocating to individual projects or programs the value of the 
contributions.
    (iii) A third party in-kind contribution to a fixed-price contract 
may count towards satisfying a cost sharing or matching requirement only 
if it results in:

[[Page 116]]

    (A) An increase in the services or property provided under the 
contract (without additional cost to the grantee or subgrantee) or
    (B) A cost savings to the grantee or subgrantee.
    (iv) The values placed on third party in-kind contributions for cost 
sharing or matching purposes will conform to the rules in the succeeding 
sections of this part. If a third party in-kind contribution is a type 
not treated in those sections, the value placed upon it shall be fair 
and reasonable.
    (c) Valuation of donated services--(1) Volunteer services. Unpaid 
services provided to a grantee or subgrantee by individuals will be 
valued at rates consistent with those ordinarily paid for similar work 
in the grantee's or subgrantee's organization. If the grantee or 
subgrantee does not have employees performing similar work, the rates 
will be consistent with those ordinarily paid by other employers for 
similar work in the same labor market. In either case, a reasonable 
amount for fringe benefits may be included in the valuation.
    (2) Employees of other organizations. When an employer other than a 
grantee, subgrantee, or cost-type contractor furnishes free of charge 
the services of an employee in the employee's normal line of work, the 
services will be valued at the employee's regular rate of pay exclusive 
of the employee's fringe benefits and overhead costs. If the services 
are in a different line of work, paragraph (c)(1) of this section 
applies.
    (d) Valuation of third party donated supplies and loaned equipment 
or space. (1) If a third party donates supplies, the contribution will 
be valued at the market value of the supplies at the time of donation.
    (2) If a third party donates the use of equipment or space in a 
building but retains title, the contribution will be valued at the fair 
rental rate of the equipment or space.
    (e) Valuation of third party donated equipment, buildings, and land. 
If a third party donates equipment, buildings, or land, and title passes 
to a grantee or subgrantee, the treatment of the donated property will 
depend upon the purpose of the grant or subgrant, as follows:
    (1) Awards for capital expenditures. If the purpose of the grant or 
subgrant is to assist the grantee or subgrantee in the acquisition of 
property, the market value of that property at the time of donation may 
be counted as cost sharing or matching,
    (2) Other awards. If assisting in the acquisition of property is not 
the purpose of the grant or subgrant, paragraphs (e)(2) (i) and (ii) of 
this section apply:
    (i) If approval is obtained from the awarding agency, the market 
value at the time of donation of the donated equipment or buildings and 
the fair rental rate of the donated land may be counted as cost sharing 
or matching. In the case of a subgrant, the terms of the grant agreement 
may require that the approval be obtained from the Federal agency as 
well as the grantee. In all cases, the approval may be given only if a 
purchase of the equipment or rental of the land would be approved as an 
allowable direct cost. If any part of the donated property was acquired 
with Federal funds, only the non-federal share of the property may be 
counted as cost-sharing or matching.
    (ii) If approval is not obtained under paragraph (e)(2)(i) of this 
section, no amount may be counted for donated land, and only 
depreciation or use allowances may be counted for donated equipment and 
buildings. The depreciation or use allowances for this property are not 
treated as third party in-kind contributions. Instead, they are treated 
as costs incurred by the grantee or subgrantee. They are computed and 
allocated (usually as indirect costs) in accordance with the cost 
principles specified in Sec. 3016.22, in the same way as depreciation or 
use allowances for purchased equipment and buildings. The amount of 
depreciation or use allowances for donated equipment and buildings is 
based on the property's market value at the time it was donated.
    (f) Valuation of grantee or subgrantee donated real property for 
construction/acquisition. If a grantee or subgrantee donates real 
property for a construction or facilities acquisition project, the 
current market value of that property may be counted as cost sharing or 
matching. If any part of the donated property was acquired with Federal

[[Page 117]]

funds, only the non-federal share of the property may be counted as cost 
sharing or matching.
    (g) Appraisal of real property. In some cases under paragraphs (d), 
(e) and (f) of this section, it will be necessary to establish the 
market value of land or a building or the fair rental rate of land or of 
space in a building. In these cases, the Federal agency may require the 
market value or fair rental value be set by an independent appraiser, 
and that the value or rate be certified by the grantee. This requirement 
will also be imposed by the grantee on subgrantees.



Sec. 3016.25  Program income.

    (a) General. Grantees are encouraged to earn income to defray 
program costs. Program income includes income from fees for services 
performed, from the use or rental of real or personal property acquired 
with grant funds, from the sale of commodities or items fabricated under 
a grant agreement, and from payments of principal and interest on loans 
made with grant funds. Except as otherwise provided in regulations of 
the Federal agency, program income does not include interest on grant 
funds, rebates, credits, discounts, refunds, etc. and interest earned on 
any of them.
    (b) Definition of program income. Program income means gross income 
received by the grantee or subgrantee directly generated by a grant 
supported activity, or earned only as a result of the grant agreement 
during the grant period. ``During the grant period'' is the time between 
the effective date of the award and the ending date of the award 
reflected in the final financial report.
    (c) Cost of generating program income. If authorized by Federal 
regulations or the grant agreement, costs incident to the generation of 
program income may be deducted from gross income to determine program 
income.
    (d) Governmental revenues. Taxes, special assessments, levies, 
fines, and other such revenues raised by a grantee or subgrantee are not 
program income unless the revenues are specifically identified in the 
grant agreement or Federal agency regulations as program income.
    (e) Royalties. Income from royalties and license fees for 
copyrighted material, patents, and inventions developed by a grantee or 
subgrantee is program income only if the revenues are specifically 
identified in the grant agreement or Federal agency regulations as 
program income. (See Sec. 3016.34.)
    (f) Property. Proceeds from the sale of real property or equipment 
will be handled in accordance with the requirements of Secs. 3016.31 and 
3016.32.
    (g) Use of program income. Program income shall be deducted from 
outlays which may be both Federal and non-Federal as described below, 
unless the Federal agency regulations or the grant agreement specify 
another alternative (or a combination of the alternatives). In 
specifying alternatives, the Federal agency may distinguish between 
income earned by the grantee and income earned by subgrantees and 
between the sources, kinds, or amounts of income. When Federal agencies 
authorize the alternatives in paragraphs (g) (2) and (3) of this 
section, program income in excess of any limits stipulated shall also be 
deducted from outlays.
    (1) Deduction. Ordinarily program income shall be deducted from 
total allowable costs to determine the net allowable costs. Program 
income shall be used for current costs unless the Federal agency 
authorizes otherwise. Program income which the grantee did not 
anticipate at the time of the award shall be used to reduce the Federal 
agency and grantee contributions rather than to increase the funds 
committed to the project.
    (2) Addition. When authorized, program income may be added to the 
funds committed to the grant agreement by the Federal agency and the 
grantee. The program income shall be used for the purposes and under the 
conditions of the grant agreement.
    (3) Cost sharing or matching. When authorized, program income may be 
used to meet the cost sharing or matching requirement of the grant 
agreement. The amount of the Federal grant award remains the same.
    (h) Income after the award period. There are no Federal requirements 
governing the disposition of program income earned after the end of the 
award

[[Page 118]]

period (i.e., until the ending date of the final financial report, see 
paragraph (a) of this section), unless the terms of the agreement or the 
Federal agency regulations provide otherwise.



Sec. 3016.26  Non-Federal audit.

    (a) Basic rule. Grantees and subgrantees are responsible for 
obtaining audits in accordance with the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of 
States, Local Governments, and Non-Profit Organizations.'' The audits 
shall be made by an independent auditor in accordance with generally 
accepted government auditing standards covering financial audits.
    (1) In USDA, revised OMB Circular A-133 is implemented in 7 CFR part 
3052, ``Audits of States, Local Governments, and Non-Profit 
Organizations.''
    (2) [Reserved]
    (b) Subgrantees. State or local governments, as those terms are 
defined for purposes of the Single Audit Act Amendments of 1996, that 
provide Federal awards to a subgrantee, which expends $300,000 or more 
(or other amount as specified by OMB) in Federal awards in a fiscal 
year, shall:
    (1) Determine whether State or local subgrantees have met the audit 
requirements of the Act and whether subgrantees covered by OMB Circular 
A-110, ``Uniform Administrative Requirements for Grants and Agreements 
with Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' have met the audit requirements of the Act. Commercial 
contractors (private for-profit and private and governmental 
organizations) providing goods and services to State and local 
governments are not required to have a single audit performed. State and 
local governments should use their own procedures to ensure that the 
contractor has complied with laws and regulations affecting the 
expenditure of Federal funds;
    (2) Determine whether the subgrantee spent Federal assistance funds 
provided in accordance with applicable laws and regulations. This may be 
accomplished by reviewing an audit of the subgrantee made in accordance 
with the Act, Circular A-110, or through other means (e.g., program 
reviews) if the subgrantee has not had such an audit;
    (3) Ensure that appropriate corrective action is taken within six 
months after receipt of the audit report in instance of noncompliance 
with Federal laws and regulations;
    (4) Consider whether subgrantee audits necessitate adjustment of the 
grantee's own records; and
    (5) Require each subgrantee to permit independent auditors to have 
access to the records and financial statements.
    (c) Auditor selection. In arranging for audit services, Sec. 3016.36 
shall be followed.

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 62 FR 45939, Aug. 29, 
1997]

                    Changes, Property, and Subawards



Sec. 3016.30  Changes.

    (a) General. Grantees and subgrantees are permitted to rebudget 
within the approved direct cost budget to meet unanticipated 
requirements and may make limited program changes to the approved 
project. However, unless waived by the awarding agency, certain types of 
post-award changes in budgets and projects shall require the prior 
written approval of the awarding agency.
    (b) Relation to cost principles. The applicable cost principles (see 
Sec. 3016.22) contain requirements for prior approval of certain types 
of costs. Except where waived, those requirements apply to all grants 
and subgrants even if paragraphs (c) through (f) of this section do not.
    (c) Budget changes. (1) Nonconstruction projects. Except as stated 
in other regulations or an award document, grantees or subgrantees shall 
obtain the prior approval of the awarding agency whenever any of the 
following changes is anticipated under a nonconstruction award:
    (i) Any revision which would result in the need for additional 
funding.
    (ii) Unless waived by the awarding agency, cumulative transfers 
among direct cost categories, or, if applicable, among separately 
budgeted programs, projects, functions, or activities which exceed or 
are expected to exceed ten percent of the current total approved

[[Page 119]]

budget, whenever the awarding agency's share exceeds $100,000.
    (iii) Transfer of funds allotted for training allowances (i.e., from 
direct payments to trainees to other expense categories).
    (2) Construction projects. Grantees and subgrantees shall obtain 
prior written approval for any budget revision which would result in the 
need for additional funds.
    (3) Combined construction and nonconstruction projects. When a grant 
or subgrant provides funding for both construction and nonconstruction 
activities, the grantee or subgrantee must obtain prior written approval 
from the awarding agency before making any fund or budget transfer from 
nonconstruction to construction or vice versa.
    (d) Programmatic changes. Grantees or subgrantees must obtain the 
prior approval of the awarding agency whenever any of the following 
actions is anticipated:
    (1) Any revision of the scope or objectives of the project 
(regardless of whether there is an associated budget revision requiring 
prior approval).
    (2) Need to extend the period of availability of funds.
    (3) Changes in key persons in cases where specified in an 
application or a grant award. In research projects, a change in the 
project director or principal investigator shall always require approval 
unless waived by the awarding agency.
    (4) Under nonconstruction projects, contracting out, subgranting (if 
authorized by law) or otherwise obtaining the services of a third party 
to perform activities which are central to the purposes of the award. 
This approval requirement is in addition to the approval requirements of 
Sec. 3016.36 but does not apply to the procurement of equipment, 
supplies, and general support services.
    (e) Additional prior approval requirements. The awarding agency may 
not require prior approval for any budget revision which is not 
described in paragraph (c) of this section.
    (f) Requesting prior approval. (1) A request for prior approval of 
any budget revision will be in the same budget formal the grantee used 
in its application and shall be accompanied by a narrative justification 
for the proposed revision.
    (2) A request for a prior approval under the applicable Federal cost 
principles (see Sec. 3016.22) may be made by letter.
    (3) A request by a subgrantee for prior approval will be addressed 
in writing to the grantee. The grantee will promptly review such request 
and shall approve or disapprove the request in writing. A grantee will 
not approve any budget or project revision which is inconsistent with 
the purpose or terms and conditions of the Federal grant to the grantee. 
If the revision, requested by the subgrantee would result in a change to 
the grantee's approved project which requires Federal prior approval, 
the grantee will obtain the Federal agency's approval before approving 
the subgrantee's request.



Sec. 3016.31  Real property.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to real property acquired under a grant or subgrant 
will vest upon acquisition in the grantee or subgrantee respectively.
    (b) Use. Except as otherwise provided by Federal statutes, real 
property will be used for the originally authorized purposes as long as 
needed for that purposes, and the grantee or subgrantee shall not 
dispose of or encumber its title or other interests.
    (c) Disposition. When real property is no longer needed for the 
originally authorized purpose, the grantee or subgrantee will request 
disposition instructions from the awarding agency. The instructions will 
provide for one of the following alternatives:
    (1) Retention of title. Retain title after compensating the awarding 
agency. The amount paid to the awarding agency will be computed by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the fair market value of the property. 
However, in those situations where a grantee or subgrantee is disposing 
of real property acquired

[[Page 120]]

with grant funds and acquiring replacement real property under the same 
program, the net proceeds from the disposition may be used as an offset 
to the cost of the replacement property.
    (2) Sale of property. Sell the property and compensate the awarding 
agency. The amount due to the awarding agency will be calculated by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the proceeds of the sale after deduction of 
any actual and reasonable selling and fixing-up expenses. If the grant 
is still active, the net proceeds from sale may be offset against the 
original cost of the property. When a grantee or subgrantee is directed 
to sell property, sales procedures shall be followed that provide for 
competition to the extent practicable and result in the highest possible 
return.
    (3) Transfer of title. Transfer title to the awarding agency or to a 
third-party designated/approved by the awarding agency. The grantee or 
subgrantee shall be paid an amount calculated by applying the grantee or 
subgrantee's percentage of participation in the purchase of the real 
property to the current fair market value of the property.



Sec. 3016.32  Equipment.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to equipment acquired under a grant or subgrant will 
vest upon acquisition in the grantee or subgrantee respectively.
    (b) States. A State will use, manage, and dispose of equipment 
acquired under a grant by the State in accordance with State laws and 
procedures. Other grantees and subgrantees will follow paragraphs (c) 
through (e) of this section.
    (c) Use. (1) Equipment shall be used by the grantee or subgrantee in 
the program or project for which it was acquired as long as needed, 
whether or not the project or program continues to be supported by 
Federal funds. When no longer needed for the original program or 
project, the equipment may be used in other activities currently or 
previously supported by a Federal agency.
    (2) The grantee or subgrantee shall also make equipment available 
for use on other projects or programs currently or previously supported 
by the Federal Government, providing such use will not interfere with 
the work on the projects or program for which it was originally 
acquired. First preference for other use shall be given to other 
programs or projects supported by the awarding agency. User fees should 
be considered if appropriate.
    (3) Notwithstanding the encouragement in Sec. 3016.25(a) to earn 
program income, the grantee or subgrantee must not use equipment 
acquired with grant funds to provide services for a fee to compete 
unfairly with private companies that provide equivalent services, unless 
specifically permitted or contemplated by Federal statute.
    (4) When acquiring replacement equipment, the grantee or subgrantee 
may use the equipment to be replaced as a trade-in or sell the property 
and use the proceeds to offset the cost of the replacement property, 
subject to the approval of the awarding agency.
    (d) Management requirements. Procedures for managing equipment 
(including replacement equipment), whether acquired in whole or in part 
with grant funds, until disposition takes place will, as a minimum, meet 
the following requirements:
    (1) Property records must be maintained that include a description 
of the property, a serial number or other identification number, the 
source of property, who holds title, the acquisition date, and cost of 
the property, percentage of Federal participation in the cost of the 
property, the location, use and condition of the property, and any 
ultimate disposition data including the date of disposal and sale price 
of the property.
    (2) A physical inventory of the property must be taken and the 
results reconciled with the property records at least once every two 
years.
    (3) A control system must be developed to ensure adequate safeguards 
to prevent loss, damage, or theft of the property. Any loss, damage, or 
theft shall be investigated.
    (4) Adequate maintenance procedures must be developed to keep the 
property in good condition.

[[Page 121]]

    (5) If the grantee or subgrantee is authorized or required to sell 
the property, proper sales procedures must be established to ensure the 
highest possible return.
    (e) Disposition. When original or replacement equipment acquired 
under a grant or subgrant is no longer needed for the original project 
or program or for other activities currently or previously supported by 
a Federal agency, disposition of the equipment will be made as follows:
    (1) Items of equipment with a current per-unit fair market value of 
less than $5,000 may be retained, sold or otherwise disposed of with no 
further obligation to the awarding agency.
    (2) Items of equipment with a current per unit fair market value in 
excess of $5,000 may be retained or sold and the awarding agency shall 
have a right to an amount calculated by multiplying the current market 
value or proceeds from sale by the awarding agency's share of the 
equipment.
    (3) In cases where a grantee or subgrantee fails to take appropriate 
disposition actions, the awarding agency may direct the grantee or 
subgrantee to take excess and disposition actions.
    (f) Federal equipment. In the event a grantee or subgrantee is 
provided federally-owned equipment:
    (1) Title will remain vested in the Federal Government.
    (2) Grantees or subgrantees will manage the equipment in accordance 
with Federal agency rules and procedures, and submit an annual inventory 
listing.
    (3) When the equipment is no longer needed, the grantee or 
subgrantee will request disposition instructions from the Federal 
agency.
    (g) Right to transfer title. The Federal awarding agency may reserve 
the right to transfer title to the Federal Government or a third part 
named by the awarding agency when such a third party is otherwise 
eligible under existing statutes. Such transfers shall be subject to the 
following standards:
    (1) The property shall be identified in the grant or otherwise made 
known to the grantee in writing.
    (2) The Federal awarding agency shall issue disposition instruction 
within 120 calendar days after the end of the Federal support of the 
project for which it was acquired. If the Federal awarding agency fails 
to issue disposition instructions within the 120 calendar-day period the 
grantee shall follow Sec. 3016.32(e).
    (3) When title to equipment is transferred, the grantee shall be 
paid an amount calculated by applying the percentage of participation in 
the purchase to the current fair market value of the property.



Sec. 3016.33  Supplies.

    (a) Title. Title to supplies acquired under a grant or subgrant will 
vest, upon acquisition, in the grantee or subgrantee respectively.
    (b) Disposition. If there is a residual inventory of unused supplies 
exceeding $5,000 in total aggregate fair market value upon termination 
or completion of the award, and if the supplies are not needed for any 
other federally sponsored programs or projects, the grantee or 
subgrantee shall compensate the awarding agency for its share.



Sec. 3016.34  Copyrights.

    The Federal awarding agency reserves a royalty-free, nonexclusive, 
and irrevocable license to reproduce, publish or otherwise use, and to 
authorize others to use, for Federal Government purposes:
    (a) The copyright in any work developed under a grant, subgrant, or 
contract under a grant or subgrant; and
    (b) Any rights of copyright to which a grantee, subgrantee or a 
contractor purchases ownership with grant support.



Sec. 3016.35  Subawards to debarred and suspended parties.

    Grantees and subgrantees must not make any award or permit any award 
(subgrant or contract) at any tier to any party which is debarred or 
suspended or is otherwise excluded from or ineligible for participation 
in Federal assistance programs under Executive Order 12549, ``Debarment 
and Suspension.''



Sec. 3016.36  Procurement.

    (a) States. When procuring property and services under a grant, a 
State will

[[Page 122]]

follow the same policies and procedures it uses for procurements from 
its non-Federal funds. The State will ensure that every purchase order 
or other contract includes any clauses required by Federal statutes and 
executive orders and their implementing regulations. Other grantees and 
subgrantees will follow paragraphs (b) through (i) in this section.
    (b) Procurement standards. (1) Grantees and subgrantees will use 
their own procurement procedures which reflect applicable State and 
local laws and regulations, provided that the procurements conform to 
applicable Federal law and the standards identified in this section.
    (2) Grantees and subgrantees will maintain a contract administration 
system which ensures that contractors perform in accordance with the 
terms, conditions, and specifications of their contracts or purchase 
orders.
    (3) Grantees and subgrantees will maintain a written code of 
standards of conduct governing the performance of their employees 
engaged in the award and administration of contracts. No employee, 
officer or agent of the grantee or subgrantee shall participate in 
selection, or in the award or administration of a contract supported by 
Federal funds if a conflict of interest, real or apparent, would be 
involved. Such a conflict would arise when:
    (i) The employee, officer or agent,
    (ii) Any member of his immediate family,
    (iii) His or her partner, or
    (iv) An organization which employs, or is about to employ, any of 
the above, has a financial or other interest in the firm selected for 
award. The grantee's or subgrantee's officers, employees or agents will 
neither solicit nor accept gratuities, favors or anything of monetary 
value from contractors, potential contractors, or parties to 
subagreements. Grantee and subgrantees may set minimum rules where the 
financial interest is not substantial or the gift is an unsolicited item 
of nominal intrinsic value. To the extent permitted by State or local 
law or regulations, such standards or conduct will provide for 
penalties, sanctions, or other disciplinary actions for violations of 
such standards by the grantee's and subgrantee's officers, employees, or 
agents, or by contractors or their agents. The awarding agency may in 
regulation provide additional prohibitions relative to real, apparent, 
or potential conflicts of interest.
    (4) Grantee and subgrantee procedures will provide for a review of 
proposed procurements to avoid purchase of unnecessary or duplicative 
items. Consideration should be given to consolidating or breaking out 
procurements to obtain a more economical purchase. Where appropriate, an 
analysis will be made of lease versus purchase alternatives, and any 
other appropriate analysis to determine the most economical approach.
    (5) To foster greater economy and efficiency, grantees and 
subgrantees are encouraged to enter into State and local 
intergovernmental agreements for procurement or use of common goods and 
services.
    (6) Grantees and subgrantees are encouraged to use Federal excess 
and surplus property in lieu of purchasing new equipment and property 
whenever such use is feasible and reduces project costs.
    (7) Grantees and subgrantees are encouraged to use value engineering 
clauses in contracts for construction projects of sufficient size to 
offer reasonable opportunities for cost reductions. Value engineering is 
a systematic and creative analysis of each contract item or task to 
ensure that its essential function is provided at the overall lower 
cost.
    (8) Grantees and subgrantees will make awards only to responsible 
contractors possessing the ability to perform successfully under the 
terms and conditions of a proposed procurement. Consideration will be 
given to such matters as contractor integrity, compliance with public 
policy, record of past performance, and financial and technical 
resources.
    (9) Grantees and subgrantees will maintain records sufficient to 
detail the significant history of a procurement. These records will 
include, but are not necessarily limited to the following: rationale for 
the method of procurement, selection of contract type, contractor 
selection or rejection, and the basis for the contract price.

[[Page 123]]

    (10) Grantees and subgrantees will use time and material type 
contracts only--
    (i) After a determination that no other contract is suitable, and
    (ii) If the contract includes a ceiling price that the contractor 
exceeds at its own risk.
    (11) Grantees and subgrantees alone will be responsible, in 
accordance with good administrative practice and sound business 
judgment, for the settlement of all contractual and administrative 
issues arising out of procurements. These issues include, but are not 
limited to source evaluation, protests, disputes, and claims. These 
standards do not relieve the grantee or subgrantee of any contractual 
responsibilities under its contracts. Federal agencies will not 
substitute their judgment for that of the grantee or subgrantee unless 
the matter is primarily a Federal concern. Violations of law will be 
referred to the local, State, or Federal authority having proper 
jurisdiction.
    (12) Grantees and subgrantees will have protest procedures to handle 
and resolve disputes relating to their procurements and shall in all 
instances disclose information regarding the protest to the awarding 
agency. A protestor must exhaust all administrative remedies with the 
grantee and subgrantee before pursuing a protest with the Federal 
agency. Reviews of protests by the Federal agency will be limited to:
    (i) Violations of Federal law or regulations and the standards of 
this section (violations of State or local law will be under the 
jurisdiction of State or local authorities) and
    (ii) Violations of the grantee's or subgrantee's protest procedures 
for failure to review a complaint or protest. Protests received by the 
Federal agency other than those specified above will be referred to the 
grantee or subgrantee.
    (c) Competition. (1) All procurement transactions will be conducted 
in a manner providing full and open competition consistent with the 
standards of Sec. 3016.36. Some of the situations considered to be 
restrictive of competition include but are not limited to:
    (i) Placing unreasonable requirements on firms in order for them to 
qualify to do business,
    (ii) Requiring unnecessary experience and excessive bonding,
    (iii) Noncompetitive pricing practices between firms or between 
affiliated companies,
    (iv) Noncompetitive awards to consultants that are on retainer 
contracts,
    (v) Organizational conflicts of interest,
    (vi) Specifying only a ``brand name'' product instead of allowing 
``an equal'' product to be offered and describing the performance of 
other relevant requirements of the procurement, and
    (vii) Any arbitrary action in the procurement process.
    (2) Grantees and subgrantees will conduct procurements in a manner 
that prohibits the use of statutorily or administratively imposed in-
State or local geographical preferences in the evaluation of bids or 
proposals, except in those cases where applicable Federal statutes 
expressly mandate or encourage geographic preference. Nothing in this 
section preempts State licensing laws. When contracting for 
architectural and engineering (A/E) services, geographic location may be 
a selection criteria provided its application leaves an appropriate 
number of qualified firms, given the nature and size of the project, to 
compete for the contract.
    (3) Grantees will have written selection procedures for procurement 
transactions. These procedures will ensure that all solicitations:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured. Such 
description shall not, in competitive procurements, contain features 
which unduly restrict competition. The description may include a 
statement of the qualitative nature of the material, product or service 
to be procured, and when necessary, shall set forth those minimum 
essential characteristics and standards to which it must conform if it 
is to satisfy its intended use. Detailed product specifications should 
be avoided if at all possible. When it is impractical or uneconomical to 
make a clear and accurate description of the technical requirements, a 
``brand name or equal'' description may be used as a means to define the 
performance or

[[Page 124]]

other salient requirements of a procurement. The specific features of 
the named brand which must be met by offerors shall be clearly stated; 
and
    (ii) Identify all requirements which the offerors must fulfill and 
all other factors to be used in evaluating bids or proposals.
    (4) Grantees and subgrantees will ensure that all prequalified lists 
of persons, firms, or products which are used in acquiring goods and 
services are current and include enough qualified sources to ensure 
maximum open and free competition. Also, grantees and subgrantees will 
not preclude potential bidders from qualifying during the solicitation 
period.
    (d) Methods of procurement to be followed. (1) Procurement by small 
purchase procedures. Small purchase procedures are those relatively 
simple and informal procurement methods for securing services, supplies, 
or other property that do not cost more than the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If 
small purchase procedures are used, price or rate quotations shall be 
obtained from an adequate number of qualified sources.
    (2) Procurement by sealed bids (formal advertising). Bids are 
publicly solicited and a firm-fixed-price contract (lump sum or unit 
price) is awarded to the responsible bidder whose bid, conforming with 
all the material terms and conditions of the invitation for bids, is the 
lowest in price. The sealed bid method is the preferred method for 
procuring construction, if the conditions in Sec. 3016.36(d)(2)(i) 
apply.
    (i) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (A) A complete, adequate, and realistic specification or purchase 
description is available;
    (B) Two or more responsible bidders are willing and able to compete 
effectively and for the business; and
    (C) The procurement lends itself to a firm fixed price contract and 
the selection of the successful bidder can be made principally on the 
basis of price.
    (ii) If sealed bids are used, the following requirements apply:
    (A) The invitation for bids will be publicly advertised and bids 
shall be solicited from an adequate number of known suppliers, providing 
them sufficient time prior to the date set for opening the bids;
    (B) The invitation for bids, which will include any specifications 
and pertinent attachments, shall define the items or services in order 
for the bidder to properly respond;
    (C) All bids will be publicly opened at the time and place 
prescribed in the invitation for bids;
    (D) A firm fixed-price contract award will be made in writing to the 
lowest responsive and responsible bidder. Where specified in bidding 
documents, factors such as discounts, transportation cost, and life 
cycle costs shall be considered in determining which bid is lowest. 
Payment discounts will only be used to determine the low bid when prior 
experience indicates that such discounts are usually taken advantage of; 
and
    (E) Any or all bids may be rejected if there is a sound documented 
reason.
    (3) Procurement by competitive proposals. The technique of 
competitive proposals is normally conducted with more than one source 
submitting an offer, and either a fixed-price or cost-reimbursement type 
contract is awarded. It is generally used when conditions are not 
appropriate for the use of sealed bids. If this method is used, the 
following requirements apply:
    (i) Requests for proposals will be publicized and identify all 
evaluation factors and their relative importance. Any response to 
publicized requests for proposals shall be honored to the maximum extent 
practical;
    (ii) Proposals will be solicited from an adequate number of 
qualified sources;
    (iii) Grantees and subgrantees will have a method for conducting 
technical evaluations of the proposals received and for selecting 
awardees;
    (iv) Awards will be made to the responsible firm whose proposal is 
most advantageous to the program, with price and other factors 
considered; and
    (v) Grantees and subgrantees may use competitive proposal procedures 
for qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby competitors' qualifications are evaluated 
and the

[[Page 125]]

most qualified competitor is selected, subject to negotiation of fair 
and reasonable compensation. The method, where price is not used as a 
selection factor, can only be used in procurement of A/E professional 
services. It cannot be used to purchase other types of services though 
A/E firms are a potential source to perform the proposed effort.
    (4) Procurement by noncompetitive proposals is procurement through 
solicitation of a proposal from only one source, or after solicitation 
of a number of sources, competition is determined inadequate.
    (i) Procurement by noncompetitive proposals may be used only when 
the award of a contract is infeasible under small purchase procedures, 
sealed bids or competitive proposals and one of the following 
circumstances applies:
    (A) The item is available only from a single source;
    (B) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (C) The awarding agency authorizes noncompetitive proposals; or
    (D) After solicitation of a number of sources, competition is 
determined inadequate.
    (ii) Cost analysis, i.e., verifying the proposed cost data, the 
projections of the data, and the evaluation of the specific elements of 
costs and profits, is required.
    (iii) Grantees and subgrantees may be required to submit the 
proposed procurement to the awarding agency for pre-award review in 
accordance with paragraph (g) of this section.
    (e) Contracting with small and minority firms, women's business 
enterprise and labor surplus area firms. (1) The grantee and subgrantee 
will take all necessary affirmative steps to assure that minority firms, 
women's business enterprises, and labor surplus area firms are used when 
possible.
    (2) Affirmative steps shall include:
    (i) Placing qualified small and minority businesses and women's 
business enterprises on solicitation lists;
    (ii) Assuring that small and minority businesses, and women's 
business enterprises are solicited whenever they are potential sources;
    (iii) Dividing total requirements, when economically feasible, into 
smaller tasks or quantities to permit maximum participation by small and 
minority business, and women's business enterprises;
    (iv) Establishing delivery schedules, where the requirement permits, 
which encourage participation by small and minority business, and 
women's business enterprises;
    (v) Using the services and assistance of the Small Business 
Administration, and the Minority Business Development Agency of the 
Department of Commerce; and
    (vi) Requiring the prime contractor, if subcontracts are to be let, 
to take the affirmative steps listed in paragraphs (e)(2) (i) through 
(v) of this section.
    (f) Contract cost and price. (1) Grantees and subgrantees must 
perform a cost or price analysis in connection with every procurement 
action including contract modifications. The method and degree of 
analysis is dependent on the facts surrounding the particular 
procurement situation, but as a starting point, grantees must make 
independent estimates before receiving bids or proposals. A cost 
analysis must be performed when the offeror is required to submit the 
elements of his estimated cost, e.g., under professional, consulting, 
and architectural engineering services contracts. A cost analysis will 
be necessary when adequate price competition is lacking, and for sole 
source procurements, including contract modifications or change orders, 
unless price reasonableness can be established on the basis of a catalog 
or market price of a commercial product sold in substantial quantities 
to the general public or based on prices set by law or regulation. A 
price analysis will be used in all other instances to determine the 
reasonableness of the proposed contract price.
    (2) Grantees and subgrantees will negotiate profit as a separate 
element of the price for each contract in which there is no price 
competition and in all cases where cost analysis is performed. To 
establish a fair and reasonable profit, consideration will be given to 
the

[[Page 126]]

complexity of the work to be performed, the risk borne by the 
contractor, the contractor's investment, the amount of subcontracting, 
the quality of its record of past performance, and industry profit rates 
in the surrounding geographical area for similar work.
    (3) Costs or prices based on estimated costs for contracts under 
grants will be allowable only to the extent that costs incurred or cost 
estimates included in negotiated prices are consistent with Federal cost 
principles (see Sec. 3016.22). Grantees may reference their own cost 
principles that comply with the applicable Federal cost principles.
    (4) The cost plus a percentage of cost and percentage of 
construction cost methods of contracting shall not be used.
    (g) Awarding agency review. (1) Grantees and subgrantees must make 
available, upon request of the awarding agency, technical specifications 
on proposed procurements where the awarding agency believes such review 
is needed to ensure that the item and/or service specified is the one 
being proposed for purchase. This review generally will take place prior 
to the time the specification is incorporated into a solicitation 
document. However, if the grantee or subgrantee desires to have the 
review accomplished after a solicitation has been developed, the 
awarding agency may still review the specifications, with such review 
usually limited to the technical aspects of the proposed purchase.
    (2) Grantees and subgrantees must on request make available for 
awarding agency pre-award review procurement documents, such as requests 
for proposals or invitations for bids, independent cost estimates, etc. 
when:
    (i) A grantee's or subgrantee's procurement procedures or operation 
fails to comply with the procurement standards in this section; or
    (ii) The procurement is expected to exceed the simplified 
acquisition threshold and is to be awarded without competition or only 
one bid or offer is received in response to a solicitation; or
    (iii) The procurement, which is expected to exceed the simplified 
acquisition threshold, specifies a ``brand name'' product; or
    (iv) The proposed award is more than the simplified acquisition 
threshold and is to be awarded to other than the apparent low bidder 
under a sealed bid procurement; or
    (v) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the simplified acquisition 
threshold.
    (3) A grantee or subgrantee will be exempt from the pre-award review 
in paragraph (g)(2) of this section if the awarding agency determines 
that its procurement systems comply with the standards of this section.
    (i) A grantee or subgrantee may request that its procurement system 
be reviewed by the awarding agency to determine whether its system meets 
these standards in order for its system to be certified. Generally, 
these reviews shall occur where there is a continuous high-dollar 
funding, and third-party contracts are awarded on a regular basis.
    (ii) A grantee or subgrantee may self-certify its procurement 
system. Such self-certification shall not limit the awarding agency's 
right to survey the system. Under a self-certification procedure, 
awarding agencies may wish to rely on written assurances from the 
grantee or subgrantee that it is complying with these standards. A 
grantee or subgrantee will cite specific procedures, regulations, 
standards, etc., as being in compliance with these requirements and have 
its system available for review.
    (h) Bonding requirements. For construction or facility improvement 
contracts or subcontracts exceeding the simplified acquisition 
threshold, the awarding agency may accept the bonding policy and 
requirements of the grantee or subgrantee provided the awarding agency 
has made a determination that the awarding agency's interest is 
adequately protected. If such a determination has not been made, the 
minimum requirements shall be as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond,

[[Page 127]]

certified check, or other negotiable instrument accompanying a bid as 
assurance that the bidder will, upon acceptance of his bid, execute such 
contractual documents as may be required within the time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is one executed in 
connection with a contract to secure fulfillment of all the contractor's 
obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by law of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (i) Contract provisions. A grantee's and subgrantee's contracts must 
contain provisions in paragraph (i) of this section. Federal agencies 
are permitted to require changes, remedies, changed conditions, access 
and records retention, suspension of work, and other clauses approved by 
the Office of Federal Procurement Policy.
    (1) Administrative, contractual, or legal remedies in instances 
where contractors violate or breach contract terms, and provide for such 
sanctions and penalties as may be appropriate. (Contracts more than the 
simplified acquisition threshold)
    (2) Termination for cause and for convenience by the grantee or 
subgrantee including the manner by which it will be effected and the 
basis for settlement. (All contracts in excess of $10,000)
    (3) Compliance with Executive Order 11246 of September 24, 1965, 
entitled ``Equal Employment Opportunity,'' as amended by Executive Order 
11375 of October 13, 1967, and as supplemented in Department of Labor 
regulations (41 CFR chapter 60). (All construction contracts awarded in 
excess of $10,000 by grantees and their contractors or subgrantees)
    (4) Compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C. 
874) as supplemented in Department of Labor regulations (29 CFR Part 3). 
(All contracts and subgrants for construction or repair)
    (5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a-7) 
as supplemented by Department of Labor regulations (29 CFR Part 5). 
(Construction contracts in excess of $2000 awarded by grantees and 
subgrantees when required by Federal grant program legislation)
    (6) Compliance with Sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330) as supplemented by 
Department of Labor regulations (29 CFR Part 5). (Construction contracts 
awarded by grantees and subgrantees in excess of $2000, and in excess of 
$2500 for other contracts which involve the employment of mechanics or 
laborers)
    (7) Notice of awarding agency requirements and regulations 
pertaining to reporting.
    (8) Notice of awarding agency requirements and regulations 
pertaining to patent rights with respect to any discovery or invention 
which arises or is developed in the course of or under such contract.
    (9) Awarding agency requirements and regulations pertaining to 
copyrights and rights in data.
    (10) Access by the grantee, the subgrantee, the Federal grantor 
agency, the Comptroller General of the United States, or any of their 
duly authorized representatives to any books, documents, papers, and 
records of the contractor which are directly pertinent to that specific 
contract for the purpose of making audit, examination, excerpts, and 
transcriptions.
    (11) Retention of all required records for three years after 
grantees or subgrantees make final payments and all other pending 
matters are closed.
    (12) Compliance with all applicable standards, orders, or 
requirements issued under section 306 of the Clean Air Act (42 U.S.C. 
1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive 
Order 11738, and Environmental Protection Agency regulations (40 CFR 
part 15). (Contracts, subcontracts, and subgrants of amounts in excess 
of $100,000)
    (13) Mandatory standards and policies relating to energy efficiency 
which are contained in the state energy conservation plan issued in 
compliance with the

[[Page 128]]

Energy Policy and Conservation Act (Pub. L. 94-163, 89 Stat. 871).

[53 FR 8044, 8087, Mar. 11, 1988, as amended at 60 FR 19639, 19641, Apr. 
19, 1995]



Sec. 3016.37  Subgrants.

    (a) States. States shall follow state law and procedures when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis) of financial assistance to local and Indian tribal 
governments. States shall:
    (1) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations;
    (2) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statute and regulation;
    (3) Ensure that a provision for compliance with Sec. 3016.42 is 
placed in every cost reimbursement subgrant; and
    (4) Conform any advances of grant funds to subgrantees substantially 
to the same standards of timing and amount that apply to cash advances 
by Federal agencies.
    (b) All other grantees. All other grantees shall follow the 
provisions of this part which are applicable to awarding agencies when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis) of financial assistance to local and Indian tribal 
governments. Grantees shall:
    (1) Ensure that every subgrant includes a provision for compliance 
with this part;
    (2) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations; 
and
    (3) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statutes and regulations.
    (c) Exceptions. By their own terms, certain provisions of this part 
do not apply to the award and administration of subgrants:
    (1) Section 3016.10;
    (2) Section 3016.11;
    (3) The letter-of-credit procedures specified in Treasury 
Regulations at 31 CFR part 205, cited in Sec. 3016.21; and
    (4) Section 3016.50.

              Reports, Records, Retention, and Enforcement



Sec. 3016.40  Monitoring and reporting program performance.

    (a) Monitoring by grantees. Grantees are responsible for managing 
the day-to-day operations of grant and subgrant supported activities. 
Grantees must monitor grant and subgrant supported activities to assure 
compliance with applicable Federal requirements and that performance 
goals are being achieved. Grantee monitoring must cover each program, 
function or activity.
    (b) Nonconstruction performance reports. The Federal agency may, if 
it decides that performance information available from subsequent 
applications contains sufficient information to meet its programmatic 
needs, require the grantee to submit a performance report only upon 
expiration or termination of grant support. Unless waived by the Federal 
agency this report will be due on the same date as the final Financial 
Status Report.
    (1) Grantees shall submit annual performance reports unless the 
awarding agency requires quarterly or semi-annual reports. However, 
performance reports will not be required more frequently than quarterly. 
Annual reports shall be due 90 days after the grant year, quarterly or 
semi-annual reports shall be due 30 days after the reporting period. The 
final performance report will be due 90 days after the expiration or 
termination of grant support. If a justified request is submitted by a 
grantee, the Federal agency may extend the due date for any performance 
report. Additionally, requirements for unnecessary performance reports 
may be waived by the Federal agency.
    (2) Performance reports will contain, for each grant, brief 
information on the following:
    (i) A comparison of actual accomplishments to the objectives 
established for the period. Where the output of the project can be 
quantified, a computation of the cost per unit of output may be required 
if that information will be useful.
    (ii) The reasons for slippage if established objectives were not 
met.

[[Page 129]]

    (iii) Additional pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (3) Grantees will not be required to submit more than the original 
and two copies of performance reports.
    (4) Grantees will adhere to the standards in this section in 
prescribing performance reporting requirements for subgrantees.
    (c) Construction performance reports. For the most part, on-site 
technical inspections and certified percentage-of-completion data are 
relied on heavily by Federal agencies to monitor progress under 
construction grants and subgrants. The Federal agency will require 
additional formal performance reports only when considered necessary, 
and never more frequently than quarterly.
    (d) Significant developments. Events may occur between the scheduled 
performance reporting dates which have significant impact upon the grant 
or subgrant supported activity. In such cases, the grantee must inform 
the Federal agency as soon as the following types of conditions become 
known:
    (1) Problems, delays, or adverse conditions which will materially 
impair the ability to meet the objective of the award. This disclosure 
must include a statement of the action taken, or contemplated, and any 
assistance needed to resolve the situation.
    (2) Favorable developments which enable meeting time schedules and 
objectives sooner or at less cost than anticipated or producing more 
beneficial results than originally planned.
    (e) Federal agencies may make site visits as warranted by program 
needs.
    (f) Waivers, extensions. (1) Federal agencies may waive any 
performance report required by this part if not needed.
    (2) The grantee may waive any performance report from a subgrantee 
when not needed. The grantee may extend the due date for any performance 
report from a subgrantee if the grantee will still be able to meet its 
performance reporting obligations to the Federal agency.



Sec. 3016.41  Financial reporting.

    (a) General. (1) Except as provided in paragraphs (a) (2) and (5) of 
this section, grantees will use only the forms specified in paragraphs 
(a) through (e) of this section, and such supplementary or other forms 
as may from time to time be authorized by OMB, for:
    (i) Submitting financial reports to Federal agencies, or
    (ii) Requesting advances or reimbursements when letters of credit 
are not used.
    (2) Grantees need not apply the forms prescribed in this section in 
dealing with their subgrantees. However, grantees shall not impose more 
burdensome requirements on subgrantees.
    (3) Grantees shall follow all applicable standard and supplemental 
Federal agency instructions approved by OMB to the extent required under 
the Paperwork Reduction Act of 1980 for use in connection with forms 
specified in paragraphs (b) through (e) of this section. Federal 
agencies may issue substantive supplementary instructions only with the 
approval of OMB. Federal agencies may shade out or instruct the grantee 
to disregard any line item that the Federal agency finds unnecessary for 
its decisionmaking purposes.
    (4) Grantees will not be required to submit more than the original 
and two copies of forms required under this part.
    (5) Federal agencies may provide computer outputs to grantees to 
expedite or contribute to the accuracy of reporting. Federal agencies 
may accept the required information from grantees in machine usable 
format or computer printouts instead of prescribed forms.
    (6) Federal agencies may waive any report required by this section 
if not needed.
    (7) Federal agencies may extend the due date of any financial report 
upon receiving a justified request from a grantee.
    (b) Financial Status Report--(1) Form. Grantees will use Standard 
Form 269 or 269A, Financial Status Report, to report the status of funds 
for all nonconstruction grants and for construction grants when required 
in accordance with paragraph Sec. 3016.41(e)(2)(iii) of this section.

[[Page 130]]

    (2) Accounting basis. Each grantee will report program outlays and 
program income on a cash or accrual basis as prescribed by the awarding 
agency. If the Federal agency requires accrual information and the 
grantee's accounting records are not normally kept on the accural basis, 
the grantee shall not be required to convert its accounting system but 
shall develop such accrual information through and analysis of the 
documentation on hand.
    (3) Frequency. The Federal agency may prescribe the frequency of the 
report for each project or program. However, the report will not be 
required more frequently than quarterly. If the Federal agency does not 
specify the frequency of the report, it will be submitted annually. A 
final report will be required upon expiration or termination of grant 
support.
    (4) Due date. When reports are required on a quarterly or semiannual 
basis, they will be due 30 days after the reporting period. When 
required on an annual basis, they will be due 90 days after the grant 
year. Final reports will be due 90 days after the expiration or 
termination of grant support.
    (c) Federal Cash Transactions Report--(1) Form. (i) For grants paid 
by letter or credit, Treasury check advances or electronic transfer of 
funds, the grantee will submit the Standard Form 272, Federal Cash 
Transactions Report, and when necessary, its continuation sheet, 
Standard Form 272a, unless the terms of the award exempt the grantee 
from this requirement.
    (ii) These reports will be used by the Federal agency to monitor 
cash advanced to grantees and to obtain disbursement or outlay 
information for each grant from grantees. The format of the report may 
be adapted as appropriate when reporting is to be accomplished with the 
assistance of automatic data processing equipment provided that the 
information to be submitted is not changed in substance.
    (2) Forecasts of Federal cash requirements. Forecasts of Federal 
cash requirements may be required in the ``Remarks'' section of the 
report.
    (3) Cash in hands of subgrantees. When considered necessary and 
feasible by the Federal agency, grantees may be required to report the 
amount of cash advances in excess of three days' needs in the hands of 
their subgrantees or contractors and to provide short narrative 
explanations of actions taken by the grantee to reduce the excess 
balances.
    (4) Frequency and due date. Grantees must submit the report no later 
than 15 working days following the end of each quarter. However, where 
an advance either by letter of credit or electronic transfer of funds is 
authorized at an annualized rate of one million dollars or more, the 
Federal agency may require the report to be submitted within 15 working 
days following the end of each month.
    (d) Request for advance or reimbursement--(1) Advance payments. 
Requests for Treasury check advance payments will be submitted on 
Standard Form 270, Request for Advance or Reimbursement. (This form will 
not be used for drawdowns under a letter of credit, electronic funds 
transfer or when Treasury check advance payments are made to the grantee 
automatically on a predetermined basis.)
    (2) Reimbursements. Requests for reimbursement under nonconstruction 
grants will also be submitted on Standard Form 270. (For reimbursement 
requests under construction grants, see paragraph (e)(1) of this 
section.)
    (3) The frequency for submitting payment requests is treated in 
Sec. 3016.41(b)(3).
    (e) Outlay report and request for reimbursement for construction 
programs. (1) Grants that support construction activities paid by 
reimbursement method.
    (i) Requests for reimbursement under construction grants will be 
submitted on Standard Form 271, Outlay Report and Request for 
Reimbursement for Construction Programs. Federal agencies may, however, 
prescribe the Request for Advance or Reimbursement form, specified in 
Sec. 3016.41(d), instead of this form.
    (ii) The frequency for submitting reimbursement requests is treated 
in Sec. 3016.41(b)(3).
    (2) Grants that support construction activities paid by letter of 
credit, electronic funds transfer or Treasury check advance.

[[Page 131]]

    (i) When a construction grant is paid by letter of credit, 
electronic funds transfer or Treasury check advances, the grantee will 
report its outlays to the Federal agency using Standard Form 271, Outlay 
Report and Request for Reimbursement for Construction Programs. The 
Federal agency will provide any necessary special instruction. However, 
frequency and due date shall be governed by Sec. 3016.41(b) (3) and (4).
    (ii) When a construction grant is paid by Treasury check advances 
based on periodic requests from the grantee, the advances will be 
requested on the form specified in Sec. 3016.41(d).
    (iii) The Federal agency may substitute the Financial Status Report 
specified in Sec. 3016.41(b) for the Outlay Report and Request for 
Reimbursement for Construction Programs.
    (3) Accounting basis. The accounting basis for the Outlay Report and 
Request for Reimbursement for Construction Programs shall be governed by 
Sec. 3016.41(b)(2).



Sec. 3016.42  Retention and access requirements for records.

    (a) Applicability. (1) This section applies to all financial and 
programmatic records, supporting documents, statistical records, and 
other records of grantees or subgrantees which are:
    (i) Required to be maintained by the terms of this part, program 
regulations or the grant agreement, or
    (ii) Otherwise reasonably considered as pertinent to program 
regulations or the grant agreement.
    (2) This section does not apply to records maintained by contractors 
or subcontractors. For a requirement to place a provision concerning 
records in certain kinds of contracts, see Sec. 3016.36(i)(10).
    (b) Length of retention period. (1) Except as otherwise provided, 
records must be retained for three years from the starting date 
specified in paragraph (c) of this section.
    (2) If any litigation, claim, negotiation, audit or other action 
involving the records has been started before the expiration of the 3-
year period, the records must be retained until completion of the action 
and resolution of all issues which arise from it, or until the end of 
the regular 3-year period, whichever is later.
    (3) To avoid duplicate recordkeeping, awarding agencies may make 
special arrangements with grantees and subgrantees to retain any records 
which are continuously needed for joint use. The awarding agency will 
request transfer of records to its custody when it determines that the 
records possess long-term retention value. When the records are 
transferred to or maintained by the Federal agency, the 3-year retention 
requirement is not applicable to the grantee or subgrantee.
    (c) Starting date of retention period--(1) General. When grant 
support is continued or renewed at annual or other intervals, the 
retention period for the records of each funding period starts on the 
day the grantee or subgrantee submits to the awarding agency its single 
or last expenditure report for that period. However, if grant support is 
continued or renewed quarterly, the retention period for each year's 
records starts on the day the grantee submits its expenditure report for 
the last quarter of the Federal fiscal year. In all other cases, the 
retention period starts on the day the grantee submits its final 
expenditure report. If an expenditure report has been waived, the 
retention period starts on the day the report would have been due.
    (2) Real property and equipment records. The retention period for 
real property and equipment records starts from the date of the 
disposition or replacement or transfer at the direction of the awarding 
agency.
    (3) Records for income transactions after grant or subgrant support. 
In some cases grantees must report income after the period of grant 
support. Where there is such a requirement, the retention period for the 
records pertaining to the earning of the income starts from the end of 
the grantee's fiscal year in which the income is earned.
    (4) Indirect cost rate proposals, cost allocations plans, etc. This 
paragraph applies to the following types of documents, and their 
supporting records: indirect cost rate computations or proposals, cost 
allocation plans, and any similar accounting computations of the rate at 
which a particular group of costs is chargeable (such as computer

[[Page 132]]

usage chargeback rates or composite fringe benefit rates).
    (i) If submitted for negotiation. If the proposal, plan, or other 
computation is required to be submitted to the Federal Government (or to 
the grantee) to form the basis for negotiation of the rate, then the 3-
year retention period for its supporting records starts from the date of 
such submission.
    (ii) If not submitted for negotiation. If the proposal, plan, or 
other computation is not required to be submitted to the Federal 
Government (or to the grantee) for negotiation purposes, then the 3-year 
retention period for the proposal plan, or computation and its 
supporting records starts from end of the fiscal year (or other 
accounting period) covered by the proposal, plan, or other computation.
    (d) Substitution of microfilm. Copies made by microfilming, 
photocopying, or similar methods may be substituted for the original 
records.
    (e) Access to records--(1) Records of grantees and subgrantees. The 
awarding agency and the Comptroller General of the United States, or any 
of their authorized representatives, shall have the right of access to 
any pertinent books, documents, papers, or other records of grantees and 
subgrantees which are pertinent to the grant, in order to make audits, 
examinations, excerpts, and transcripts.
    (2) Expiration of right of access. The rights of access in this 
section must not be limited to the required retention period but shall 
last as long as the records are retained.
    (f) Restrictions on public access. The Federal Freedom of 
Information Act (5 U.S.C. 552) does not apply to records Unless required 
by Federal, State, or local law, grantees and subgrantees are not 
required to permit public access to their records.



Sec. 3016.43  Enforcement.

    (a) Remedies for noncompliance. If a grantee or subgrantee 
materially fails to comply with any term of an award, whether stated in 
a Federal statute or regulation, an assurance, in a State plan or 
application, a notice of award, or elsewhere, the awarding agency may 
take one or more of the following actions, as appropriate in the 
circumstances:
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the grantee or subgrantee or more severe enforcement 
action by the awarding agency,
    (2) Disallow (that is, deny both use of funds and matching credit 
for) all or part of the cost of the activity or action not in 
compliance,
    (3) Wholly or partly suspend or terminate the current award for the 
grantee's or subgrantee's program,
    (4) Withhold further awards for the program, or
    (5) Take other remedies that may be legally available.
    (b) Hearings, appeals. In taking an enforcement action, the awarding 
agency will provide the grantee or subgrantee an opportunity for such 
hearing, appeal, or other administrative proceeding to which the grantee 
or subgrantee is entitled under any statute or regulation applicable to 
the action involved.
    (c) Effects of suspension and termination. Costs of grantee or 
subgrantee resulting from obligations incurred by the grantee or 
subgrantee during a suspension or after termination of an award are not 
allowable unless the awarding agency expressly authorizes them in the 
notice of suspension or termination or subsequently. Other grantee or 
subgrantee costs during suspension or after termination which are 
necessary and not reasonably avoidable are allowable if:
    (1) The costs result from obligations which were properly incurred 
by the grantee or subgrantee before the effective date of suspension or 
termination, are not in anticipation of it, and, in the case of a 
termination, are noncancellable, and,
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to Debarment and Suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude grantee or subgrantee from being subject to 
``Debarment and Suspension'' under E.O. 12549 (see Sec. 3016.35).

[[Page 133]]



Sec. 3016.44  Termination for convenience.

    Except as provided in Sec. 3016.43 awards may be terminated in whole 
or in part only as follows:
    (a) By the awarding agency with the consent of the grantee or 
subgrantee in which case the two parties shall agree upon the 
termination conditions, including the effective date and in the case of 
partial termination, the portion to be terminated, or
    (b) By the grantee or subgrantee upon written notification to the 
awarding agency, setting forth the reasons for such termination, the 
effective date, and in the case of partial termination, the portion to 
be terminated. However, if, in the case of a partial termination, the 
awarding agency determines that the remaining portion of the award will 
not accomplish the purposes for which the award was made, the awarding 
agency may terminate the award in its entirety under either Sec. 3016.43 
or paragraph (a) of this section.



                 Subpart D--After-the-Grant Requirements



Sec. 3016.50  Closeout.

    (a) General. The Federal agency will close out the award when it 
determines that all applicable administrative actions and all required 
work of the grant has been completed.
    (b) Reports. Within 90 days after the expiration or termination of 
the grant, the grantee must submit all financial, performance, and other 
reports required as a condition of the grant. Upon request by the 
grantee, Federal agencies may extend this timeframe. These may include 
but are not limited to:
    (1) Final performance or progress report.
    (2) Financial Status Report (SF 269) or Outlay Report and Request 
for Reimbursement for Construction Programs (SF-271) (as applicable.)
    (3) Final request for payment (SF-270) (if applicable).
    (4) Invention disclosure (if applicable).
    (5) Federally-owned property report:

In accordance with Sec. 3016.32(f), a grantee must submit an inventory 
of all federally owned property (as distinct from property acquired with 
grant funds) for which it is accountable and request disposition 
instructions from the Federal agency of property no longer needed.
    (c) Cost adjustment. The Federal agency will, within 90 days after 
receipt of reports in paragraph (b) of this section, make upward or 
downward adjustments to the allowable costs.
    (d) Cash adjustments. (1) The Federal agency will make prompt 
payment to the grantee for allowable reimbursable costs.
    (2) The grantee must immediately refund to the Federal agency any 
balance of unobligated (unencumbered) cash advanced that is not 
authorized to be retained for use on other grants.



Sec. 3016.51  Later disallowances and adjustments.

    The closeout of a grant does not affect:
    (a) The Federal agency's right to disallow costs and recover funds 
on the basis of a later audit or other review;
    (b) The grantee's obligation to return any funds due as a result of 
later refunds, corrections, or other transactions;
    (c) Records retention as required in Sec. 3016.42;
    (d) Property management requirements in Secs. 3016.31 and 3016.32; 
and
    (e) Audit requirements in Sec. 3016.26.



Sec. 3016.52  Collection of amounts due.

    (a) Any funds paid to a grantee in excess of the amount to which the 
grantee is finally determined to be entitled under the terms of the 
award constitute a debt to the Federal Government. If not paid within a 
reasonable period after demand, the Federal agency may reduce the debt 
by:
    (1) Making an adminstrative offset against other requests for 
reimbursements,
    (2) Withholding advance payments otherwise due to the grantee, or
    (3) Other action permitted by law.
    (b) Except where otherwise provided by statutes or regulations, the 
Federal agency will charge interest on an overdue debt in accordance 
with the Federal Claims Collection Standards (4

[[Page 134]]

CFR Ch. II). The date from which interest is computed is not extended by 
litigation or the filing of any form of appeal.



                         Subpart E--Entitlement

    Source: 65 FR 49480, Aug. 14, 2000, unless otherwise noted.



Sec. 3016.60  Special procurement provisions.

    (a) Notwithstanding Secs. 3016.36(a) and 3016.37(a), States 
conducting procurements under grants or subgrants under the USDA 
entitlement programs specified in Sec. 3016.4(b) may elect to follow 
either the State laws, policies, and procedures as authorized by 
Secs. 3016.36(a) and 3016.37(a), or the procurement standards for other 
governmental grantees and all governmental subgrantees in accordance 
with Sec. 3016.36(b) through (i). Regardless of the option selected, 
States shall ensure that paragraphs (b) and (c) of this section are 
followed
    (b) When conducting a procurement under the USDA entitlement 
programs specified in Sec. 3016.4(b) of this part, a grantee or 
subgrantee may enter into a contract with a party that has provided 
specification information to the grantee or subgrantee for the grantee's 
or subgrantee's use in developing contract specifications for conducting 
such a procurement. In order to ensure objective contractor performance 
and eliminate unfair competitive advantage, however, a person that 
develops or drafts specifications, requirements, statements of work, 
invitations for bids, requests for proposals, contract terms and 
conditions or other documents for use by a grantee or subgrantee in 
conducting a procurement under the USDA entitlement programs specified 
in Sec. 3016.4(b) shall be excluded from competing for such 
procurements. Such persons are ineligible for contract awards resulting 
from such procurements regardless of the procurement method used. 
However, prospective contractors may provide grantees or subgrantees 
with specification information related to a procurement and still 
compete for the procurement if the grantee or subgrantee, and not the 
prospective contractor, develops or drafts the specifications, 
requirements, statements of work, invitations for bid, and/or requests 
for proposals used to conduct the procurement.
    (c) Procurements under USDA entitlement programs specified in 
Sec. 3016.4(b) shall be conducted in a manner that prohibits the use of 
statutorily or administratively imposed in-State or local geographic 
preferences except as provided for in Sec. 3016.36(c)(2).



Sec. 3016.61  Financial reporting.

    The financial reporting provisions found in Sec. 3016.41 do not 
apply to any of the USDA entitlement programs listed in Sec. 3016.4(b) 
except the Food Distribution Program on Indian Reservations. The 
financial reporting requirements for these entitlement programs are 
found in the following program regulations:
    (a) For the National School Lunch Program, 7 CFR part 210;
    (b) For the Special Milk Program for Children, 7 CFR part 215;
    (c) For the School Breakfast Program, 7 CFR part 220;
    (d) For the Summer Food Service Program for Children, 7 CFR part 
225;
    (e) For the Child and Adult Care Food Program, 7 CFR part 226;
    (f) For State Administrative Expense Funds under section 7 of the 
Child Nutrition Act of 1966, 7 CFR part 235; and
    (g) For State Administrative Expenses under section 16 of the Food 
Stamp Act of 1977, 7 CFR part 277.



PART 3017--GOVERNMENTWIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT) AND GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (GRANTS)--Table of Contents




                           Subpart A--General

Sec.
3017.100  Purpose.
3017.105  Definitions.
3017.110  Coverage.
3017.115  Policy.

                       Subpart B--Effect of Action

3017.200  Debarment or suspension.
3017.205  Ineligible persons.
3017.210  Voluntary exclusion.
3017.215  Exception provision.

[[Page 135]]

3017.220  Continuation of covered transactions.
3017.225  Failure to adhere to restrictions.

                          Subpart C--Debarment

3017.300  General.
3017.305  Causes for debarment.
3017.310  Procedures.
3017.311  Investigation and referral.
3017.312  Notice of proposed debarment.
3017.313  Opportunity to contest proposed debarment.
3017.314  Debarring official's decision.
3017.315  Settlement and voluntary exclusion.
3017.320  Period of debarment.
3017.325  Scope of debarment.

                          Subpart D--Suspension

3017.400  General.
3017.405  Causes for suspension.
3017.410  Procedures.
3017.411  Notice of suspension.
3017.412  Opportunity to contest suspension.
3017.413  Suspending official's decision.
3017.415  Period of suspension.
3017.420  Scope of suspension.

       Subpart E--Responsibilities of GSA, Agency and Participants

3017.500  GSA responsibilities.
3017.505  USDA responsibilities.
3017.510  Participants' responsibilities.
3017.515  Appeal of debarment or suspension decisions.

          Subpart F--Drug-Free Workplace Requirements (Grants)

3017.600  Purpose.
3017.605  Definitions.
3017.610  Coverage.
3017.615  Grounds for suspension of payments, suspension or termination 
          of grants, or suspension or debarment.
3017.620  Effect of violation.
3017.625  Exception provision.
3017.630  Certification requirements and procedures.
3017.635  Reporting of and employee sanctions for convictions of 
          criminal drug offenses.

Appendix A to Part 3017--Certification Regarding Debarment, Suspension, 
          and Other Responsibility Matters--Primary Covered Transactions
Appendix B to Part 3017--Certification Regarding Debarment, Suspension, 
          Ineligibility and Voluntary Exclusion--Lower Tier Covered 
          Transactions
Appendix C to Part 3017--Certification Regarding Drug-Free Workplace 
          Requirements

    Authority: 5 U.S.C. 301; 41 U.S.C. 701 et seq.; E.O. 12549, 51 FR 
6370, 3 CFR, 1986 Comp., p. 189.

    Source: 54 FR 4731, Jan. 30, 1989, unless otherwise noted.

    Cross Reference: See also Office of Management and Budget notices 
published at 55 FR 21679, May 25, 1990, and 60 FR 33036, June 26, 1995.



                           Subpart A--General



Sec. 3017.100  Purpose.

    (a) Executive Order (E.O.) 12549 provides that, to the extent 
permitted by law, Executive departments and agencies shall participate 
in a governmentwide system for nonprocurement debarment and suspension. 
A person who is debarred or suspended shall be excluded from Federal 
financial and nonfinancial assistance and benefits under Federal 
programs and activities. Debarment or suspension of a participant in a 
program by one agency shall have governmentwide effect.
    (b) These regulations implement section 3 of E.O. 12549 and the 
guidelines promulgated by the Office of Management and Budget under 
section 6 of the E.O. by:
    (1) Prescribing the programs and activities that are covered by the 
governmentwide system;
    (2) Prescribing the governmentwide criteria and governmentwide 
minimum due process procedures that each agency shall use;
    (3) Providing for the listing of debarred and suspended 
participants, participants declared ineligible (see definition of 
``ineligible'' in Sec. 3017.105), and participants who have voluntarily 
excluded themselves from participation in covered transactions;
    (4) Setting forth the consequences of a debarment, suspension, 
determination of ineligibility, or voluntary exclusion; and
    (5) Offering such other guidance as necessary for the effective 
implementation and administration of the governmentwide system.
    (c) These regulations also implement Executive Order 12689 (3 CFR, 
1989 Comp., p. 235) and 31 U.S.C. 6101 note (Public Law 103-355, sec. 
2455, 108 Stat. 3327) by--

[[Page 136]]

    (1) Providing for the inclusion in the List of Parties Excluded from 
Federal Procurement and Nonprocurement Programs all persons proposed for 
debarment, debarred or suspended under the Federal Acquisition 
Regulation, 48 CFR Part 9, subpart 9.4; persons against which 
governmentwide exclusions have been entered under this part; and persons 
determined to be ineligible; and
    (2) Setting forth the consequences of a debarment, suspension, 
determination of ineligibility, or voluntary exclusion.
    (d) Although these regulations cover the listing of ineligible 
participants and the effect of such listing, they do not prescribe 
policies and procedures governing declarations of ineligibility.

[60 FR 33040, 33043, June 26, 1995]



Sec. 3017.105  Definitions.

    The following definitions apply to this part:
    Adequate evidence. Information sufficient to support the reasonable 
belief that a particular act or omission has occurred.
    Affiliate. Persons are affiliates of each other if, directly or 
indirectly, either one controls or has the power to control the other, 
or, a third person controls or has the power to control both. Indicia of 
control include, but are not limited to: interlocking management or 
ownership, identity of interests among family members, shared facilities 
and equipment, common use of employees, or a business entity organized 
following the suspension or debarment of a person which has the same or 
similar management, ownership, or principal employees as the suspended, 
debarred, ineligible, or voluntarily excluded person.
    Agency. Any executive department, military department or defense 
agency or other agency of the executive branch, excluding the 
independent regulatory agencies.
    (1) A USDA agency, when used in the context of USDA internal 
procedures or requirements, is any organizational unit of the U.S. 
Department of Agriculture with authority delegated in 7 CFR part 2 to 
carry out primary covered transactions under USDA programs.
    (2) [Reserved]
    Appeals officer. Any administrative law judge of the Office of 
Administrative Law Judges, Department of Agriculture.
    Civil judgment. The disposition of a civil action by any court of 
competent jurisdiction, whether entered by verdict, decision, 
settlement, stipulation, or otherwise creating a civil liability for the 
wrongful acts complained of; or a final determination of liability under 
the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-12).
    Conviction. A judgment or conviction of a criminal offense by any 
court of competent jurisdiction, whether entered upon a verdict or a 
plea, including a plea of nolo contendere.
    Debarment. An action taken by a debarring official in accordance 
with these regulations to exclude a person from participating in covered 
transactions. A person so excluded is ``debarred.''
    Debarring official. An official authorized to impose debarment. The 
debarring official is either:
    (1) The agency head, or
    (2) An official designated by the agency head.
    (i) In USDA, the authority to act as a debarring official is not 
delegated below the agency head, except that in the case of the Forest 
Service, the Chief may redelegate the authority to act as a debarring 
official to the Deputy Chief or an Associate Deputy Chief for the 
National Forest System.
    (ii) [Reserved]
    (3) In USDA, each Under Secretary, Assistant Secretary, or agency 
head who has been delegated authority in part 2 of this title to carry 
out a covered transaction is authorized to act as a debarring official 
in connection with such covered transaction.
    Indictment. Indictment for a criminal offense. An information or 
other filing by competent authority charging a criminal offense shall be 
given the same effect as an indictment.
    Ineligible. Excluded from participation in Federal nonprocurement 
programs pursuant to a determination of ineligibility under statutory, 
executive order, or regulatory authority, other than Executive Order 
12549 and its agency implementing regulations; for example, excluded 
pursuant to the

[[Page 137]]

Davis-Bacon Act and its implementing regulations, the equal employment 
opportunity acts and executive orders, or the environmental protection 
acts and executive orders. A person is ineligible where the 
determination of ineligibility affects such person's eligibility to 
participate in more than one covered transaction.
    Legal proceedings. Any criminal proceeding or any civil judicial 
proceeding to which the Federal Government or a State or local 
government or quasi-governmental authority is a party. The term includes 
appeals from such proceedings.
    List of Parties Excluded from Federal Procurement and Nonprocurement 
Programs. A list compiled, maintained and distributed by the General 
Services Administration (GSA) containing the names and other information 
about persons who have been debarred, suspended, or voluntarily excluded 
under Executive Orders 12549 and 12689 and these regulations or 48 CFR 
part 9, subpart 9.4, persons who have been proposed for debarment under 
48 CFR part 9, subpart 9.4, and those persons who have been determined 
to be ineligible.
    Notice. A written communication served in person or sent by 
certified mail, return receipt requested, or its equivalent, to the last 
known address of a party, its identified counsel, its agent for service 
of process, or any partner, officer, director, owner, or joint venturer 
of the party. Notice, if undeliverable, shall be considered to have been 
received by the addressee five days after being properly sent to the 
last address known by the agency.
    Participant. Any person who submits a proposal for, enters into, or 
reasonably may be expected to enter into a covered transaction. This 
term also includes any person who acts on behalf of or is authorized to 
commit a participant in a covered transaction as an agent or 
representative of another participant.
    Person. Any individual, corporation, partnership, association, unit 
of government or legal entity, however organized, except: foreign 
governments or foreign governmental entities, public international 
organizations, foreign government owned (in whole or in part) or 
controlled entities, and entities consisting wholly or partially of 
foreign governments or foreign governmental entities.
    Preponderance of the evidence. Proof by information that, compared 
with that opposing it, leads to the conclusion that the fact at issue is 
more probably true than not.
    Principal. Officer, director, owner, partner, key employee, or other 
person within a participant with primary management or supervisory 
responsibilities; or a person who has a critical influence on or 
substantive control over a covered transaction, whether or not employed 
by the participant. Persons who have a critical influence on or 
substantive control over a covered transaction are:
    (1) Principal investigators.
    (2) [Reserved]
    Proposal. A solicited or unsolicited bid, application, request, 
invitation to consider or similar communication by or on behalf of a 
person seeking to participate or to receive a benefit, directly or 
indirectly, in or under a covered transaction.
    Respondent. A person against whom a debarment or suspension action 
has been initiated.
    State. Any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, any territory or possession 
of the United States, or any agency of a State, exclusive of 
institutions of higher education, hospitals, and units of local 
government. A State instrumentality will be considered part of the State 
government if it has a written determination from a State government 
that such State considers that instrumentality to be an agency of the 
State government.
    Suspending official. An official authorized to impose suspension. 
The suspending official is either:
    (1) The agency head, or
    (2) An official designated by the agency head.
    (i) In USDA, the authority to act as a suspending official is not 
delegated below the agency head, except that in the case of the Forest 
Service, the Chief may redelegate the authority to act as a suspending 
official to the Deputy Chief or an Associate Deputy Chief for the 
National Forest System.

[[Page 138]]

    (ii) [Reserved]
    (3) In USDA, each Under Secretary, Assistant Secretary, or agency 
head who has been delegated authority in part 2 of this title to carry 
out a covered transaction is authorized to act as a suspending official 
in connection with such covered transaction.
    Suspension. An action taken by a suspending official in accordance 
with these regulations that immediately excludes a person from 
participating in covered transactions for a temporary period, pending 
completion of an investigation and such legal, debarment, or Program 
Fraud Civil Remedies Act proceedings as may ensue. A person so excluded 
is ``suspended.''
    USDA. U.S. Department of Agriculture.
    Voluntary exclusion or voluntarily excluded. A status of 
nonparticipation or limited participation in covered transactions 
assumed by a person pursuant to the terms of a settlement.

[54 FR 4731, Jan. 30, 1989, as amended at 60 FR 33040, 33043, June 26, 
1995; 63 FR 27667, May 20, 1998]



Sec. 3017.110  Coverage.

    (a) These regulations apply to all persons who have participated, 
are currently participating or may reasonably be expected to participate 
in transactions under Federal nonprocurement programs. For purposes of 
these regulations such transactions will be referred to as ``covered 
transactions.''
    (1) Covered transaction. For purposes of these regulations, a 
covered transaction is a primary covered transaction or a lower tier 
covered transaction. Covered transactions at any tier need not involve 
the transfer of Federal funds.
    (i) Primary covered transaction. Except as noted in paragraph (a)(2) 
of this section, a primary covered transaction is any nonprocurement 
transaction between an agency and a person, regardless of type, 
including: Grants, cooperative agreements, scholarships, fellowships, 
contracts of assistance, loans, loan guarantees, subsidies, insurance, 
payments for specified use, donation agreements and any other 
nonprocurement transactions between a Federal agency and a person. 
Primary covered transactions also include those transactions specially 
designated by the U.S. Department of Housing and Urban Development in 
such agency's regulations governing debarment and suspension.
    (ii) Lower tier covered transaction. A lower tier covered 
transaction is:
    (A) Any transaction between a participant and a person other than a 
procurement contract for goods or services, regardless of type, under a 
primary covered transaction.
    (B) Any procurement contract for goods or services between a 
participant and a person, regardless of type, expected to equal or 
exceed the Federal procurement small purchase threshold fixed at 10 
U.S.C. 2304(g) and 41 U.S.C. 253(g) (currently $25,000) under a primary 
covered transaction.
    (C) Any procurement contract for goods or services between a 
participant and a person under a covered transaction, regardless of 
amount, under which that person will have a critical influence on or 
substantive control over that covered transaction. Such persons are:
    (1) Principal investigators.
    (2) Providers of federally-required audit services.
    (2) Exceptions. The following transactions are not covered:
    (i) Statutory entitlements or mandatory awards (but not subtier 
awards thereunder which are not themselves mandatory), including 
deposited funds insured by the Federal Government;
    (ii) Direct awards to foreign governments or public international 
organizations, or transactions with foreign governments or foreign 
governmental entities, public international organizations, foreign 
government owned (in whole or in part) or controlled entities, entities 
consisting wholly or partially of foreign governments or foreign 
governmental entities;
    (iii) Benefits to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits received 
in an individual's business capacity are not excepted);
    (iv) Federal employment;
    (v) Transactions pursuant to national or agency-recognized 
emergencies or disasters;
    (vi) Incidental benefits derived from ordinary governmental 
operations; and

[[Page 139]]

    (vii) Other transactions where the application of these regulations 
would be prohibited by law.
    (3) Department of Agriculture covered transactions. (i) With respect 
to paragraph (a)(1) of this section, for USDA's export and foreign 
assistance programs, covered transactions will include only primary 
covered transactions. Any lower tier transactions with respect to UDSA's 
export and foreign assistance programs will not be considered lower tier 
covered transactions for the purposes of this part. The export or 
substitution of Federal timber governed by the Forest Resources 
Conservation and Shortage Relief Act of 1990, 16 U.S.C. 620 et seq. (the 
``Export Act''), is specifically excluded from the coverage of this 
rule. The Export Act provides separate statutory authority to debar 
persons engaged in both primary covered transactions and lower tier 
transactions.
    (ii) With respect to paragraph (a)(1)(ii)(B) of this section, for 
USDA's domestic food assistance programs, only the initial such 
procurement contract and the first tier subcontract under that 
procurement contract shall be considered lower tier covered 
transactions.
    (iii) With respect to paragraph (a)(2) of this section, the 
following USDA transactions also are not covered: transactions under 
programs which provide statutory entitlements and make available loans 
to individuals and entities in their capacity as producers of 
agricultural commodities; transactions under conservation programs; 
transactions under warehouse licensing programs; the receipt of 
licenses, permits, certificates, and indemnification under regulatory 
programs conducted in the interest of public health and safety and 
animal and plant health and safety; the receipt of official grading and 
inspection services, animal damage control services, public health and 
safety inspection services, and animal and plant health and safety 
inspection services; if the person is a State or local government, the 
provision of official grading and inspection services, animal damage 
control services, public health and safety inspection services, animal 
and plant health and safety inspection services; and permits, licenses, 
exchanges and other acquisitions of real property, rights of way, and 
easements under natural resource management programs.
    (b) Relationship to other sections. This section describes the types 
of transactions to which a debarment or suspension under the regulations 
will apply. Subpart B, ``Effect of Action,'' Sec. 3017.200, ``Debarment 
or suspension,'' sets forth the consequences of a debarment or 
suspension. Those consequences would obtain only with respect to 
participants and principals in the covered transactions and activities 
described in Sec. 3017.110(a). Sections 3017.325, ``Scope of 
debarment,'' and 3017.420, ``Scope of suspension,'' govern the extent to 
which a specific participant or organizational elements of a participant 
would be automatically included within a debarment or suspension action, 
and the conditions under which affiliates or persons associated with a 
participant may also be brought within the scope of the action.
    (c) Relationship to Federal procurement activities. In accordance 
with E.O. 12689 and section 2455 of Public Law 103-355, any debarment, 
suspension, proposed debarment or other governmentwide exclusion 
initiated under the Federal Acquisition Regulation (FAR) on or after 
August 25, 1995 shall be recognized by and effective for Executive 
Branch agencies and participants as an exclusion under this regulation. 
Similarly, any debarment, suspension or other governmentwide exclusion 
initiated under this regulation on or after August 25, 1995 shall be 
recognized by and effective for those agencies as a debarment or 
suspension under the FAR.

[54 FR 4731, Jan. 30, 1989, as amended at 60 FR 33041, 33043, June 26, 
1995; 61 FR 250, Jan. 4, 1996]



Sec. 3017.115  Policy.

    (a) In order to protect the public interest, it is the policy of the 
Federal Government to conduct business only with responsible persons. 
Debarment and suspension are discretionary actions that, taken in 
accordance with Executive Order 12549 and these regulations, are 
appropriate means to implement this policy.

[[Page 140]]

    (b) Debarment and suspension are serious actions which shall be used 
only in the public interest and for the Federal Government's protection 
and not for purposes of punishment. Agencies may impose debarment or 
suspension for the causes and in accordance with the procedures set 
forth in these regulations.
    (c) When more than one agency has an interest in the proposed 
debarment or suspension of a person, consideration shall be given to 
designating one agency as the lead agency for making the decision. 
Agencies are encouraged to establish methods and procedures for 
coordinating their debarment or suspension actions.
    (d) In any case in which an administrative exclusion is considered 
under an authority other than this part, USDA will initiate, where 
appropriate, a debarment or suspension action under this part for the 
protection of the entire Federal Government.

[54 FR 4731, Jan. 30, 1989, as amended at 61 FR 251, Jan. 4, 1996]



                       Subpart B--Effect of Action



Sec. 3017.200  Debarment or suspension.

    (a) Primary covered transactions. Except to the extent prohibited by 
law, persons who are debarred or suspended shall be excluded from 
primary covered transactions as either participants or principals 
throughout the Executive Branch of the Federal Government for the period 
of their debarment, suspension, or the period they are proposed for 
debarment under 48 CFR part 9, subpart 9.4. Accordingly, no agency shall 
enter into primary covered transactions with such excluded persons 
during such period, except as permitted pursuant to Sec. 3017.215.
    (b) Lower tier covered transactions. Except to the extent prohibited 
by law, persons who have been proposed for debarment under 48 CFR part 
9, subpart 9.4, debarred or suspended shall be excluded from 
participating as either participants or principals in all lower tier 
covered transactions (see Sec. 3017.110(a)(1)(ii)) for the period of 
their exclusion.
    (c) Exceptions. Debarment or suspension does not affect a person's 
eligibility for--
    (1) Statutory entitlements or mandatory awards (but not subtier 
awards thereunder which are not themselves mandatory), including 
deposited funds insured by the Federal Government;
    (2) Direct awards to foreign governments or public international 
organizations, or transactions with foreign governments or foreign 
governmental entities, public international organizations, foreign 
government owned (in whole or in part) or controlled entities, and 
entities consisting wholly or partially of foreign governments or 
foreign governmental entities;
    (3) Benefits to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits received 
in an individual's business capacity are not excepted);
    (4) Federal employment;
    (5) Transactions pursuant to national or agency-recognized 
emergencies or disasters;
    (6) Incidental benefits derived from ordinary governmental 
operations; and
    (7) Other transactions where the application of these regulations 
would be prohibited by law.
    (d) Department of Agriculture excepted transactions. With respect to 
paragraph (c) of this section, the following USDA transactions also are 
excepted: transactions under programs which provide statutory 
entitlements and make available loans to individuals and entities in 
their capacity as producers of agricultural commodities; transations 
under conservation programs; transactions under warehouse licensing 
programs; the receipt of licenses, permits, certificates, and 
indemnification under regulatory programs conducted in the interest of 
public health and safety and animal and plant health and safety; the 
receipt of official grading and inspection services, animal damage 
control services, public health and safety inspection services, and 
animal and plant health and safety inspection services; if the person is 
a State or local government, the provision of official grading and 
inspection services, animal damage control services, public health and 
safety inspection services, and animal and plant health and safety 
inspection services; and permits, licenses, exchanges, and other 
acquisitions of real property, rights of way, and easements

[[Page 141]]

under natural resource management programs.

[60 FR 33041, 33043, June 26, 1995, as amended at 61 FR 251, Jan. 4, 
1996]



Sec. 3017.205  Ineligible persons.

    Persons who are ineligible, as defined in Sec. 3017.105(i), are 
excluded in accordance with the applicable statutory, executive order, 
or regulatory authority.



Sec. 3017.210  Voluntary exclusion.

    Persons who accept voluntary exclusions under Sec. 3017.315 are 
excluded in accordance with the terms of their settlements. USDA shall, 
and participants may, contact the original action agency to ascertain 
the extent of the exclusion.



Sec. 3017.215  Exception provision.

    USDA may grant an exception permitting a debarred, suspended, or 
voluntarily excluded person, or a person proposed for debarment under 48 
CFR part 9, subpart 9.4, to participate in a particular covered 
transaction upon a written determination by the agency head or an 
authorized designee stating the reason(s) for deviating from the 
Presidential policy established by Executive Order 12549 and 
Sec. 3017.200. However, in accordance with the President's stated 
intention in the Executive Order, exceptions shall be granted only 
infrequently. Exceptions shall be reported in accordance with 
Sec. 3017.505(a).

[60 FR 33041, 33043, June 26, 1995]



Sec. 3017.220  Continuation of covered transactions.

    (a) Notwithstanding the debarment, suspension, proposed debarment 
under 48 CFR part 9, subpart 9.4, determination of ineligibility, or 
voluntary exclusion of any person by an agency, agencies and 
participants may continue covered transactions in existence at the time 
the person was debarred, suspended, proposed for debarment under 48 CFR 
part 9, subpart 9.4, declared ineligible, or voluntarily excluded. A 
decision as to the type of termination action, if any, to be taken 
should be made only after thorough review to ensure the propriety of the 
proposed action.
    (b) Agencies and participants shall not renew or extend covered 
transactions (other than no-cost time extensions) with any person who is 
debarred, suspended, proposed for debarment under 48 CFR part 9, subpart 
9.4, ineligible or voluntary excluded, except as provided in 
Sec. 3017.215.

[60 FR 33041, 33043, June 26, 1995]



Sec. 3017.225  Failure to adhere to restrictions.

    (a) Except as permitted under Sec. 3017.215 or Sec. 3017.220, a 
participant shall not knowingly do business under a covered transaction 
with a person who is--
    (1) Debarred or suspended;
    (2) Proposed for debarment under 48 CFR part 9, subpart 9.4; or
    (3) Ineligible for or voluntarily excluded from the covered 
transaction.
    (b) Violation of the restriction under paragraph (a) of this section 
may result in disallowance of costs, annulment or termination of award, 
issuance of a stop work order, debarment or suspension, or other 
remedies as appropriate.
    (c) A participant may rely upon the certification of a prospective 
participant in a lower tier covered transaction that it and its 
principals are not debarred, suspended, proposed for debarment under 48 
CFR part 9, subpart 9.4, ineligible, or voluntarily excluded from the 
covered transaction (See appendix B of these regulations), unless it 
knows that the certification is erroneous. An agency has the burden of 
proof that a participant did knowingly do business with a person that 
filed an erroneous certification.

[60 FR 33041, 33043, June 26, 1995]



                          Subpart C--Debarment



Sec. 3017.300  General.

    The debarring official may debar a person for any of the causes in 
Sec. 3017.305, using procedures established in Secs. 3017.310 through 
Sec. 3017.314. The existence of a cause for debarment, however, does not 
necessarily require that the person be debarred; the seriousness of the 
person's acts or omissions and

[[Page 142]]

any mitigating factors shall be considered in making any debarment 
decision.



Sec. 3017.305  Causes for debarment.

    Debarment may be imposed in accordance with the provisions of 
Secs. 3017.300 through Sec. 3017.314 for:
    (a) Conviction of or civil judgment for:
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction;
    (2) Violation of Federal or State antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, or obstruction of 
justice; or
    (4) Commission of any other offense indicating a lack of business 
integrity or business honesty that seriously and directly affects the 
present responsibility of a person.
    (b) Violation of the terms of a public agreement or transaction so 
serious as to affect the integrity of an agency program, such as:
    (1) A willful failure to perform in accordance with the terms of one 
or more public agreements or transactions;
    (2) A history of failure to perform or of unsatisfactory performance 
of one or more public agreements or transactions; or
    (3) A willful violation of a statutory or regulatory provision or 
requirement applicable to a public agreement or transaction.
    (c) Any of the following causes:
    (1) A nonprocurement debarment by any Federal agency taken before 
March 1, 1989, the effective date of these regulations or a procurement 
debarment by any Federal agency taken pursuant to 48 CFR Subpart 9.4;
    (2) Knowingly doing business with a debarred, suspended, ineligible, 
or voluntarily excluded person, in connection with a covered 
transaction, except as permitted in Sec. 3017.215 or Sec. 3017.220;
    (3) Failure to pay a single substantial debt, or a number of 
outstanding debts (including disallowed costs and overpayments, but not 
including sums owed the Federal Government under the Internal Revenue 
Code) owed to any Federal agency or instrumentality, provided the debt 
is uncontested by the debtor or, if contested, provided that the 
debtor's legal and administrative remedies have been exhausted;
    (4) Violation of a material provision of a voluntary exclusion 
agreement entered into under Sec. 3017.315 or of any settlement of a 
debarment or suspension action; or
    (5) Violation of any requirement of Subpart F of this part, relating 
to providing a drug-free workplace, as set forth in Sec. 3017.615 of 
this part.
    (d) Any other cause of so serious or compelling a nature that it 
affects the present responsibility of a person.

[54 FR 4731, Jan. 30, 1989, as amended at 54 FR 4952, Jan. 31, 1989]



Sec. 3017.310  Procedures.

    USDA shall process debarment actions as informally as practicable, 
consistent with the principles of fundamental fairness, using the 
procedures in Secs. 3017.311 through 3017.314.



Sec. 3017.311  Investigation and referral.

    Information concerning the existence of a cause for debarment from 
any source shall be promptly reported, investigated, and referred, when 
appropriate, to the debarring official for consideration. After 
consideration, the debarring official may issue a notice of proposed 
debarment.
    (a) The decision to utilize agency personnel, the Office of 
Inspector General (OIG), or other appropriate resources to conduct the 
investigation and develop the documentation required by paragraph (b) of 
this section is the responsibility of the agency possessing the 
information.
    (b) Basic documentation shall be developed that includes but is not 
limited to:
    (1) The name of the specific respondent(s) against whom the action 
is being proposed or taken;
    (2) The reason(s) for proposing the debarment;

[[Page 143]]

    (3) The specific cause(s) for debarment from Sec. 3017.305;
    (4) A short narrative stating the facts and/or describing other 
evidence supporting the reason(s) for the need to debar;
    (5) The recommended time period for the debarment;
    (6) The potential effect and/or consequences that the debarment will 
have on the respondent(s);
    (7) Copies of any relevant support documentation identified under 
this section.
    (c) The debarring official shall be responsible for deciding whether 
or not to proceed with the action.
    (d) The Office of the General Counsel (OGC) is responsible for:
    (1) Reviewing the documentation and notices for legal sufficiency, 
and
    (2) Providing any necessary coordination with the Department of 
Justice (DOJ).

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.312  Notice of proposed debarment.

    A debarment proceeding shall be initiated by notice to the 
respondent advising:
    (a) That debarment is being considered;
    (1) Information on the specific debarment action proposed must be 
given.
    (b) Of the reasons for the proposed debarment in terms sufficient to 
put the respondent on notice of the conduct or transaction(s) upon which 
it is based;
    (c) Of the cause(s) relied upon under Sec. 3017.305 for proposing 
debarment;
    (d) Of the provisions of Secs. 3017.311 through 3017.314, and any 
other USDA procedures, if applicable, governing debarment 
decisionmaking; and
    (e) Of the potential effect of a debarment.

In USDA, the notice to the respondent shall be signed by the debarring 
official and transmitted by certified mail, return receipt requested. 
OGC will be consulted on all proposed debarment actions prior to the 
notice being sent to the respondent.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.313  Opportunity to contest proposed debarment.

    (a) Submission in opposition. Within 30 days after receipt of the 
notice of proposed debarment, the respondent may submit, in person, in 
writing, or through a representative, information and argument in 
opposition to the proposed debarment.
    (b) Additional proceedings as to disputed material facts. (1) In 
actions not based upon a conviction or civil judgment, if the debarring 
official finds that the respondent's submission in opposition raises a 
genuine dispute over facts material to the proposed debarment, 
respondent(s) shall be afforded an opportunity to appear with a 
representative, submit documentary evidence, present witnesses, and 
confront any witness the agency presents.
    (2) A transcribed record of any additional proceedings shall be made 
available at cost to the respondent, upon request, unless the respondent 
and the agency, by mutual agreement, waive the requirement for a 
transcript.



Sec. 3017.314  Debarring official's decision.

    (a) No additional proceedings necessary. In actions based upon a 
conviction or civil judgment, or in which there is no genuine dispute 
over material facts, the debarring official shall make a decision on the 
basis of all the information in the administrative record, including any 
submission made by the respondent. The decision shall be made within 45 
days after receipt of any information and argument submitted by the 
respondent, unless the debarring official extends this period for good 
cause.
    (1) In USDA debarment actions where respondent(s) fail(s) to timely 
provide any submission in opposition, the action will be considered 
decided.
    (b) Additional proceedings necessary. (1) In actions in which 
additional proceedings are necessary to determine disputed material 
facts, written findings of fact shall be prepared. The debarring 
official shall base the decision on the facts as found, together with 
any information and argument submitted by the respondent and any other 
information in the administrative record.

[[Page 144]]

    (2) The debarring official may refer disputed material facts to 
another official for findings of fact. The debarring official may reject 
any such findings, in whole or in part, only after specifically 
determining them to be arbitrary and capricious or clearly erroneous.
    (3) The debarring official's decision shall be made after the 
conclusion of the proceedings with respect to disputed facts.
    (c)(1) Standard of proof. In any debarment action, the cause for 
debarment must be established by a preponderance of the evidence. Where 
the proposed debarment is based upon a conviction or civil judgment, the 
standard shall be deemed to have been met.
    (2) Burden of proof. The burden of proof is on the agency proposing 
debarment.
    (d) Notice of debarring official's decision. (1) If the debarring 
official decides to impose debarment, the respondent shall be given 
prompt notice:
    (i) Referring to the notice of proposed debarment;
    (ii) Specifying the reasons for debarment;
    (iii) Stating the period of debarment, including effective dates; 
and
    (iv) Advising that the debarment is effective for covered 
transactions throughout the executive branch of the Federal Government 
unless an agency head or an authorized designee makes the determination 
referred to in Sec. 3017.215.
    (2) If the debarring official decides not to impose debarment, the 
respondent shall be given prompt notice of that decision. A decision not 
to impose debarment shall be without prejudice to a subsequent 
imposition of debarment by any other agency.
    (3) In USDA, the notice to the respondent shall be in writing, 
signed by the debarring official, and transmitted by certified mail, 
return receipt requested. The OGC will be consulted on all debarment 
actions prior to the notice being sent to the respondent.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.315  Settlement and voluntary exclusion.

    (a) When in the best interest of the Government, USDA may, at any 
time, settle a debarment or suspension action.
    (b) If a participant and the agency agree to a voluntary exclusion 
of the participant, such voluntary exclusion shall be entered on the 
Nonprocurement List (see Subpart E).



Sec. 3017.320  Period of debarment.

    (a) Debarment shall be for a period commensurate with the 
seriousness of the cause(s). If a suspension precedes a debarment, the 
suspension period shall be considered in determining the debarment 
period.
    (1) Debarment for causes other than those related to a violation of 
the requirements of Subpart F of this part generally should not exceed 
three years. Where circumstances warrant, a longer period of debarment 
may be imposed.
    (2) In the case of a debarment for a violation of the requirements 
of Subpart F of this part (see 3017.305(c)(5)), the period of debarment 
shall not exceed five years.
    (b) The debarring official may extend an existing debarment for an 
additional period, if that official determines that an extension is 
necessary to protect the public interest.

However, a debarment may not be extended solely on the basis of the 
facts and circumstances upon which the initial debarment action was 
based. If debarment for an additional period is determined to be 
necessary, the procedures of Secs. 3017.311 through 3017.314 shall be 
followed to extend the debarment.
    (c) The respondent may request the debarring official to reverse the 
debarment decision or to reduce the period or scope of debarment. Such a 
request shall be in writing and supported by documentation. The 
debarring official may grant such a request for reasons including, but 
not limited to:
    (1) Newly discovered material evidence;
    (2) Reversal of the conviction or civil judgment upon which the 
debarment was based;
    (3) Bona fide change in ownership or management;
    (4) Elimination or other causes for which the debarment was imposed; 
or

[[Page 145]]

    (5) Other reasons the debarring official deems appropriate.

[54 FR 4731, Jan. 30, 1989, as amended at 54 FR 4952, Jan. 31, 1989]



Sec. 3017.325  Scope of debarment.

    (a) Scope in general. (1) Debarment of a person under these 
regulations constitutes debarment of all its divisions and other 
organizational elements from all covered transactions, unless the 
debarment decision is limited by its terms to one or more specifically 
identified individuals, divisions or other organizational elements or to 
specific types of transactions.
    (2) The debarment action may include any affiliate of the 
participant that is specifically named and given notice of the proposed 
debarment and an opportunity to respond (see Secs. 3017.311 through 
3017.314).
    (b) Imputing conduct. For purposes of determining the scope of 
debarment, conduct may be imputed as follows:
    (1) Conduct imputed to participant. The fraudulent, criminal or 
other seriously improper conduct of any officer, director, shareholder, 
partner, employee, or other individual associated with a participant may 
be imputed to the participant when the conduct occurred in connection 
with the individual's performance of duties for or on behalf of the 
participant, or with the participant's knowledge, approval, or 
acquiescence. The participant's acceptance of the benefits derived from 
the conduct shall be evidence of such knowledge, approval, or 
acquiescence.
    (2) Conduct imputed to individuals associated with participant. The 
fraudulent, criminal, or other seriously improper conduct of a 
participant may be imputed to any officer, director, shareholder, 
partner, employee, or other individual associated with the participant 
who participated in, knew of, or had reason to know of the participant's 
conduct.
    (3) Conduct of one participant imputed to other participants in a 
joint venture. The fraudulent, criminal, or other seriously improper 
conduct of one participant in a joint venture, grant pursuant to a joint 
application, or similar arrangement or with the knowledge, approval, or 
acquiescence of these participants. Acceptance of the benefits derived 
from the conduct shall be evidence of such knowledge, approval, or 
acquiescence.



                          Subpart D--Suspension



Sec. 3017.400  General.

    (a) The suspending official may suspend a person from any of the 
causes in Sec. 3017.405 using procedures established in Secs. 3017.410 
through 3017.413.
    (b) Suspension is a serious action to be imposed only when:
    (1) There exists adequate evidence of one or more of the causes set 
out in Sec. 3017.405, and
    (2) Immediate action is necessary to protect the public interest.
    (c) In assessing the adequacy of the evidence, the agency should 
consider how much information is available, how credible it is given the 
circumstances, whether or not important allegations are corroborated, 
and what inferences can reasonably be drawn as a result. This assessment 
should include an examination of basic documents such as grants, 
cooperative agreements, loan authorizations, and contracts.



Sec. 3017.405  Causes for suspension.

    (a) Suspension may be imposed in accordance with the provisions of 
Secs. 3017.400 through 3017.413 upon adequate evidence:
    (1) To suspect the commission of an offense listed in 
Sec. 3017.305(a); or
    (2) That a cause for debarment under Sec. 3017.305 may exist.
    (b) Indictment shall constitute adequate evidence for purposes of 
suspension actions.



Sec. 3017.410  Procedures.

    (a) Investigation and referral. Information concerning the existence 
of a cause for suspension from any source shall be promptly reported, 
investigated, and referred, when appropriate, to the suspending official 
for consideration. After consideration, the suspending official may 
issue a notice of suspension.
    (1) The decision to utilize agency personnel, OIG or other 
appropriate resources to conduct the investigation

[[Page 146]]

and develop the documentation required by paragraph (a)(2) of this 
section is the responsibility of the agency possessing the information.
    (2) Basic documentation shall be developed that includes but is not 
limited to:
    (i) The name of the specific respondent(s) against whom the 
suspension is to be taken;
    (ii) The reason(s) for proposing the suspension;
    (iii) The specific cause(s) for suspension from Sec. 3017.405;
    (iv) A short narrative stating the facts and/or describing other 
evidence supporting the reason(s) for the suspension;
    (v) The recommended time period for the suspension;
    (vi) The potential effect and/or consequences that the suspension 
will have on the respondent(s);
    (vii) Copies of any relevant support documentation identified under 
this section.
    (3) The suspending official shall be responsible for deciding 
whether or not to proceed with the suspension.
    (4) OGC is responsible for:
    (i) Reviewing the documentation and notice for legal sufficiency, 
and
    (ii) Providing any necessary coordination with DOJ.
    (b) Decisionmaking process. USDA shall process suspension actions as 
informally as practicable, consistent with principles of fundamental 
fairness, using the procedures in Sec. 3017.411 through Sec. 3017.413.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.411  Notice of suspension.

    When a respondent is suspended, notice shall immediately be given:
    (a) That suspension has been imposed;
    (b) That the suspension is based on an indictment, conviction, or 
other adequate evidence that the respondent has committed irregularities 
seriously reflecting on the propriety of further Federal Government 
dealings with the respondent;
    (c) Describing any such irregularities in terms sufficient to put 
the respondent on notice without disclosing the Federal Government's 
evidence;
    (d) Of the cause(s) relied upon under Sec. 3017.405 for imposing 
suspension;
    (e) That the suspension is for a temporary period pending the 
completion of an investigation or ensuing legal, debarment, or Program 
Fraud Civil Remedies Act proceedings;
    (f) Of the provisions of Sec. 3017.411 through Sec. 3017.413 and any 
other USDA procedures, if applicable, governing suspension 
decisionmaking; and
    (g) Of the effect of the suspension.

In USDA, the notice to the respondent shall be signed by the suspending 
official and transmitted by certified mail, return receipt requested. 
OGC will be consulted on all proposed suspension actions prior to the 
notice being sent to the respondent.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.412  Opportunity to contest suspension.

    (a) Submission in opposition. Within 30 days after receipt of the 
notice of suspension, the respondent may submit, in person, in writing, 
or through a representative, information and argument in opposition to 
the suspension.
    (b) Additional proceedings as to disputed material facts. (1) If the 
suspending official finds that the respondent's submission in opposition 
raises a genuine dispute over facts material to the suspension, 
respondent(s) shall be afforded an opportunity to appear with a 
representative, submit documentary evidence, present witnesses, and 
confront any witness the agency presents, unless:
    (i) The action is based on an indictment, conviction or civil 
judgment, or
    (ii) A determination is made, on the basis of Department of Justice 
advice, that the substantial interests of the Federal Government in 
pending or contemplated legal proceedings based on the same facts as the 
suspension would be prejudiced.
    (A) In USDA, such determination shall be made by the suspending 
official, after coordination with OGC.
    (B) In USDA, the suspending official shall continue the suspension 
only if he/she determines, after consultation with OGC, that there is 
enough evidence to proceed without using the

[[Page 147]]

facts that DOJ has advised would prejudice the contemplated legal 
proceedings. If there is not such evidence, the suspension shall be 
terminated immediately without prejudice.
    (2) A transcribed record of any additional proceedings shall be 
prepared and made available at cost to the respondent, upon request, 
unless the respondent and the agency, by mutual agreement, waive the 
requirement for a transcript.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.413  Suspending official's decision.

    The suspending official may modify or terminate the suspension (for 
example, see Sec. 3017.320(c) for reasons for reducing the period or 
scope of debarment) or may leave it in force. However, a decision to 
modify or terminate the suspension shall be without prejudice to the 
subsequent imposition of suspension by any other agency or debarment by 
any agency. The decision shall be rendered in accordance with the 
following provisions:
    (a) No additional proceedings necessary. In actions: based on an 
indictment, conviction, or civil judgment; in which there is no genuine 
dispute over material facts; or in which additional proceedings to 
determine disputed material facts have been denied on the basis of 
Department of Justice advice, the suspending official shall make a 
decision on the basis of all the information in the administrative 
record, including any submission made by the respondent. The decision 
shall be made within 45 days after receipt of any information and 
argument submitted by the respondent, unless the suspending official 
extends this period for good cause.
    (1) In USDA, the suspending official shall terminate the suspension 
immediately when additional proceedings to determine disputed facts have 
been denied on the basis of DOJ advice. The agency, however, reserves 
the right to proceed with the suspension when DOJ completes its legal 
proceedings or is satisfied that the suspension no longer will prejudice 
DOJ's proceedings.
    (2) In USDA suspension actions, where the respondent(s) fail(s) to 
timely provide any submission in opposition, the action will be 
considered decided.
    (b) Additional proceedings necessary. (1) In actions in which 
additional proceedings are necessary to determine disputed material 
facts, written findings of fact shall be prepared. The suspending 
official shall base the decision on the facts as found, together with 
any information and argument submitted by the respondent and any other 
information in the administrative record.
    (2) The suspending official may refer matters involving disputed 
material facts to another official for findings of fact. The suspending 
official may reject any such findings, in whole or in part, only after 
specificially determining them to be arbitrary or capricious or clearly 
erroneous.
    (c) Notice of suspending official's decision. Prompt written notice 
of the suspending official's decision shall be sent to the respondent.
    (1) In USDA, the notice to the respondent shall be signed by the 
suspending official and transmitted by certified mail, return receipt 
requested. OGC will be consulted on all proposed suspension actions 
prior to the notice being sent to the respondent. The notice shall 
include the following:
    (i) Reference to the previously issued notice of suspension;
    (ii) The reason(s) for the action taken in this notice.
    (iii) The effective date(s) of the suspension taken in this notice 
and, where appropriate, the period of the suspension;
    (iv) Advice that the suspension is effective for covered 
transactions throughout the executive branch of the Federal Government 
unless an agency head or a designee authorized by an agency head makes a 
determination referred to in Sec. 3017.215.
    (b) [Reserved]

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4732, Jan. 30, 
1989]



Sec. 3017.415  Period of suspension.

    (a) Suspension shall be for a temporary period pending the 
completion of an investigation or ensuring legal, debarment, or Program 
Fraud Civil

[[Page 148]]

Remedies Act proceedings, unless terminated sooner by the suspending 
official or as provided in paragraph (b) of this section.
    (b) If legal or administrative proceedings are not initiated within 
12 months after the date of the suspension notice, the suspension shall 
be terminated unless an Assistant Attorney General or United States 
Attorney requests its extension in writing, in which case it may be 
extended for an additional six months. In no event may a suspension 
extend beyond 18 months, unless such proceedings have been initiated 
within that period.
    (c) The suspending official shall notify the Department of Justice 
of an impending termination of a suspension, at least 30 days before the 
12-month period expires, to give that Department an opportunity to 
request an extension.
    (1) The suspending official shall notify OGC which will notify DOJ 
of the impending termination of a suspension.
    (2) [Reserved]

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4733, Jan. 30, 
1989]



Sec. 3017.420  Scope of suspension.

    The scope of a suspension is the same as the scope of a debarment 
(see Sec. 3017.325), except that the procedures of Secs. 3017.410 
through 3017.413 shall be used in imposing a suspension.



       Subpart E--Responsibilities of GSA, Agency and Participants



Sec. 3017.500  GSA responsibilities.

    (a) In accordance with the OMB guidelines, GSA shall compile, 
maintain, and distribute a list of all persons who have been debarred, 
suspended, or voluntarily excluded by agencies under Executive Order 
12549 and these regulations, and those who have been determined to be 
ineligible.
    (b) At a minimum, this list shall indicate:
    (1) The names and addresses of all debarred, suspended, ineligible, 
and voluntarily excluded persons, in alphabetical order, with cross-
references when more than one name is involved in a single action;
    (2) The type of action;
    (3) The cause for the action;
    (4) The scope of the action;
    (5) Any termination date for each listing; and
    (6) The agency and name and telephone number of the agency point of 
contact for the action.



Sec. 3017.505  USDA responsibilities.

    (a) The agency shall provide GSA with current information concerning 
debarments, suspensions, determinations of ineligibility, and voluntary 
exclusions it has taken. Until February 18, 1989, the agency shall also 
provide GSA and OMB with information concerning all transactions in 
which USDA has granted exceptions under Sec. 3017.215 permitting 
participation by debarred, suspended, or voluntarily excluded persons.
    (b) Unless an alternative schedule is agreed to by GSA, the agency 
shall advise GSA of the information set forth in Sec. 3017.500(b) and of 
the exceptions granted under Sec. 3017.215 within five working days 
after taking such actions.
    (1) Each communication with GSA regarding additions, deletions, or 
changes to the Nonprocurement List shall be in writing.
    (2) [Reserved]
    (c) The agency shall direct inquiries concerning listed persons to 
the agency that took the action.
    (d) Agency officials shall check the Nonprocurement List before 
entering covered transactions to determine whether a participant in a 
primary transaction is debarred, suspended, ineligible, or voluntarily 
excluded (Tel. ).
    (e) Agency officials shall check the Nonprocurement List before 
approving principals or lower tier participants where agency approval of 
the principal or lower tier participant is required under the terms of 
the transaction, to determine whether such principals or participants 
are debarred, suspended, ineligible, or voluntarily excluded.
    (f) USDA agencies shall provide the Office of Finance and Management 
(OFM) with a copy of any information provided to GSA pursuant to this 
section.
    (g) USDA agencies shall notify GSA and OFM, in writing, of debarment 
or

[[Page 149]]

suspension decisions overturned on appeal under Sec. 3017.515.

[54 FR 4722 and 4731, Jan. 30, 1989, as amended at 54 FR 4733, Jan. 30, 
1989]



Sec. 3017.510  Participants' responsibilities.

    (a) Certification by participants in primary covered transactions. 
Each participant shall submit the certification in Appendix A to this 
Part for it and its principals at the time the participant submits its 
proposal in connection with a primary covered transaction, except that 
States need only complete such certification as to their principals. 
Participants may decide the method and frequency by which they determine 
the eligibility of their principals. In addition, each participant may, 
but is not required to, check the Nonprocurement List for its principals 
(Tel. ). Adverse information on the certification will not necessarily 
result in denial of participation. However, the certification, and any 
additional information pertaining to the certification submitted by the 
participant, shall be considered in the administration of covered 
transactions.
    (b) Certification by participants in lower tier covered 
transactions. (1) Each participant shall require participants in lower 
tier covered transactions to include the certification in Appendix B to 
this part for it and its principals in any proposal submitted in 
connection with such lower tier covered transactions.
    (2) A participant may rely upon the certification of a prospective 
participant in a lower tier covered transaction that it and its 
principals are not debarred, suspended, ineligible, or voluntarily 
excluded from the covered transaction by any Federal agency, unless it 
knows that the certification is erroneous. Participants may decide the 
method and frequency by which they determine the eligibility of their 
principals. In addition, a participant may, but is not required to, 
check the Nonprocurement List for its principals and for participants 
(Tel. ).
    (c) Changed circumstances regarding certification. A participant 
shall provide immediate written notice to USDA if at any time the 
participant learns that its certification was erroneous when submitted 
or has become erroneous by reason of changed circumstances. Participants 
in lower tier covered transactions shall provide the same updated notice 
to the participant to which it submitted its proposal.



Sec. 3017.515  Appeal of debarment or suspension decisions.

    (a) If a decision to debar or suspend is made by a debarring or 
suspending official under Sec. 3017.314 or Sec. 3017.413, the respondent 
may appeal the decision to the Office of Administrative Law Judges 
(OALJ) by filing the appeal, in writing, to the Hearing Clerk, OALJ, 
United States Department of Agriculture, Washington, DC 20250. The 
appeal must be filed within 30 days of receiving the decision and it 
must specify the basis of the appeal. The decision of a debarring or 
suspending official under Sec. 3017.314 or Sec. 3017.413 may be vacated 
by the assigned appeals officer if the officer determines that the 
decision is:
    (1) Not in accordance with law;
    (2) Not based on the applicable standard of evidence; or
    (3) Arbitrary and capricious and an abuse of discretion.
    (b) The appeals officer will base his/her decision solely upon the 
administrative record.
    (c) Within 90 days of the date the appeal is filed with USDA's OALJ 
Hearing Clerk, the appeals officer will notify, in writing, the 
respondent(s) and the debarring or suspending official, who took the 
action being appealed, of his/her decision in the appeal. The notice 
must specify the reason(s) for the decision made by the appeals officer.
    (d) The appeals officer's decision is final and is not appealable 
within USDA.

[54 FR 4733, Jan. 30, 1989]



          Subpart F--Drug-Free Workplace Requirements (Grants)

    Source: 55 FR 21688, 21691, May 25, 1990, unless otherwise noted.



Sec. 3017.600  Purpose.

    (a) The purpose of this subpart is to carry out the Drug-Free 
Workplace Act of 1988 by requiring that--

[[Page 150]]

    (1) A grantee, other than an individual, shall certify to the agency 
that it will provide a drug-free workplace;
    (2) A grantee who is an individual shall certify to the agency that, 
as a condition of the grant, he or she will not engage in the unlawful 
manufacture, distribution, dispensing, possession or use of a controlled 
substance in conducting any activity with the grant.
    (b) Requirements implementing the Drug-Free Workplace Act of 1988 
for contractors with the agency are found at 48 CFR subparts 9.4, 23.5, 
and 52.2.



Sec. 3017.605  Definitions.

    (a) Except as amended in this section, the definitions of 
Sec. 3017.105 apply to this subpart.
    (b) For purposes of this subpart--
    (1) Controlled substance means a controlled substance in schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812), and as 
further defined by regulation at 21 CFR 1308.11 through 1308.15;
    (2) Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes;
    (3) Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance;
    (4) Drug-free workplace means a site for the performance of work 
done in connection with a specific grant at which employees of the 
grantee are prohibited from engaging in the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance;
    (5) Employee means the employee of a grantee directly engaged in the 
performance of work under the grant, including:
    (i) All direct charge employees;
    (ii) All indirect charge employees, unless their impact or 
involvement is insignificant to the performance of the grant; and,
    (iii) Temporary personnel and consultants who are directly engaged 
in the performance of work under the grant and who are on the grantee's 
payroll.

This definition does not include workers not on the payroll of the 
grantee (e.g., volunteers, even if used to meet a matching requirement; 
consultants or independent contractors not on the payroll; or employees 
of subrecipients or subcontractors in covered workplaces);
    (6) Federal agency or agency means any United States executive 
department, military department, government corporation, government 
controlled corporation, any other establishment in the executive branch 
(including the Executive Office of the President), or any independent 
regulatory agency;
    (7) Grant means an award of financial assistance, including a 
cooperative agreement, in the form of money, or property in lieu of 
money, by a Federal agency directly to a grantee. The term grant 
includes block grant and entitlement grant programs, whether or not 
exempted from coverage under the grants management government-wide 
common rule on uniform administrative requirements for grants and 
cooperative agreements. The term does not include technical assistance 
that provides services instead of money, or other assistance in the form 
of loans, loan guarantees, interest subsidies, insurance, or direct 
appropriations; or any veterans' benefits to individuals, i.e., any 
benefit to veterans, their families, or survivors by virtue of the 
service of a veteran in the Armed Forces of the United States;
    (8) Grantee means a person who applies for or receives a grant 
directly from a Federal agency (except another Federal agency);
    (9) Individual means a natural person;
    (10) State means any of the States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency of a State, exclusive of 
institutions of higher education, hospitals, and units of local 
government. A State instrumentality will be considered part of the State 
government if it has a written

[[Page 151]]

determination from a State government that such State considers the 
instrumentality to be an agency of the State government.



Sec. 3017.610  Coverage.

    (a) This subpart applies to any grantee of the agency.
    (b) This subpart applies to any grant, except where application of 
this subpart would be inconsistent with the international obligations of 
the United States or the laws or regulations of a foreign government. A 
determination of such inconsistency may be made only by the agency head 
or his/her designee.
    (c) The provisions of subparts A, B, C, D and E of this part apply 
to matters covered by this subpart, except where specifically modified 
by this subpart. In the event of any conflict between provisions of this 
subpart and other provisions of this part, the provisions of this 
subpart are deemed to control with respect to the implementation of 
drug-free workplace requirements concerning grants.



Sec. 3017.615  Grounds for suspension of payments, suspension or termination of grants, or suspension or debarment.

    A grantee shall be deemed in violation of the requirements of this 
subpart if the agency head or his or her official designee determines, 
in writing, that--
    (a) The grantee has made a false certification under Sec. 3017.630;
    (b) With respect to a grantee other than an individual--
    (1) The grantee has violated the certification by failing to carry 
out the requirements of paragraphs (A)(a)-(g) and/or (B) of the 
certification (Alternate I to Appendix C) or
    (2) Such a number of employees of the grantee have been convicted of 
violations of criminal drug statutes for violations occurring in the 
workplace as to indicate that the grantee has failed to make a good 
faith effort to provide a drug-free workplace.
    (c) With respect to a grantee who is an individual--
    (1) The grantee has violated the certification by failing to carry 
out its requirements (Alternate II to Appendix C); or
    (2) The grantee is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any grant activity.



Sec. 3017.620  Effect of violation.

    (a) In the event of a violation of this subpart as provided in 
Sec. 3017.615, and in accordance with applicable law, the grantee shall 
be subject to one or more of the following actions:
    (1) Suspension of payments under the grant;
    (2) Suspension or termination of the grant; and
    (3) Suspension or debarment of the grantee under the provisions of 
this part.
    (b) Upon issuance of any final decision under this part requiring 
debarment of a grantee, the debarred grantee shall be ineligible for 
award of any grant from any Federal agency for a period specified in the 
decision, not to exceed five years (see Sec. 3017.320(a)(2) of this 
part).



Sec. 3017.625  Exception provision.

    The agency head may waive with respect to a particular grant, in 
writing, a suspension of payments under a grant, suspension or 
termination of a grant, or suspension or debarment of a grantee if the 
agency head determines that such a waiver would be in the public 
interest. This exception authority cannot be delegated to any other 
official.



Sec. 3017.630  Certification requirements and procedures.

    (a)(1) As a prior condition of being awarded a grant, each grantee 
shall make the appropriate certification to the Federal agency providing 
the grant, as provided in Appendix C to this part.
    (2) Grantees are not required to make a certification in order to 
continue receiving funds under a grant awarded before March 18, 1989, or 
under a no-cost time extension of such a grant. However, the grantee 
shall make a one-time drug-free workplace certification for a non-
automatic continuation of such a grant made on or after March 18, 1989.

[[Page 152]]

    (b) Except as provided in this section, all grantees shall make the 
required certification for each grant. For mandatory formula grants and 
entitlements that have no application process, grantees shall submit a 
one-time certification in order to continue receiving awards.
    (c) A grantee that is a State may elect to make one certification in 
each Federal fiscal year. States that previously submitted an annual 
certification are not required to make a certification for Fiscal Year 
1990 until June 30, 1990. Except as provided in paragraph (d) of this 
section, this certification shall cover all grants to all State agencies 
from any Federal agency. The State shall retain the original of this 
statewide certification in its Governor's office and, prior to grant 
award, shall ensure that a copy is submitted individually with respect 
to each grant, unless the Federal agency has designated a central 
location for submission.
    (d)(1) The Governor of a State may exclude certain State agencies 
from the statewide certification and authorize these agencies to submit 
their own certifications to Federal agencies. The statewide 
certification shall name any State agencies so excluded.
    (2) A State agency to which the statewide certification does not 
apply, or a State agency in a State that does not have a statewide 
certification, may elect to make one certification in each Federal 
fiscal year. State agencies that previously submitted a State agency 
certification are not required to make a certification for Fiscal Year 
1990 until June 30, 1990. The State agency shall retain the original of 
this State agency-wide certification in its central office and, prior to 
grant award, shall ensure that a copy is submitted individually with 
respect to each grant, unless the Federal agency designates a central 
location for submission.
    (3) When the work of a grant is done by more than one State agency, 
the certification of the State agency directly receiving the grant shall 
be deemed to certify compliance for all workplaces, including those 
located in other State agencies.
    (e)(1) For a grant of less than 30 days performance duration, 
grantees shall have this policy statement and program in place as soon 
as possible, but in any case by a date prior to the date on which 
performance is expected to be completed.
    (2) For a grant of 30 days or more performance duration, grantees 
shall have this policy statement and program in place within 30 days 
after award.
    (3) Where extraordinary circumstances warrant for a specific grant, 
the grant officer may determine a different date on which the policy 
statement and program shall be in place.



Sec. 3017.635  Reporting of and employee sanctions for convictions of criminal drug offenses.

    (a) When a grantee other than an individual is notified that an 
employee has been convicted for a violation of a criminal drug statute 
occurring in the workplace, it shall take the following actions:
    (1) Within 10 calendar days of receiving notice of the conviction, 
the grantee shall provide written notice, including the convicted 
employee's position title, to every grant officer, or other designee on 
whose grant activity the convicted employee was working, unless a 
Federal agency has designated a central point for the receipt of such 
notifications. Notification shall include the identification number(s) 
for each of the Federal agency's affected grants.
    (2) Within 30 calendar days of receiving notice of the conviction, 
the grantee shall do the following with respect to the employee who was 
convicted.
    (i) Take appropriate personnel action against the employee, up to 
and including termination, consistent with requirements of the 
Rehabilitation Act of 1973, as amended; or
    (ii) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for such purposes by 
a Federal, State, or local health, law enforcement, or other appropriate 
agency.
    (b) A grantee who is an individual who is convicted for a violation 
of a criminal drug statute occurring during the conduct of any grant 
activity shall

[[Page 153]]

report the conviction, in writing, within 10 calendar days, to his or 
her Federal agency grant officer, or other designee, unless the Federal 
agency has designated a central point for the receipt of such notices. 
Notification shall include the identification number(s) for each of the 
Federal agency's affected grants.

(Approved by the Office of Management and Budget under control number 
0991-0002)

Appendix A to Part 3017--Certification Regarding Debarment, Suspension, 
     and Other Responsibility Matters--Primary Covered Transactions

                     Instructions for Certification

    1. By signing and submitting this proposal, the prospective primary 
participant is providing the certification set out below.
    2. The inability of a person to provide the certification required 
below will not necessarily result in denial of participation in this 
covered transaction. The prospective participant shall submit an 
explanation of why it cannot provide the certification set out below. 
The certification or explanation will be considered in connection with 
the department or agency's determination whether to enter into this 
transaction. However, failure of the prospective primary participant to 
furnish a certification or an explanation shall disqualify such person 
from participation in this transaction.
    3. The certification in this clause is a material representation of 
fact upon which reliance was placed when the department or agency 
determined to enter into this transaction. If it is later determined 
that the prospective primary participant knowingly rendered an erroneous 
certification, in addition to other remedies available to the Federal 
Government, the department or agency may terminate this transaction for 
cause or default.
    4. The prospective primary participant shall provide immediate 
written notice to the department or agency to which this proposal is 
submitted if at any time the prospective primary participant learns that 
its certification was erroneous when submitted or has become erroneous 
by reason of changed circumstances.
    5. The terms covered transaction, debarred, suspended, ineligible, 
lower tier covered transaction, participant, person, primary covered 
transaction, principal, proposal, and voluntarily excluded, as used in 
this clause, have the meanings set out in the Definitions and Coverage 
sections of the rules implementing Executive Order 12549. You may 
contact the department or agency to which this proposal is being 
submitted for assistance in obtaining a copy of those regulations.
    6. The prospective primary participant agrees by submitting this 
proposal that, should the proposed covered transaction be entered into, 
it shall not knowingly enter into any lower tier covered transaction 
with a person who is proposed for debarment under 48 CFR part 9, subpart 
9.4, debarred, suspended, declared ineligible, or voluntarily excluded 
from participation in this covered transaction, unless authorized by the 
department or agency entering into this transaction.
    7. The prospective primary participant further agrees by submitting 
this proposal that it will include the clause titled ``Certification 
Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-
Lower Tier Covered Transaction,'' provided by the department or agency 
entering into this covered transaction, without modification, in all 
lower tier covered transactions and in all solicitations for lower tier 
covered transactions.
    8. A participant in a covered transaction may rely upon a 
certification of a prospective participant in a lower tier covered 
transaction that it is not proposed for debarment under 48 CFR part 9, 
subpart 9.4, debarred, suspended, ineligible, or voluntarily excluded 
from the covered transaction, unless it knows that the certification is 
erroneous. A participant may decide the method and frequency by which it 
determines the eligibility of its principals. Each participant may, but 
is not required to, check the List of Parties Excluded from Federal 
Procurement and Nonprocurement Programs.
    9. Nothing contained in the foregoing shall be construed to require 
establishment of a system of records in order to render in good faith 
the certification required by this clause. The knowledge and information 
of a participant is not required to exceed that which is normally 
possessed by a prudent person in the ordinary course of business 
dealings.
    10. Except for transactions authorized under paragraph 6 of these 
instructions, if a participant in a covered transaction knowingly enters 
into a lower tier covered transaction with a person who is proposed for 
debarment under 48 CFR part 9, subpart 9.4, suspended, debarred, 
ineligible, or voluntarily excluded from participation in this 
transaction, in addition to other remedies available to the Federal 
Government, the department or agency may terminate this transaction for 
cause or default.

[[Page 154]]

Certification Regarding Debarment, Suspension, and Other Responsibility 
                  Matters--Primary Covered Transactions

    (1) The prospective primary participant certifies to the best of its 
knowledge and belief, that it and its principals:
    (a) Are not presently debarred, suspended, proposed for debarment, 
declared ineligible, or voluntarily excluded by any Federal department 
or agency;
    (b) Have not within a three-year period preceding this proposal been 
convicted of or had a civil judgment rendered against them for 
commission of fraud or a criminal offense in connection with obtaining, 
attempting to obtain, or performing a public (Federal, State or local) 
transaction or contract under a public transaction; violation of Federal 
or State antitrust statutes or commission of embezzlement, theft, 
forgery, bribery, falsification or destruction of records, making false 
statements, or receiving stolen property;
    (c) Are not presently indicted for or otherwise criminally or 
civilly charged by a governmental entity (Federal, State or local) with 
commission of any of the offenses enumerated in paragraph (1)(b) of this 
certification; and
    (d) Have not within a three-year period preceding this application/
proposal had one or more public transactions (Federal, State or local) 
terminated for cause or default.
    (2) Where the prospective primary participant is unable to certify 
to any of the statements in this certification, such prospective 
participant shall attach an explanation to this proposal.

[60 FR 33042, 33043, June 26, 1995]

Appendix B to Part 3017--Certification Regarding Debarment, Suspension, 
 Ineligibility and Voluntary Exclusion--Lower Tier Covered Transactions

                     Instructions for Certification

    1. By signing and submitting this proposal, the prospective lower 
tier participant is providing the certification set out below.
    2. The certification in this clause is a material representation of 
fact upon which reliance was placed when this transaction was entered 
into. If it is later determined that the prospective lower tier 
participant knowingly rendered an erroneous certification, in addition 
to other remedies available to the Federal Government the department or 
agency with which this transaction originated may pursue available 
remedies, including suspension and/or debarment.
    3. The prospective lower tier participant shall provide immediate 
written notice to the person to which this proposal is submitted if at 
any time the prospective lower tier participant learns that its 
certification was erroneous when submitted or had become erroneous by 
reason of changed circumstances.
    4. The terms covered transaction, debarred, suspended, ineligible, 
lower tier covered transaction, participant, person, primary covered 
transaction, principal, proposal, and voluntarily excluded, as used in 
this clause, have the meaning set out in the Definitions and Coverage 
sections of rules implementing Executive Order 12549. You may contact 
the person to which this proposal is submitted for assistance in 
obtaining a copy of those regulations.
    5. The prospective lower tier participant agrees by submitting this 
proposal that, should the proposed covered transaction be entered into, 
it shall not knowingly enter into any lower tier covered transaction 
with a person who is proposed for debarment under 48 CFR part 9, subpart 
9.4, debarred, suspended, declared ineligible, or voluntarily excluded 
from participation in this covered transaction, unless authorized by the 
department or agency with which this transaction originated.
    6. The prospective lower tier participant further agrees by 
submitting this proposal that it will include this clause titled 
``Certification Regarding Debarment, Suspension, Ineligibility and 
Voluntary Exclusion-Lower Tier Covered Transaction,'' without 
modification, in all lower tier covered transactions and in all 
solicitations for lower tier covered transactions.
    7. A participant in a covered transaction may rely upon a 
certification of a prospective participant in a lower tier covered 
transaction that it is not proposed for debarment under 48 CFR part 9, 
subpart 9.4, debarred, suspended, ineligible, or voluntarily excluded 
from covered transactions, unless it knows that the certification is 
erroneous. A participant may decide the method and frequency by which it 
determines the eligibility of its principals. Each participant may, but 
is not required to, check the List of Parties Excluded from Federal 
Procurement and Nonprocurement Programs.
    8. Nothing contained in the foregoing shall be construed to require 
establishment of a system of records in order to render in good faith 
the certification required by this clause. The knowledge and information 
of a participant is not required to exceed that which is normally 
possessed by a prudent person in the ordinary course of business 
dealings.
    9. Except for transactions authorized under paragraph 5 of these 
instructions, if a participant in a covered transaction knowingly enters 
into a lower tier covered transaction with a person who is proposed for 
debarment under 48 CFR part 9, subpart 9.4, suspended, debarred, 
ineligible, or voluntarily excluded

[[Page 155]]

from participation in this transaction, in addition to other remedies 
available to the Federal Government, the department or agency with which 
this transaction originated may pursue available remedies, including 
suspension and/or debarment.

    Certification Regarding Debarment, Suspension, Ineligibility an 
          Voluntary Exclusion--Lower Tier Covered Transactions

    (1) The prospective lower tier participant certifies, by submission 
of this proposal, that neither it nor its principals is presently 
debarred, suspended, proposed for debarment, declared ineligible, or 
voluntarily excluded from participation in this transaction by any 
Federal department or agency.
    (2) Where the prospective lower tier participant is unable to 
certify to any of the statements in this certification, such prospective 
participant shall attach an explanation to this proposal.

[60 FR 33042, 33043, June 26, 1995]

  Appendix C to Part 3017--Certification Regarding Drug-Free Workplace 
                              Requirements

                     Instructions for Certification

    1. By signing and/or submitting this application or grant agreement, 
the grantee is providing the certification set out below.
    2. The certification set out below is a material representation of 
fact upon which reliance is placed when the agency awards the grant. If 
it is later determined that the grantee knowingly rendered a false 
certification, or otherwise violates the requirements of the Drug-Free 
Workplace Act, the agency, in addition to any other remedies available 
to the Federal Government, may take action authorized under the Drug-
Free Workplace Act.
    3. For grantees other than individuals, Alternate I applies.
    4. For grantees who are individuals, Alternate II applies.
    5. Workplaces under grants, for grantees other than individuals, 
need not be identified on the certification. If known, they may be 
identified in the grant application. If the grantee does not identify 
the workplaces at the time of application, or upon award, if there is no 
application, the grantee must keep the identity of the workplace(s) on 
file in its office and make the information available for Federal 
inspection. Failure to identify all known workplaces constitutes a 
violation of the grantee's drug-free workplace requirements.
    6. Workplace identifications must include the actual address of 
buildings (or parts of buildings) or other sites where work under the 
grant takes place. Categorical descriptions may be used (e.g., all 
vehicles of a mass transit authority or State highway department while 
in operation, State employees in each local unemployment office, 
performers in concert halls or radio studios).
    7. If the workplace identified to the agency changes during the 
performance of the grant, the grantee shall inform the agency of the 
change(s), if it previously identified the workplaces in question (see 
paragraph five).
    8. Definitions of terms in the Nonprocurement Suspension and 
Debarment common rule and Drug-Free Workplace common rule apply to this 
certification. Grantees' attention is called, in particular, to the 
following definitions from these rules:
    Controlled substance means a controlled substance in Schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812) and as 
further defined by regulation (21 CFR 1308.11 through 1308.15);
    Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes;
    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance;
    Employee means the employee of a grantee directly engaged in the 
performance of work under a grant, including: (i) All direct charge 
employees; (ii) All indirect charge employees unless their impact or 
involvement is insignificant to the performance of the grant; and, (iii) 
Temporary personnel and consultants who are directly engaged in the 
performance of work under the grant and who are on the grantee's 
payroll. This definition does not include workers not on the payroll of 
the grantee (e.g., volunteers, even if used to meet a matching 
requirement; consultants or independent contractors not on the grantee's 
payroll; or employees of subrecipients or subcontractors in covered 
workplaces).

        Certification Regarding Drug-Free Workplace Requirements

             Alternate I. (Grantees Other Than Individuals)

    A. The grantee certifies that it will or will continue to provide a 
drug-free workplace by:
    (a) Publishing a statement notifying employees that the unlawful 
manufacture, distribution, dispensing, possession, or use of a 
controlled substance is prohibited in the grantee's workplace and 
specifying the actions that will be taken against employees for 
violation of such prohibition;
    (b) Establishing an ongoing drug-free awareness program to inform 
employees about--
    (1) The dangers of drug abuse in the workplace;

[[Page 156]]

    (2) The grantee's policy of maintaining a drug-free workplace;
    (3) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (4) The penalties that may be imposed upon employees for drug abuse 
violations occurring in the workplace;
    (c) Making it a requirement that each employee to be engaged in the 
performance of the grant be given a copy of the statement required by 
paragraph (a);
    (d) Notifying the employee in the statement required by paragraph 
(a) that, as a condition of employment under the grant, the employee 
will--
    (1) Abide by the terms of the statement; and
    (2) Notify the employer in writing of his or her conviction for a 
violation of a criminal drug statute occurring in the workplace no later 
than five calendar days after such conviction;
    (e) Notifying the agency in writing, within ten calendar days after 
receiving notice under paragraph (d)(2) from an employee or otherwise 
receiving actual notice of such conviction. Employers of convicted 
employees must provide notice, including position title, to every grant 
officer or other designee on whose grant activity the convicted employee 
was working, unless the Federal agency has designated a central point 
for the receipt of such notices. Notice shall include the identification 
number(s) of each affected grant;
    (f) Taking one of the following actions, within 30 calendar days of 
receiving notice under paragraph (d)(2), with respect to any employee 
who is so convicted--
    (1) Taking appropriate personnel action against such an employee, up 
to and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973, as amended; or
    (2) Requiring such employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for such purposes by 
a Federal, State, or local health, law enforcement, or other appropriate 
agency;
    (g) Making a good faith effort to continue to maintain a drug-free 
workplace through implementation of paragraphs (a), (b), (c), (d), (e) 
and (f).
    B. The grantee may insert in the space provided below the site(s) 
for the performance of work done in connection with the specific grant:

Place of Performance (Street address, city, county, state, zip code)
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

Check {time}  if there are workplaces on file that are not identified 
here.

              Alternate II. (Grantees Who Are Individuals)

    (a) The grantee certifies that, as a condition of the grant, he or 
she will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity with the grant;
    (b) If convicted of a criminal drug offense resulting from a 
violation occurring during the conduct of any grant activity, he or she 
will report the conviction, in writing, within 10 calendar days of the 
conviction, to every grant officer or other designee, unless the Federal 
agency designates a central point for the receipt of such notices. When 
notice is made to such a central point, it shall include the 
identification number(s) of each affected grant.

[55 FR 21690, 21691, May 25, 1990]



PART 3018--NEW RESTRICTIONS ON LOBBYING--Table of Contents




                           Subpart A--General

Sec.
3018.100  Conditions on use of funds.
3018.105  Definitions.
3018.110  Certification and disclosure.

                 Subpart B--Activities by Own Employees

3018.200  Agency and legislative liaison.
3018.205  Professional and technical services.
3018.210  Reporting.

            Subpart C--Activities by Other Than Own Employees

3018.300  Professional and technical services.

                  Subpart D--Penalties and Enforcement

3018.400  Penalties.
3018.405  Penalty procedures.
3018.410  Enforcement.

                          Subpart E--Exemptions

3018.500  Secretary of Defense.

                        Subpart F--Agency Reports

3018.600  Semi-annual compilation.
3018.605  Inspector General report.

Appendix A to Part 3018--Certification Regarding Lobbying
Appendix B to Part 3018--Disclosure Form to Report Lobbying

    Authority: Sec. 319, Pub. L. 101-121 (31 U.S.C. 1352); 5 U.S.C. 301.

    Source: 55 FR 6737 and 6746, Feb. 26, 1990.

[[Page 157]]


    Cross Reference: See also Office of Management and Budget notice 
published at 54 FR 52306, December 20, 1989.



                           Subpart A--General



Sec. 3018.100  Conditions on use of funds.

    (a) No appropriated funds may be expended by the recipient of a 
Federal contract, grant, loan, or cooperative ageement to pay any person 
for influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with any of the following 
covered Federal actions: the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (b) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or cooperative agreement shall file with that 
agency a certification, set forth in Appendix A, that the person has not 
made, and will not make, any payment prohibited by paragraph (a) of this 
section.
    (c) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or a cooperative agreement shall file with that 
agency a disclosure form, set forth in Appendix B, if such person has 
made or has agreed to make any payment using nonappropriated funds (to 
include profits from any covered Federal action), which would be 
prohibited under paragraph (a) of this section if paid for with 
appropriated funds.
    (d) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a statement, set forth in Appendix A, whether that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.
    (e) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a disclosure form, set forth in Appendix B, if that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.



Sec. 3018.105  Definitions.

    For purposes of this part:
    (a) Agency, as defined in 5 U.S.C. 552(f), includes Federal 
executive departments and agencies as well as independent regulatory 
commissions and Government corporations, as defined in 31 U.S.C. 
9101(1).
    (b) Covered Federal action means any of the following Federal 
actions:
    (1) The awarding of any Federal contract;
    (2) The making of any Federal grant;
    (3) The making of any Federal loan;
    (4) The entering into of any cooperative agreement; and,
    (5) The extension, continuation, renewal, amendment, or modification 
of any Federal contract, grant, loan, or cooperative agreement.

Covered Federal action does not include receiving from an agency a 
commitment providing for the United States to insure or guarantee a 
loan. Loan guarantees and loan insurance are addressed independently 
within this part.
    (c) Federal contract means an acquisition contract awarded by an 
agency, including those subject to the Federal Acquisition Regulation 
(FAR), and any other acquisition contract for real or personal property 
or services not subject to the FAR.
    (d) Federal cooperative agreement means a cooperative agreement 
entered into by an agency.
    (e) Federal grant means an award of financial assistance in the form 
of money, or property in lieu of money, by the Federal Government or a 
direct

[[Page 158]]

appropriation made by law to any person. The term does not include 
technical assistance which provides services instead of money, or other 
assistance in the form of revenue sharing, loans, loan guarantees, loan 
insurance, interest subsidies, insurance, or direct United States cash 
assistance to an individual.
    (f) Federal loan means a loan made by an agency. The term does not 
include loan guarantee or loan insurance.
    (g) Indian tribe and tribal organization have the meaning provided 
in section 4 of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450B). Alaskan Natives are included under the definitions 
of Indian tribes in that Act.
    (h) Influencing or attempting to influence means making, with the 
intent to influence, any communication to or appearance before an 
officer or employee or any agency, a Member of Congress, an officer or 
employee of Congress, or an employee of a Member of Congress in 
connection with any covered Federal action.
    (i) Loan guarantee and loan insurance means an agency's guarantee or 
insurance of a loan made by a person.
    (j) Local government means a unit of government in a State and, if 
chartered, established, or otherwise recognized by a State for the 
performance of a governmental duty, including a local public authority, 
a special district, an intrastate district, a council of governments, a 
sponsor group representative organization, and any other instrumentality 
of a local government.
    (k) Officer or employee of an agency includes the following 
individuals who are employed by an agency:
    (1) An individual who is appointed to a position in the Government 
under title 5, U.S. Code, including a position under a temporary 
appointment;
    (2) A member of the uniformed services as defined in section 101(3), 
title 37, U.S. Code;
    (3) A special Government employee as defined in section 202, title 
18, U.S. Code; and,
    (4) An individual who is a member of a Federal advisory committee, 
as defined by the Federal Advisory Committee Act, title 5, U.S. Code 
appendix 2.
    (l) Person means an individual, corporation, company, association, 
authority, firm, partnership, society, State, and local government, 
regardless of whether such entity is operated for profit or not for 
profit. This term excludes an Indian tribe, tribal organization, or any 
other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (m) Reasonable compensation means, with respect to a regularly 
employed officer or employee of any person, compensation that is 
consistent with the normal compensation for such officer or employee for 
work that is not furnished to, not funded by, or not furnished in 
cooperation with the Federal Government.
    (n) Reasonable payment means, with respect to perfessional and other 
technical services, a payment in an amount that is consistent with the 
amount normally paid for such services in the private sector.
    (o) Recipient includes all contractors, subcontractors at any tier, 
and subgrantees at any tier of the recipient of funds received in 
connection with a Federal contract, grant, loan, or cooperative 
agreement. The term excludes an Indian tribe, tribal organization, or 
any other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (p) Regularly employed means, with respect to an officer or employee 
of a person requesting or receiving a Federal contract, grant, loan, or 
cooperative agreement or a commitment providing for the United States to 
insure or guarantee a loan, an officer or employee who is employed by 
such person for at least 130 working days within one year immediately 
preceding the date of the submission that initiates agency consideration 
of such person for receipt of such contract, grant, loan, cooperative 
agreement, loan insurance commitment, or loan guarantee commitment. An 
officer or employee who is employed by such person for less than 130 
working days within one year immediately preceding the date of the 
submission that initiates agency consideration of such person shall be 
considered to be regularly employed as

[[Page 159]]

soon as he or she is employed by such person for 130 working days.
    (q) State means a State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, a territory or possession of 
the United States, an agency or instrumentality of a State, and a multi-
State, regional, or interstate entity having governmental duties and 
powers.



Sec. 3018.110  Certification and disclosure.

    (a) Each person shall file a certification, and a disclosure form, 
if required, with each submission that initiates agency consideration of 
such person for:
    (1) Award of a Federal contract, grant, or cooperative agreement 
exceeding $100,000; or
    (2) An award of a Federal loan or a commitment providing for the 
United States to insure or guarantee a loan exceeding $150,000.
    (b) Each person shall file a certification, and a disclosure form, 
if required, upon receipt by such person of:
    (1) A Federal contract, grant, or cooperative agreement exceeding 
$100,000; or
    (2) A Federal loan or a commitment providing for the United States 
to insure or guarantee a loan exceeding $150,000,

Unless such person previously filed a certification, and a disclosure 
form, if required, under paragraph (a) of this section.
    (c) Each person shall file a disclosure form at the end of each 
calendar quarter in which there occurs any event that requires 
disclosure or that materially affects the accuracy of the information 
contained in any disclosure form previously filed by such person under 
paragraphs (a) or (b) of this section. An event that materially affects 
the accuracy of the information reported includes:
    (1) A cumulative increase of $25,000 or more in the amount paid or 
expected to be paid for influencing or attempting to influence a covered 
Federal action; or
    (2) A change in the person(s) or individual(s) influencing or 
attempting to influence a covered Federal action; or,
    (3) A change in the officer(s), employee(s), or Member(s) contacted 
to influence or attempt to influence a covered Federal action.
    (d) Any person who requests or receives from a person referred to in 
paragraphs (a) or (b) of this section:
    (1) A subcontract exceeding $100,000 at any tier under a Federal 
contract;
    (2) A subgrant, contract, or subcontract exceeding $100,000 at any 
tier under a Federal grant;
    (3) A contract or subcontract exceeding $100,000 at any tier under a 
Federal loan exceeding $150,000; or,
    (4) A contract or subcontract exceeding $100,000 at any tier under a 
Federal cooperative agreement,

Shall file a certification, and a disclosure form, if required, to the 
next tier above.
    (e) All disclosure forms, but not certifications, shall be forwarded 
from tier to tier until received by the person referred to in paragraphs 
(a) or (b) of this section. That person shall forward all disclosure 
forms to the agency.
    (f) Any certification or disclosure form filed under paragraph (e) 
of this section shall be treated as a material representation of fact 
upon which all receiving tiers shall rely. All liability arising from an 
erroneous representation shall be borne solely by the tier filing that 
representation and shall not be shared by any tier to which the 
erroneous representation is forwarded. Submitting an erroneous 
certification or disclosure constitutes a failure to file the required 
certification or disclosure, respectively. If a person fails to file a 
required certification or disclosure, the United States may pursue all 
available remedies, including those authorized by section 1352, title 
31, U.S. Code.
    (g) For awards and commitments in process prior to December 23, 
1989, but not made before that date, certifications shall be required at 
award or commitment, covering activities occurring between December 23, 
1989, and the date of award or commitment. However, for awards and 
commitments in process prior to the December 23, 1989 effective date of 
these provisions, but not made before December 23, 1989, disclosure 
forms shall not be required at time of award or commitment but shall be 
filed within 30 days.

[[Page 160]]

    (h) No reporting is required for an activity paid for with 
appropriated funds if that activity is allowable under either Subpart B 
or C.



                 Subpart B--Activities by Own Employees



Sec. 3018.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in 
Sec. 3018.100 (a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement if 
the payment is for agency and legislative liaison activities not 
directly related to a covered Federal action.
    (b) For purposes of paragraph (a) of this section, providing any 
information specifically requested by an agency or Congress is allowable 
at any time.
    (c) For purposes of paragraph (a) of this section, the following 
agency and legislative liaison activities are allowable at any time only 
where they are not related to a specific solicitation for any covered 
Federal action:
    (1) Discussing with an agency (including individual demonstrations) 
the qualities and characteristics of the person's products or services, 
conditions or terms of sale, and service capabilities; and,
    (2) Technical discussions and other activities regarding the 
application or adaptation of the person's products or services for an 
agency's use.
    (d) For purposes of paragraph (a) of this section, the following 
agencies and legislative liaison activities are allowable only where 
they are prior to formal solicitation of any covered Federal action:
    (1) Providing any information not specifically requested but 
necessary for an agency to make an informed decision about initiation of 
a covered Federal action;
    (2) Technical discussions regarding the preparation of an 
unsolicited proposal prior to its official submission; and,
    (3) Capability presentations by persons seeking awards from an 
agency pursuant to the provisions of the Small Business Act, as amended 
by Public Law 95-507 and other subsequent amendments.
    (e) Only those activities expressly authorized by this section are 
allowable under this section.



Sec. 3018.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in 
Sec. 3018.100 (a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement or 
an extension, continuation, renewal, amendment, or modification of a 
Federal contract, grant, loan, or cooperative agreement if payment is 
for professional or technical services rendered directly in the 
preparation, submission, or negotiation of any bid, proposal, or 
application for that Federal contract, grant, loan, or cooperative 
agreement or for meeting requirements imposed by or pursuant to law as a 
condition for receiving that Federal contract, grant, loan, or 
cooperative agreement.
    (b) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting of a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of

[[Page 161]]

his or her client's proposal, but generally advocate one proposal over 
another are not allowable under this section because the lawyer is not 
providing professional legal services. Similarly, communications with 
the intent to influence made by an engineer providing an engineering 
analysis prior to the preparation or submission of a bid or proposal are 
not allowable under this section since the engineer is providing 
technical services but not directly in the preparation, submission or 
negotiation of a covered Federal action.
    (c) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (d) Only those services expressly authorized by this section are 
allowable under this section.



Sec. 3018.210  Reporting.

    No reporting is required with respect to payments of reasonable 
compensation made to regularly employed officers or employees of a 
person.



            Subpart C--Activities by Other Than Own Employees



Sec. 3018.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in 
Sec. 3018.100 (a), does not apply in the case of any reasonable payment 
to a person, other than an officer or employee of a person requesting or 
receiving a covered Federal action, if the payment is for professional 
or technical services rendered directly in the preparation, submission, 
or negotiation of any bid, proposal, or application for that Federal 
contract, grant, loan, or cooperative agreement or for meeting 
requirements imposed by or pursuant to law as a condition for receiving 
that Federal contract, grant, loan, or cooperative agreement.
    (b) The reporting requirements in Sec. 3018.110 (a) and (b) 
regarding filing a disclosure form by each person, if required, shall 
not apply with respect to professional or technical services rendered 
directly in the preparation, submission, or negotiation of any 
commitment providing for the United States to insure or guarantee a 
loan.
    (c) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting or a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of his or her client's 
proposal, but generally advocate one proposal over another are not 
allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.
    (d) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.

[[Page 162]]

    (e) Persons other than officers or employees of a person requesting 
or receiving a covered Federal action include consultants and trade 
associations.
    (f) Only those services expressly authorized by this section are 
allowable under this section.



                  Subpart D--Penalties and Enforcement



Sec. 3018.400  Penalties.

    (a) Any person who makes an expenditure prohibited herein shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such expenditure.
    (b) Any person who fails to file or amend the disclosure form (see 
Appendix B) to be filed or amended if required herein, shall be subject 
to a civil penalty of not less than $10,000 and not more than $100,000 
for each such failure.
    (c) A filing or amended filing on or after the date on which an 
administrative action for the imposition of a civil penalty is commenced 
does not prevent the imposition of such civil penalty for a failure 
occurring before that date. An administrative action is commenced with 
respect to a failure when an investigating official determines in 
writing to commence an investigation of an allegation of such failure.
    (d) In determining whether to impose a civil penalty, and the amount 
of any such penalty, by reason of a violation by any person, the agency 
shall consider the nature, circumstances, extent, and gravity of the 
violation, the effect on the ability of such person to continue in 
business, any prior violations by such person, the degree of culpability 
of such person, the ability of the person to pay the penalty, and such 
other matters as may be appropriate.
    (e) First offenders under paragraphs (a) or (b) of this section 
shall be subject to a civil penalty of $10,000, absent aggravating 
circumstances. Second and subsequent offenses by persons shall be 
subject to an appropriate civil penalty between $10,000 and $100,000, as 
determined by the agency head or his or her designee.
    (f) An imposition of a civil penalty under this section does not 
prevent the United States from seeking any other remedy that may apply 
to the same conduct that is the basis for the imposition of such civil 
penalty.



Sec. 3018.405  Penalty procedures.

    Agencies shall impose and collect civil penalties pursuant to the 
provisions of the Program Fraud and Civil Remedies Act, 31 U.S.C. 
sections 3803 (except subsection (c)), 3804, 3805, 3806, 3807, 3808, and 
3812, insofar as these provisions are not inconsistent with the 
requirements herein.



Sec. 3018.410  Enforcement.

    The head of each agency shall take such actions as are necessary to 
ensure that the provisions herein are vigorously implemented and 
enforced in that agency.



                          Subpart E--Exemptions



Sec. 3018.500  Secretary of Defense.

    (a) The Secretary of Defense may exempt, on a case-by-case basis, a 
covered Federal action from the prohibition whenever the Secretary 
determines, in writing, that such an exemption is in the national 
interest. The Secretary shall transmit a copy of each such written 
exemption to Congress immediately after making such a determination.
    (b) The Department of Defense may issue supplemental regulations to 
implement paragraph (a) of this section.



                        Subpart F--Agency Reports



Sec. 3018.600  Semi-annual compilation.

    (a) The head of each agency shall collect and compile the disclosure 
reports (see appendix B) and, on May 31 and November 30 of each year, 
submit to the Secretary of the Senate and the Clerk of the House of 
Representatives a report containing a compilation of the information 
contained in the disclosure reports received during the six-month period 
ending on March 31 or September 30, respectively, of that year.
    (b) The report, including the compilation, shall be available for 
public inspection 30 days after receipt of the report by the Secretary 
and the Clerk.

[[Page 163]]

    (c) Information that involves intelligence matters shall be reported 
only to the Select Committee on Intelligence of the Senate, the 
Permanent Select Committee on Intelligence of the House of 
Representatives, and the Committees on Appropriations of the Senate and 
the House of Representatives in accordance with procedures agreed to by 
such committees. Such information shall not be available for public 
inspection.
    (d) Information that is classified under Executive Order 12356 or 
any successor order shall be reported only to the Committee on Foreign 
Relations of the Senate and the Committee on Foreign Affairs of the 
House of Representatives or the Committees on Armed Services of the 
Senate and the House of Representatives (whichever such committees have 
jurisdiction of matters involving such information) and to the 
Committees on Appropriations of the Senate and the House of 
Representatives in accordance with procedures agreed to by such 
committees. Such information shall not be available for public 
inspection.
    (e) The first semi-annual compilation shall be submitted on May 31, 
1990, and shall contain a compilation of the disclosure reports received 
from December 23, 1989 to March 31, 1990.
    (f) Major agencies, designated by the Office of Management and 
Budget (OMB), are required to provide machine-readable compilations to 
the Secretary of the Senate and the Clerk of the House of 
Representatives no later than with the compilations due on May 31, 1991. 
OMB shall provide detailed specifications in a memorandum to these 
agencies.
    (g) Non-major agencies are requested to provide machine-readable 
compilations to the Secretary of the Senate and the Clerk of the House 
of Representatives.
    (h) Agencies shall keep the originals of all disclosure reports in 
the official files of the agency.



Sec. 3018.605  Inspector General report.

    (a) The Inspector General, or other official as specified in 
paragraph (b) of this section, of each agency shall prepare and submit 
to Congress each year, commencing with submission of the President's 
Budget in 1991, an evaluation of the compliance of that agency with, and 
the effectiveness of, the requirements herein. The evaluation may 
include any recommended changes that may be necessary to strengthen or 
improve the requirements.
    (b) In the case of an agency that does not have an Inspector 
General, the agency official comparable to an Inspector General shall 
prepare and submit the annual report, or, if there is no such comparable 
official, the head of the agency shall prepare and submit the annual 
report.
    (c) The annual report shall be submitted at the same time the agency 
submits its annual budget justifications to Congress.
    (d) The annual report shall include the following: All alleged 
violations relating to the agency's covered Federal actions during the 
year covered by the report, the actions taken by the head of the agency 
in the year covered by the report with respect to those alleged 
violations and alleged violations in previous years, and the amounts of 
civil penalties imposed by the agency in the year covered by the report.

        Appendix A to Part 3018--Certification Regarding Lobbying

 Certification for Contracts, Grants, Loans, and Cooperative Agreements

    The undersigned certifies, to the best of his or her knowledge and 
belief, that:
    (1) No Federal appropriated funds have been paid or will be paid, by 
or on behalf of the undersigned, to any person for influencing or 
attempting to influence an officer or employee of an agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (2) If any funds other than Federal appropriated funds have been 
paid or will be paid to any person for influencing or attempting to 
influence an officer or employee of any agency, a Member of Congress, an 
officer or employee of Congress, or an employee of a Member of Congress 
in connection with this Federal contract, grant, loan, or cooperative 
agreement, the undersigned shall complete

[[Page 164]]

and submit Standard Form-LLL, ``Disclosure Form to Report Lobbying,'' in 
accordance with its instructions.
    (3) The undersigned shall require that the language of this 
certification be included in the award documents for all subawards at 
all tiers (including subcontracts, subgrants, and contracts under 
grants, loans, and cooperative agreements) and that all subrecipients 
shall certify and disclose accordingly.
    This certification is a material representation of fact upon which 
reliance was placed when this transaction was made or entered into. 
Submission of this certification is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required certification shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

            Statement for Loan Guarantees and Loan Insurance

    The undersigned states, to the best of his or her knowledge and 
belief, that:
    If any funds have been paid or will be paid to any person for 
influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with this commitment 
providing for the United States to insure or guarantee a loan, the 
undersigned shall complete and submit Standard Form-LLL, ``Disclosure 
Form to Report Lobbying,'' in accordance with its instructions.
    Submission of this statement is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required statement shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

[[Page 165]]


       Appendix B to Part 3018--Disclosure Form to Report Lobbying
      [GRAPHIC] [TIFF OMITTED] TC13SE91.000
      

[[Page 166]]


[GRAPHIC] [TIFF OMITTED] TC13SE91.001


[[Page 167]]


[GRAPHIC] [TIFF OMITTED] TC13SE91.002


[[Page 168]]





PART 3019--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS--Table of Contents




                           Subpart A--General

Sec.
3019.1  Purpose.
3019.2  Definitions.
3019.3  Effect on other issuances.
3019.4  Deviations.
3019.5  Subawards.

                    Subpart B--Pre-Award Requirements

3019.10  Purpose.
3019.11  Pre-award policies.
3019.12  Forms for applying for Federal assistance.
3019.13  Debarment and suspension.
3019.14  Special award conditions.
3019.15  Metric system of measurement.
3019.16  Resource Conservation and Recovery Act.
3019.17  Certifications and representations.

                   Subpart C--Post-Award Requirements

                    Financial and Program Management

3019.20  Purpose of financial and program management.
3019.21  Standards for financial management systems.
3019.22  Payment.
3019.23  Cost sharing or matching.
3019.24  Program income.
3019.25  Revision of budget and program plans.
3019.26  Non-Federal audits.
3019.27  Allowable costs.
3019.28  Period of availability of funds.

                           Property Standards

3019.30  Purpose of property standards.
3019.31  Insurance coverage.
3019.32  Real property.
3019.33  Federally-owned and exempt property.
3019.34  Equipment.
3019.35  Supplies and other expendable property.
3019.36  Intangible property.
3019.37  Property trust relationship.

                          Procurement Standards

3019.40  Purpose of procurement standards.
3019.41  Recipient responsibilities.
3019.42  Codes of conduct.
3019.43  Competition.
3019.44  Procurement procedures.
3019.45  Cost and price analysis.
3019.46  Procurement records.
3019.47  Contract administration.
3019.48  Contract provisions.

                           Reports and Records

3019.50  Purpose of reports and records.
3019.51  Monitoring and reporting program performance.
3019.52  Financial reporting.
3019.53  Retention and access requirements for records.

                       Termination and Enforcement

3019.60  Purpose of termination and enforcement.
3019.61  Termination.
3019.62  Enforcement.

                 Subpart D--After-the-Award Requirements

3019.70  Purpose.
3019.71  Closeout procedures.
3019.72  Subsequent adjustments and continuing responsibilities.
3019.73  Collection of amounts due.

Appendix A to Part 3019--Contract Provisions

    Authority: 5 U.S.C. 301; 31 U.S.C. 901-903; 7 CFR 2.28.

    Source: 60 FR 44124, Aug. 24, 1995, unless otherwise noted.



                           Subpart A--General



Sec. 3019.1  Purpose.

    (a) This part establishes uniform administrative requirements for 
Federal grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations. Federal 
awarding agencies shall not impose additional or inconsistent 
requirements, except as provided in Secs. 3019.4, and 3019.14 or unless 
specifically required by Federal statute or executive order. Non-profit 
organizations that implement Federal programs for the States are also 
subject to State requirements.
    (b) This part also applies specifically to the grants, agreements 
and subawards to institutions of higher education, hospitals, and other 
non-profit organizations that are awarded to carry out the following 
entitlement programs:
    (1) Entitlement grants under the following programs authorized by 
The Richard B. Russell National School Lunch Act:

[[Page 169]]

    (i) National School Lunch Program, General Assistance (section 4 of 
the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) National School Lunch Program, Special Meal Assistance 
(section 11 of the Act),
    (iv) Summer Food Service Program for Children (section 13 of the 
Act), and
    (v) Child and Adult Care Food Program (section 17 of the Act).
    (2) Entitlement grants under the following programs authorized by 
The Child Nutrition Act of 1966:
    (i) Special Milk Program for Children (section 3 of the Act), and
    (ii) School Breakfast Program (section 4 of the Act).
    (3) Entitlement grants for State Administrative Expenses under The 
Food Stamp Act of 1977 (section 16 of the Act).

[60 FR 44124, Aug. 24, 1995, as amended at 65 FR 49480, Aug. 14, 2000]



Sec. 3019.2  Definitions.

    (a) Accrued expenditures means the charges incurred by the recipient 
during a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subrecipients, and 
other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required.
    (b) Accrued income means the sum of:
    (1) Earnings during a given period from:
    (i) Services performed by the recipient, and
    (ii) Goods and other tangible property delivered to purchasers, and
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    (c) Acquisition cost of equipment means the net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such as 
the cost of installation, transportation, taxes, duty or protective in-
transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    (d) Advance means a payment made by Treasury check or other 
appropriate payment mechanism to a recipient upon its request either 
before outlays are made by the recipient or through the use of 
predetermined payment schedules.
    (e) Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants and 
other agreements in the form of money or property in lieu of money, by 
the Federal Government to an eligible recipient. The term does not 
include: technical assistance, which provides services instead of money; 
other assistance in the form of loans, loan guarantees, interest 
subsidies, or insurance; direct payments of any kind to individuals; 
contracts which are required to be entered into and administered under 
procurement laws and regulations; and those agreements that are entered 
into under the authorities provided by sections 1472(b), 1473A, and 
1473C of the National Research Extension, and Teaching Policy Act of 
1977 (as amended by the Food Security Act (7 U.S.C. 3318, 3319a and 
3319c.) and subsequent authorizations.
    (f) Cash contributions means the recipient's cash outlay, including 
the outlay of money contributed to the recipient by third parties.
    (g) Closeout means the process by which a Federal awarding agency 
determines that all applicable administrative actions and all required 
work of the award have been completed by the recipient and Federal 
awarding agency.
    (h) Contract means a procurement contract under an award or 
subaward, and a procurement subcontract under a recipient's or 
subrecipient's contract.
    (i) Cost sharing or matching means that portion of project or 
program costs not borne by the Federal Government.
    (j) Date of completion means the date on which all work under an 
award is completed or the date on the award document, or any supplement 
or amendment thereto, on which Federal sponsorship ends.

[[Page 170]]

    (k) Disallowed costs means those charges to an award that the 
Federal awarding agency determines to be unallowable, in accordance with 
the applicable Federal cost principles or other terms and conditions 
contained in the award.
    (l) Equipment means tangible nonexpendable personal property 
including exempt property charged directly to the award having a useful 
life of more than one year and an acquisition cost of $5000 or more per 
unit. However, consistent with recipient policy, lower limits may be 
established.
    (m) Excess property means property under the control of any Federal 
awarding agency that, as determined by the head thereof, is no longer 
required for its needs or the discharge of its responsibilities.
    (n) Exempt property means tangible personal property acquired in 
whole or in part with Federal funds, where the Federal awarding agency 
has statutory authority to vest title in the recipient without further 
obligation to the Federal Government. An example of exempt property 
authority is contained in the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6306), for property acquired under an award to conduct 
basic or applied research by a non-profit institution of higher 
education or non-profit organization whose principal purpose is 
conducting scientific research.
    (o) Federal awarding agency means the U.S. Department of Agriculture 
(USDA) or any subagency of the U.S. Department of Agriculture that 
provides an award to the recipient.
    (p) Federal funds authorized means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount may include any authorized carryover of unobligated funds from 
prior funding periods when permitted by agency regulations or agency 
implementing instructions.
    (q) Federal share of real property, equipment, or supplies means 
that percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    (r) Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    (s) Intangible property and debt instruments means, but is not 
limited to, trademarks, copyrights, patents and patent applications and 
such property as loans, notes and other debt instruments, lease 
agreements, stock and other instruments of property ownership, whether 
considered tangible or intangible.
    (t) Obligations means the amounts of orders placed, contracts and 
grants awarded, services received and similar transactions during a 
given period that require payment by the recipient during the same or a 
future period.
    (u) Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applied and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    (v) Personal property means property of any kind except real 
property. It may be tangible, having physical existence, or intangible, 
having no physical existence, such as copyrights, patents, or 
securities.
    (w) Prior approval means written approval by an authorized official 
evidencing prior consent.
    (x) Program income means gross income earned by the recipient that 
is directly generated by a supported activity or earned as a result of 
the award (see exclusions in Secs. 3019.24 (e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired under 
federally-funded projects, the sale of

[[Page 171]]

commodities or items fabricated under an award, license fees and 
royalties on patents and copyrights, and interest on loans made with 
award funds. Interest earned on advances of Federal funds is not program 
income. Except as otherwise provided in Federal awarding agency 
regulations or the terms and conditions of the award, program income 
does not include the receipt of principal on loans, rebates, credits, 
discounts, etc., or interest earned on any of them.
    (y) Project costs means all allowable costs, as set forth in the 
applicable Federal cost principles, incurred by a recipient and the 
value of the contributions made by third parties in accomplishing the 
objectives of the award during the project period.
    (z) Project period means the period established in the award 
document during which Federal sponsorship begins and ends.
    (aa) Property means, unless otherwise stated, real property, 
equipment, intangible property and debt instruments.
    (bb) Real property means land, including land improvements, 
structures and appurtenances thereto, but excludes movable machinery and 
equipment.
    (cc) Recipient means an organization receiving financial assistance 
directly from Federal awarding agencies to carry out a project or 
program. The term includes public and private institutions of higher 
education, public and private hospitals, and other quasi-public and 
private non-profit organizations such as, but not limited to, community 
action agencies, research institutes, educational associations, and 
health centers. The term may include commercial organizations, foreign 
or international organizations (such as agencies of the United Nations) 
which are recipients, subrecipients, or contractors or subcontractors of 
recipients or subrecipients at the discretion of the Federal awarding 
agency. The term does not include government-owned contractor-operated 
facilities or research centers providing continued support for mission-
oriented, large-scale programs that are government-owned or controlled, 
or are designated as federally-funded research and development centers.
    (dd) Research and development means all research activities, both 
basic and applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions. ``Research'' 
is defined as a systematic study directed toward fuller scientific 
knowledge or understanding of the subject studied. ``Development'' is 
the systematic use of knowledge and understanding gained from research 
directed toward the production of useful materials, devices, systems, or 
methods, including design and development of prototypes and processes. 
The term research also includes activities involving the training of 
individuals in research techniques where such activities utilize the 
same facilities as other research and development activities and where 
such activities are not included in the instruction function.
    (ee) Small awards means a grant or cooperative agreement not 
exceeding the small purchase threshold fixed at 41 U.S.C. 403(11) 
(currently $25,000).
    (ff) Subaward means an award of financial assistance in the form of 
money, or property in lieu of money, made under an award by a recipient 
to an eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' in paragraph (e) of this section.
    (gg) Subrecipient means the legal entity to which a subaward is made 
and which is accountable to the recipient for the use of the funds 
provided. The term may include foreign or international organizations 
(such as agencies of the United Nations) at the discretion of the 
Federal awarding agency.
    (hh) Supplies means all personal property excluding equipment, 
intangible property, and debt instruments as defined in this section, 
and inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement (``subject 
inventions''), as defined in 37 CFR part 401, ``Rights to Inventions

[[Page 172]]

Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts, and Cooperative Agreements.''
    (ii) Suspension means an action by a Federal awarding agency that 
temporarily withdraws Federal sponsorship under an award, pending 
corrective action by the recipient or pending a decision to terminate 
the award by the Federal awarding agency. Suspension of an award is a 
separate action from suspension under Federal agency regulations 
implementing E.O.s 12549 and 12689, ``Debarment and Suspension.''
    (jj) Termination means the cancellation of Federal sponsorship, in 
whole or in part, under an agreement at any time prior to the date of 
completion.
    (kk) Third party in-kind contributions means the value of non-cash 
contributions provided by non-Federal third parties. Third party in-kind 
contributions may be in the form of real property, equipment, supplies 
and other expendable property, and the value of goods and services 
directly benefiting and specifically identifiable to the project or 
program.
    (ll) Unliquidated obligations, for financial reports prepared on a 
cash basis, means the amount of obligations incurred by the recipient 
that have not been paid. For reports prepared on an accrued expenditure 
basis, they represent the amount of obligations incurred by the 
recipient for which an outlay has not been recorded.
    (mm) Unobligated balance means the portion of the funds authorized 
by the Federal awarding agency that has not been obligated by the 
recipient and is determined by deducting the cumulative obligations from 
the cumulative funds authorized.
    (nn) Unrecovered indirect cost means the difference between the 
amount awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    (oo) Working capital advance means a procedure where by funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.

[60 FR 44124, Aug. 24, 1995, as amended at 65 FR 49482, Aug. 14, 2000]



Sec. 3019.3  Effect on other issuances.

    For awards subject to this part, all administrative requirements of 
codified program regulations, program manuals, handbooks and other 
nonregulatory materials which are inconsistent with the requirements of 
this part shall be superseded, except to the extent they are required by 
statute, or authorized in accordance with the deviations provision in 
Sec. 3019.4.



Sec. 3019.4  Deviations.

    The Office of Management and Budget (OMB) may grant exceptions for 
classes of grants or recipients subject to the requirements of this part 
when exceptions are not prohibited by statute. However, in the interest 
of maximum uniformity, exceptions from the requirements of this part 
shall be permitted only in unusual circumstances. Federal awarding 
agencies may apply more restrictive requirements to a class of 
recipients when approved by OMB. Federal awarding agencies may apply 
less restrictive requirements when awarding small awards, except for 
those requirements which are statutory. Exceptions on a case-by-case 
basis may also be made by Federal awarding agencies.



Sec. 3019.5  Subawards.

    Unless sections of this part specifically exclude subrecipients from 
coverage, the provisions of this part shall be applied to subrecipients 
performing work under awards if such subrecipients are institutions of 
higher education, hospitals or other non-profit organizations. State and 
local government subrecipients are subject to the provisions of 
regulations implementing the grants management common rule, ``Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Government,'' codified at 7 CFR part 3016.



                    Subpart B--Pre-Award Requirements



Sec. 3019.10  Purpose.

    Sections 3019.11 through 3019.17 prescribe forms and instructions 
and other pre-award matters to be used in applying for Federal awards.

[[Page 173]]



Sec. 3019.11  Pre-award policies.

    (a) Use of grants and cooperative agreements, and contracts. In each 
instance, the Federal awarding agency shall decide on the appropriate 
award instrument (i.e., grant, cooperative agreement, or contract). The 
Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301-08) governs 
the use of grants, cooperative agreements and contracts. A grant or 
cooperative agreement shall be used only when the principal purpose of a 
transaction is to accomplish a public purpose of support or stimulation 
authorized by Federal statute. The statutory criterion for choosing 
between grants and cooperative agreements is that for the latter, 
``substantial involvement is expected between the executive agency and 
the State, local government, or other recipient when carrying out the 
activity contemplated in the agreement.'' Contracts shall be used when 
the principal purpose is acquisition of property or services for the 
direct benefit or use of the Federal Government.
    (b) Public notice and priority setting. Federal awarding agencies 
shall notify the public of its intended funding priorities for 
discretionary grant programs, unless funding priorities are established 
by Federal statute.



Sec. 3019.12  Forms for applying for Federal assistance.

    (a) Federal awarding agencies shall comply with the applicable 
report clearance requirements of 5 CFR part 1320, ``Controlling 
Paperwork Burdens on the Public,'' with regard to all forms used by the 
Federal awarding agency in place of or as a supplement to the Standard 
Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by the Federal awarding agency.
    (c) For Federal programs covered by E.O. 12372, ``Intergovernmental 
Review of Federal Programs,'' the applicant shall complete the 
appropriate sections of the SF-424 (Application for Federal Assistance) 
indicating whether the application was subject to review by the State 
Single Point of Contact (SPOC). The name and address of the SPOC for a 
particular State can be obtained from the Federal awarding agency or the 
Catalog of Federal Domestic Assistance. The SPOC shall advise the 
applicant whether the program for which application is made has been 
selected by that State for review. The U.S. Department of Agriculture 
procedures implementing E.O. 12372 are found at CFR part 3015.
    (d) Federal awarding agencies that do not use the SF-424 form should 
indicate whether the application is subject to review by the State under 
E.O. 12372.



Sec. 3019.13  Debarment and suspension.

    Federal awarding agencies and recipients shall comply with the 
nonprocurement debarment and suspension common rule implementing E.O.s 
12549 and 12669, ``Debarment and Suspension,'' codified at 7 CFR 3017. 
This common rule restricts subawards and contracts with certain parties 
that are debarred, suspended or otherwise excluded from or ineligible 
for participation in Federal assistance programs or activities.



Sec. 3019.14  Special award conditions.

    If an applicant or recipient.
    (a) Has a history of poor performance,
    (b) Is not financially stable,
    (c) Has a management system that does not meet the standards 
prescribed in this part,
    (d) Has not conformed to the terms and conditions of a previous 
award, or
    (e) Is not otherwise responsible,

Federal awarding agencies may impose additional requirements as needed, 
provided that such applicant or recipient is notified in writing as to: 
the nature of the additional requirements, the reason why the additional 
requirements are being imposed, the nature of the corrective action 
needed, the time allowed for completing the corrective actions, and the 
method for requesting reconsideration of the additional requirements 
imposed. Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.



Sec. 3019.15  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and

[[Page 174]]

Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce. The Act 
requires each Federal agency to establish a date or dates in 
consultation with the Secretary of Commerce, when the metric system of 
measurement will be used in the agency's procurements, grants, and other 
business-related activities. Metric implementation may take longer where 
the use of the system is initially impractical or likely to cause 
significant inefficiencies in the accomplishment of federally-funded 
activities. Federal awarding agencies shall follow the provisions of 
E.O. 12770, ``Metric Usage in Federal Government Programs.''



Sec. 3019.16  Resource Conservation and Recovery Act.

    Under the Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-
580 codified at 42 U.S.C. 6962), any State agency or agency of a 
political subdivision of a State which is using appropriated Federal 
funds must comply with section 6002. Section 6002 requires that 
preference be given in procurement programs to the purchase of specific 
products containing recycled materials identified in guidelines 
developed by the Environmental Protection Agency (EPA) (40 CFR parts 
247-254). Accordingly, State and local institutions of higher education, 
hospitals, and non-profit organizations that receive direct Federal 
awards or other Federal funds shall give preference in their procurement 
programs funded with Federal funds to the purchase of recycled products 
pursuant to the EPA guidelines.



Sec. 3019.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, each Federal 
awarding agency is authorized and encouraged to allow recipients to 
submit certifications and representations required by statute, executive 
order, or regulation on an annual basis, if the recipients have ongoing 
and continuing relationships with the agency. Annual certifications and 
representations shall be signed by responsible officials with the 
authority to ensure recipients' compliance with the pertinent 
requirements.



                   Subpart C--Post-Award Requirements

                    Financial and Program Management



Sec. 3019.20  Purpose of financial and program management.

    Sections 3019.21 through 3019.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.



Sec. 3019.21  Standards for financial management systems.

    (a) Federal awarding agencies shall require recipients to relate 
financial data to performance data and develop unit cost information 
whenever practical.
    (b) Recipients' financial management systems shall provide for the 
following.
    (1) Accurate, current and complete disclosure of the financial 
results of each federally-sponsored project or program in accordance 
with the reporting requirements set forth in Sec. 3019.52. If a Federal 
awarding agency requires reporting on an accrual basis from a recipient 
that maintains its records on other than an accrual basis, the recipient 
shall not be required to establish an accrual accounting system. These 
recipients may develop such accrual data for its reports on the basis of 
an analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to Federal awards, authorizations, obligations, 
unobligated balances, assets, outlays, income and interest.
    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients shall adequately safeguard all 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever

[[Page 175]]

appropriate, financial information should be related to performance and 
unit cost data.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient. To the extent that the provisions 
of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, 
payment methods of State agencies, instrumentalities, and fiscal agents 
shall be consistent with CMIA Treasury-State Agreements or the CMIA 
default procedures codified at 31 CFR part 205, ``Withdrawal of Cash 
From the Treasury for Advances Under Federal Grant and Other Programs.''
    (6) Written procedures for determining the reasonableness, 
allocability and allowability of costs in accordance with the provisions 
of the applicable Federal cost principles and the terms and conditions 
of the award.
    (7) Accounting records including cost accounting records that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the repayment 
of money borrowed by the recipient, the Federal USDA awarding agency, at 
its discretion, may require adequate bonding and insurance if the 
bonding and insurance requirements of the recipient are not deemed 
adequate to protect the interest of the Federal Government.
    (d) The Federal awarding agency may require adequate fidelity bond 
coverage where the recipient lacks sufficient coverage to protect the 
Federal Government's interest.
    (e) Where bonds are required in the situations described in 
paragraphs (c) and (d) of this section, the bonds shall be obtained from 
companies holding certificates of authority as acceptable sureties, as 
prescribed in 31 CFR part 223, ``Surety Companies Doing Business With 
the United States.''



Sec. 3019.22  Payment.

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities shall 
be consistent with Treasury-State CMIA agreements or default procedures 
codified at 31 CFR part 205.
    (b) Recipients are to be paid in advance, provided they maintain or 
demonstrate the willingness to maintain: written procedures that 
minimize the time elapsing between the transfer of funds and 
disbursement by the recipient, and financial management systems that 
meet the standards for fund control and accountability as established in 
Sec. 3019.21. Cash advances to a recipient organization shall be limited 
to the minimum amounts needed and be timed to be in accordance with the 
actual, immediate cash requirements of the recipient organization in 
carrying out the purpose of the approved program or project. The timing 
and amount of cash advances shall be as close as is administratively 
feasible to the actual disbursements by the recipient organization for 
direct program or project costs and the proportionate share of any 
allowable indirect costs.
    (c) Whenever possible, advances shall be consolidated to cover 
anticipated cash needs for all awards made by the Federal awarding 
agency to the recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients shall be authorized to submit requests for advances 
and reimbursements at least monthly when electronic fund transfers are 
not used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270, ``Request for Advance or Reimbursement,'' or other forms as 
may be authorized by OMB. This form is not to be used when Treasury 
check advance payments are made to the recipient automatically through 
the use of a predetermined payment schedule or if precluded by special 
Federal awarding agency instructions for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. Federal awarding agencies 
may also

[[Page 176]]

use this method on any construction agreement, or if the major portion 
of the construction project is accomplished through private market 
financing or Federal loans, and the Federal assistance constitutes a 
minor portion of the project.
    (1) When the reimbursement method is used, the Federal awarding 
agency shall make payment within 30 days after receipt of the billing, 
unless the billing is improper.
    (2) Recipients shall be authorized to submit request for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments and 
the Federal awarding agency has determined that reimbursement is not 
feasible because the recipient lacks sufficient working capital, the 
Federal awarding agency may provide cash on a working capital advance 
basis. Under this procedure, the Federal awarding agency shall advance 
cash to the recipient to cover its estimated disbursement needs for an 
initial period generally geared to the awardee's disbursing cycle. 
Thereafter, the Federal awarding agency shall reimburse the recipient 
for its actual cash disbursements. The working capital advance method of 
payment shall not be used for recipients unwilling or unable to provide 
timely advances to their subrecipient to meet the subrecipient's actual 
cash disbursements.
    (g) To the extent available, recipients shall disburse funds from 
repayments to and interest earned on a revolving fund, program income, 
rebates, refunds, contract settlements, audit recoveries and interest 
earned on such funds before requesting additional cash payments.
    (h) Unless otherwise required by statute, Federal awarding agencies 
shall not withhold payments for proper charges made by recipients at any 
time during the project period unless paragraphs (h)(1) and (h)(2) of 
this section apply.
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements.
    (2) The recipient or subrecipient is delinquent in a debt to the 
Untied States as defined in OMB Circular A-129, ``Managing Federal 
Credit Programs.''
    (3) Under such conditions, the Federal awarding agency may, upon 
reasonable notice, inform the recipient that payments shall not be made 
for obligations incurred after a specified date until the conditions are 
corrected or the indebtedness to the Federal Government is liquidated.
    (i) Standards governing the use of banks and other institutions as 
depositories of funds advanced under awards are as follows.
    (1) Except for situations described in paragraph (i)(2) of this 
section, Federal awarding agencies shall not require separate depository 
accounts for funds provided to a recipient or establish any eligibility 
requirements for depositories for funds provided to a recipient. 
However, recipients must be able to account for the receipt, obligation 
and expenditure of funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.
    (j) Consistent with the national goal of expanding the opportunities 
for women-owned and minority-owned business enterprises, recipients 
shall be encouraged to use women-owned and minority-owned banks (a bank 
which is owned at least 50 percent by women or minority group members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless paragraphs (k)(1), (k)(2) or (k)(3) of this 
section apply.
    (1) The recipient receives less than $120,000 in Federal awards per 
year.
    (2) The best reasonably available interest bearing account would not 
be expected to earn interest in excess of $250 per year on Federal cash 
balances.
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) For those entities where CMIA and its implementing regulations 
do not apply, interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human

[[Page 177]]

Services, Payment Management System, P.O. Box 6021, Rockville, MD 20852. 
Interest amounts up to $250 per year may be retained by the recipient 
for administrative expense. In keeping with the Electronic Funds 
Transfer rules, (31 CFR Part 206), interest should be remitted to the 
HHS Payment Management System through an electronic medium such as the 
FEDWIRE Deposit system. Recipients which do not have this capability 
should use a check. State universities and hospitals shall comply with 
CMIA, as it pertains to interest. If an entity subject to CMIA uses its 
own funds to pay pre-award costs for discretionary awards without prior 
written approval from the Federal awarding agency, it waives its right 
to recover the interest under CMIA.
    (m) Except as noted elsewhere in this part, only the following forms 
shall be authorized for the recipients in requesting advances and 
reimbursements. Federal agencies shall not require more than an original 
and two copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. Each Federal 
awarding agency shall adopt the SF-270 as a standard form for all 
nonconstruction programs when electronic funds transfer or predetermined 
advance methods are not used. Federal awarding agencies, however, have 
the option of using this form for construction programs in lieu of the 
SF-271, ``Outlay Report and Request for Reimbursement for Construction 
Programs.''
    (2) SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs. Each Federal awarding agency shall adopt the SF-
271 as the standard form to be used for requesting reimbursement for 
construction programs. However, a Federal awarding agency may substitute 
the SF-270 when the Federal awarding agency determines that it provides 
adequate information to meet Federal needs.



Sec. 3019.23  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, shall 
be accepted as part of the recipient's cost sharing or matching when 
such contributions meet all of the following criteria.
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable costs principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are provided for in the approved budget when required by the 
Federal awarding agency.
    (7) Conform to other provisions of this part, as applicable.
    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching only with the prior approval of the Federal awarding 
agency.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If a Federal awarding agency authorizes recipients to donate buildings 
or land for construction/facilities acquisition projects or long-term 
use, the value of the donated property for cost sharing or matching 
shall be the lesser of paragraphs (c)(1) or (c)(2) of this section.
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation.
    (2) The current fair market value. However, when there is sufficient 
justification, the Federal awarding agency may approve the use of the 
current fair market value of the donated property, even if it exceeds 
the certified value at the time of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel, consultants, and other skilled and unskilled labor may be 
counted as cost sharing or matching if the service is an integral and 
necessary part of an approved project or program. Rates for volunteer 
services shall be consistent with those paid for similar work in the 
recipient's organization. In those instances in which the required 
skills are not found in the recipient organization, rates shall be 
consistent with those

[[Page 178]]

paid for similar work in the labor market in which the recipient 
competes for the kind of services involved. In either case, paid fringe 
benefits that are reasonable, allowable, and allocable may be included 
in the valuation.
    (e) When an employer other than the recipient furnishes the services 
of an employee, these services shall be valued at the employee's regular 
rate of pay (plus an amount of fringe benefits that are reasonable, 
allowable, and allocable, but exclusive of overhead costs), provided 
these services are in the same skill for which the employee is normally 
paid.
    (f) Donated supplies may include such items as expendable equipment, 
office supplies, laboratory supplies or workshop and classroom supplies. 
Value assessed to donated supplies included in the cost sharing or 
matching share shall be reasonable and shall not exceed the fair market 
value of the property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings and land for which title passes to the 
recipient may differ according to the purpose of the award, if 
paragraphs (g)(1) or (g)(2) of this section apply.
    (1) If the purpose of the award is to assist the recipient in the 
acquisition of equipment, buildings or land, the total value of the 
donated property may be claimed as cost sharing or matching.
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the Federal 
awarding agency has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall not exceed its 
fair market value at the time of donation to the recipient as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient.
    (2) The value of donated equipment shall not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (5) The following requirements pertain to the recipient's supporting 
records for in-kind contributions from third parties.
    (i) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (ii) The basis for determining the valuation of personal service, 
material, equipment, buildings and land shall be documented.



Sec. 3019.24  Program income.

    (a) Federal awarding agencies shall apply the standards set forth in 
this section in requiring recipient organizations to account for program 
income related to projects financed in whole or in part with Federal 
funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period shall be retained by the 
recipient and, in accordance with Federal awarding agency regulations or 
the terms and conditions of the award, shall be used in one or more of 
the ways listed in the following.
    (1) Added to funds committed to the project by the Federal awarding 
agency and recipient and used to further eligible project or program 
objectives.
    (2) Used to finance the non-Federal share of the project or program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When an agency authorizes the disposition of program income as 
described in paragraphs (b)(1) or (b)(2) of this section, program income 
in excess of any limits stipulated shall be used in

[[Page 179]]

accordance with paragraph (b)(3) of this section.
    (d) In the event that the Federal awarding agency does not specify 
in its regulations or the terms and conditions of the award how program 
income is to be used, paragraph (b)(3) of this section shall apply 
automatically to all projects or programs except research. For awards 
that support research, paragraph (b)(1) of this section shall apply 
automatically unless the awarding agency indicates in the terms and 
conditions another alternative on the award or the recipient is subject 
to special award conditions, as indicated in Sec. 3019.14.
    (e) Unless Federal awarding agency regulations or the terms and 
conditions of the award provide otherwise, recipients shall have no 
obligation to the Federal Government regarding program income earned 
after the end of the project period.
    (f) If authorized by Federal awarding agency regulations or the 
terms and conditions of the award, costs incident to the generation of 
program income may be deducted from gross income to determine program 
income, provided these costs have not been charged to the award.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (See 
Secs. 3019.30 through 3019.37).
    (h) Unless Federal awarding agency regulations or the terms and 
condition of the award provide otherwise, recipients shall have no 
obligation to the Federal Government with respect to program income 
earned from license fees and royalties for copyrighted material, 
patents, patent applications, trademarks, and inventions produced under 
an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply 
to inventions made under an experimental, developmental, or research 
award.



Sec. 3019.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
Federal and non-Federal share, or only the Federal share, depending upon 
Federal awarding agency requirements. It shall be related to performance 
for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, recipients shall request prior 
approvals from Federal awarding agencies for one or more of the 
following program or budget related reasons.
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (4) The need for additional Federal funding.
    (5) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa, if approval is required by the 
Federal awarding agency.
    (6) The inclusion, unless waived by the Federal awarding agency, of 
costs that require prior approval in accordance with OMB Circular A-21, 
``Cost Principles for Institutions of Higher Education,'' OMB Circular 
A-122, ``Cost Principles for Non-Profit Organizations,'' or 45 CFR part 
74 Appendix E, ``Principles for Determining Costs Applicable to Research 
and Development under Grants and Contracts with Hospitals,'' or 48 CFR 
part 31, ``Contract Cost Principles and Procedures,'' as applicable.
    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) Unless described in the application and funded in the approved 
awards, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment or general support services.

[[Page 180]]

    (d) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (e) Except for requirements listed in paragraphs (c)(1) and (c)(4) 
of this section, Federal awarding agencies are authorized, at their 
option, to waive cost-related and administrative prior written approvals 
required by this part and OMB Circulars A-21 and A-122. Such waivers may 
include authorizing recipients to do any one or more of the following.
    (1) Incur pre-award costs 90 calendar days prior to award or more 
than 90 calendar days with the prior approval of the Federal awarding 
agency. All pre-award costs are incurred at the recipient's risk (i.e., 
the Federal awarding agency is under no obligation to reimburse such 
costs if for any reason the recipient does not receive an award or if 
the award is less than anticipated and inadequate to cover such costs).
    (2) Initiate a one-time extension of the expiration date of the 
award of up to 12 months unless one or more of the following conditions 
apply. For one-time extensions, the recipient must notify the Federal 
awarding agency in writing with the supporting reasons and revised 
expiration date at least 10 days before the expiration date specified in 
the award. This one-time extension may not be exercised merely for the 
purpose of using unobligated balances.
    (i) The terms and conditions of award prohibit the extension.
    (ii) The extension requires additional Federal funds.
    (iii) The extension involves any change in the approved objectives 
or scope of the project.
    (3) Carry forward unobligated balances to subsequent funding 
periods.
    (4) For awards that support research, unless the Federal awarding 
agency provides otherwise in the award or in the agency's regulations, 
the prior approval requirements described in this paragraph (e) are 
automatically waived (i.e., recipients need not obtain such prior 
approvals) unless one of the conditions included in paragraph (e)(2) of 
this section applies.
    (f) The Federal awarding agency may, at its option, restrict the 
transfer of funds among direct cost categories or programs, functions 
and activities for awards in which the Federal share of the project 
exceeds $100,000 and the cumulative amount of such transfers exceeds or 
is expected to exceed 10 percent of the total budget as last approved by 
the Federal awarding agency. No Federal awarding agency shall permit a 
transfer that would cause any Federal appropriation or part thereof to 
be used for purposes other than those consistent with the original 
intent of the appropriation.
    (g) All other changes to nonconstruction budgets, except for the 
changes described in paragraph (j) of this section, do not require prior 
approval.
    (h) For construction awards, recipients shall request prior written 
approval promptly from Federal awarding agencies for budget revisions 
whenever paragraphs (h)(1), (h)(2) or (h)(3) of this section apply.
    (1) The revision results from changes in the scope or the objective 
of the project or program.
    (2) The need arises for additional Federal funds to complete the 
project.
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with 
applicable OMB cost principles listed in Sec. 3019.27.
    (i) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (j) When a Federal awarding agency makes an award that provides 
support for both construction and nonconstruction work, the Federal 
awarding agency may require the recipient to request prior approval from 
the Federal awarding agency before making any fund or budget transfers 
between the two types of work supported.
    (k) For both construction and nonconstruction awards, Federal 
awarding agencies shall require recipients to notify the Federal 
awarding agency in writing promptly whenever the amount of Federal 
authorized funds is expected to exceed the needs of the recipient for 
the project period by more than $5000 or five percent of the Federal 
award, whichever is greater. This notification shall not be required if 
an application

[[Page 181]]

for additional funding is submitted for a continuation award.
    (l) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the 
Federal awarding agency indicates a letter of request suffices.
    (m) Within 30 calendar days from the date of receipt of the request 
for budget revisions, Federal awarding agencies shall review the request 
and notify the recipient whether the budget revisions have been 
approved. If the revision is still under consideration at the end of 30 
calendar days, the Federal awarding agency shall inform the recipient in 
writing of the date when the recipient may expect the decision.



Sec. 3019.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organizations (including hospitals) shall 
be subject to the audit requirements contained in the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, 
``Audits of States, Local Governments, and Non-Profit Organizations.''
    (b) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act Amendments of 1996 (31 
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 
Local Governments, and Non-Profit Organizations.''
    (c) For-profit hospitals not covered by the audit provisions of 
revised OMB Circular A-133 shall be subject to the audit requirements of 
the Federal awarding agencies.
    (d) Commercial organizations shall be subject to the audit 
requirements of the Federal awarding agency or the prime recipient as 
incorporated into the award document.
    (e) In USDA, revised OMB Circular A-133 is implemented in 7 CFR part 
3052, ``Audits of States, Local Governments, and Non-Profit 
Organizations.''

[60 FR 44124, Aug. 24, 1995, as amended at 62 FR 45939, Aug. 29, 1997]



Sec. 3019.27  Allowable costs.

    For each kind of recipient, there is a set of Federal principles for 
determining allowable costs. Allowability of costs shall be determined 
in accordance with the cost principles applicable to the entity 
incurring the costs. Thus, allowability of costs incurred by State, 
local or federally-recognized Indian tribal governments is determined in 
accordance with the provisions of OMB Circular A-87, ``Cost Principles 
for State and Local Governments.'' The allowability of costs incurred by 
non-profit organizations is determined in accordance with the provisions 
of OMB Circular A-122, ``Cost Principles for Non-Profit Organizations.'' 
The allowability of costs incurred by institutions of higher education 
is determined in accordance with the provisions of OMB Circular A-21, 
``Cost Principles for Educational Institutions.'' The allowability of 
costs incurred by hospitals is determined in accordance with the 
provisions of Appendix E of 45 CFR part 74, ``Principles for Determining 
Costs Applicable to Research and Development Under Grants and Contracts 
with Hospitals.'' The allowability of costs incurred by commercial 
organizations and those non-profit organizations listed in Attachment C 
to Circular A-122 is determined in accordance with the provisions of the 
Federal Acquisition Regulation (FAR) at 48 CFR part 31.



Sec. 3019.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
grant only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by the Federal 
awarding agency.

                           Property Standards



Sec. 3019.30  Purpose of property standards.

    Sections 3019.31 through 3019.37 set forth uniform standards 
governing management and disposition of property furnished by the 
Federal Government whose cost was charged to a project supported by a 
Federal award. Federal awarding agencies shall require recipients to 
observe these standards under awards and shall not impose additional 
requirements, unless specifically required by Federal statute. The 
recipient may use its own property management standards and procedures

[[Page 182]]

provided it observes the provisions of Secs. 3019.31 through 3019.37.



Sec. 3019.31  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.



Sec. 3019.32  Real property.

    Each Federal awarding agency shall prescribe requirements for 
recipients concerning the use and disposition of real property acquired 
in whole or in part under awards. Unless otherwise provided by statute, 
such requirements, at a minimum, shall contain the following.
    (a) Title to real property shall vest in the recipient subject to 
the condition that the recipient shall use the real property for the 
authorized purpose of the project as long as it is needed and shall not 
encumber the property without approval of the Federal awarding agency.
    (b) The recipient shall obtain written approval by the Federal 
awarding agency for the use of real property in other federally-
sponsored projects when the recipient determines that the property is no 
longer needed for the purpose of the original project. Use in other 
projects shall be limited to those under federally-sponsored projects 
(i.e., awards) or programs that have purposes consistent with those 
authorized for support by the Federal awarding agency.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b), the recipient shall request disposition 
instructions from the Federal awarding agency or its successor Federal 
awarding agency. The Federal awarding agency shall observe one or more 
of the following disposition instructions.
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by the Federal awarding agency and pay the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project (after 
deducting actual and reasonable selling and fix-up expenses, if any, 
from the sales proceeds). When the recipient is authorized or required 
to sell the property, proper sales procedures shall be established that 
provide for competition to the extent practicable and result in the 
highest possible return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.



Sec. 3019.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually an inventory listing of federally-owned property in their 
custody to the Federal awarding agency. Upon completion of the award or 
when the property is no longer needed, the recipient shall report the 
property to the Federal awarding agency for further Federal agency 
utilization.
    (2) If the Federal awarding agency has no further need for the 
property, it shall be declared excess and reported to the General 
Services Administration, unless the Federal awarding agency has 
statutory authority to dispose of the property by alternative methods 
(e.g., the authority provided by the Federal Technology Transfer Act (15 
U.S.C. 3710(I)) to donate research equipment to educational and non-
profit organizations in accordance with E.O. 12821, ``Improving 
Mathematics and Science Education in Support of the National Education 
Goals''). Appropriate instructions shall be issued to the recipient by 
the Federal awarding agency.

[[Page 183]]

    (b) Exempt property. When statutory authority exists, the Federal 
awarding agency has the option to vest title to property acquired with 
Federal funds in the recipient without further obligation to the Federal 
Government and under conditions the Federal awarding agency considers 
appropriate. Such property is ``exempt property.'' Should a Federal 
awarding agency not establish conditions, title to exempt property upon 
acquisition shall vest in the recipient without further obligation to 
the Federal Government.



Sec. 3019.34  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
shall vest in the recipient, subject to conditions of this section.
    (b) The recipient shall not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a fee 
that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.
    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds and shall not 
encumber the property without approval of the Federal awarding agency. 
When no longer needed for the original project or program, the recipient 
shall use the equipment in connection with its other federally-sponsored 
activities, in the following order of priority:
    (1) Activities sponsored by the Federal awarding agency which funded 
the original project, then
    (2) Activities sponsored by other Federal awarding agencies.
    (d) During the time that equipment is used on the project or program 
for which it was acquired, the recipient shall make it available for use 
on other projects or programs if such other use will not interfere with 
the work on the project or program for which the equipment was 
originally acquired. First preference for such other use shall be given 
to other projects or programs sponsored by the Federal awarding agency 
that financed the equipment; second preference shall be given to 
projects or programs sponsored by other Federal awarding agencies. If 
the equipment is owned by the Federal Government, use on other 
activities not sponsored by the Federal Government shall be permissible 
if authorized by the Federal awarding agency. User charges shall be 
treated as program income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to the 
approval of the Federal awarding agency.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned equipment shall include 
all of the following.
    (1) Equipment records shall be maintained accurately and shall 
include the following information.
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient or the Federal Government.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
equipment furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
recipient compensates the Federal awarding agency for its share.
    (2) Equipment owned by the Federal Government shall be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment shall be taken and the results 
reconciled with the equipment records at

[[Page 184]]

least once every two years. Any differences between quantities 
determined by the physical inspection and those shown in the accounting 
records shall be investigated to determine the causes of the difference. 
The recipient shall, in connection with the inventory, verify the 
existence, current utilization, and continued need for the equipment.
    (4) A control system shall be in effect to ensure adequate 
safeguards to prevent loss, damage, or theft of the equipment. Any loss, 
damage, or theft of equipment shall be investigated and fully 
documented; if the equipment was owned by the Federal Government, the 
recipient shall promptly notify the Federal awarding agency.
    (5) Adequate maintenance procedures shall be implemented to keep the 
equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall be established which provide 
for competition to the extent practicable and result in the highest 
possible return.
    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards. For equipment with a current per unit fair market value of 
$5000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the original Federal awarding 
agency or its successor. The amount of compensation shall be computed by 
applying the percentage of Federal participation in the cost of the 
original project or program to the current fair market value of the 
equipment. If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from the Federal awarding agency. 
The Federal awarding agency shall determine whether the equipment can be 
used to meet the agency's requirements. If no requirement exists within 
that agency, the availability of the equipment shall be reported to the 
General Services Administration by the Federal awarding agency to 
determine whether a requirement for the equipment exists in other 
Federal agencies. The Federal awarding agency shall issue instructions 
to the recipient no later than 120 calendar days after the recipient's 
request and the following procedures shall govern.
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse the Federal awarding agency an 
amount computed by applying to the sales proceeds the percentage of 
Federal participation in the cost of the original project or program. 
However, the recipient shall be permitted to deduct and retain from the 
Federal share $500 or ten percent of the proceeds, whichever is less, 
for the recipient's selling and handling expenses.
    (2) If the recipient is instructed to ship the equipment elsewhere, 
the recipient shall be reimbursed by the Federal Government by an amount 
which is computed by applying the percentage of the recipient's 
participation in the cost of the original project or program to the 
current fair market value of the equipment, plus any reasonable shipping 
or interim storage costs incurred.
    (3) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient shall be reimbursed by the Federal awarding 
agency for such costs incurred in its disposition.
    (4) The Federal awarding agency may reserve the right to transfer 
the title to the Federal Government or to a third party named by the 
Federal Government when such third party is otherwise eligible under 
existing statutes. Such transfer shall be subject to the following 
standards.
    (i) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (ii) The Federal awarding agency shall issue disposition 
instructions within 120 calendar days after receipt of a final 
inventory. The final inventory shall list all equipment acquired with 
grant funds and federally-owned equipment. If the Federal awarding 
agency fails to issue disposition instructions within the 120 calendar 
day period, the recipient shall apply the standards of this section, as 
appropriate.
    (iii) When the Federal awarding agency exercises its right to take 
title,

[[Page 185]]

the equipment shall be subject to the provisions for federally-owned 
equipment.



Sec. 3019.35  Supplies and other expendable property.

    (a) Title to supplies and other expendable property shall vest in 
the recipient upon acquisition. If there is a residual inventory of 
unused supplies exceeding $5000 in total aggregate value upon 
termination or completion of the project or program and the supplies are 
not needed for any other federally-sponsored project or program, the 
recipient shall retain the supplies for use on non-Federal sponsored 
activities or sell them, but shall, in either case, compensate the 
Federal Government for its share. The amount of compensation shall be 
computed in the same manner as for equipment.
    (b) The recipient shall not use supplies acquired with Federal funds 
to provide services to non-Federal outside organizations for a fee that 
is less than private companies charge for equivalent services, unless 
specifically authorized by Federal statute as long as the Federal 
Government retains an interest in the supplies.



Sec. 3019.36  Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, under 
an award. The Federal awarding agency(ies) reserve a royalty-free, 
nonexclusive and irrevocable right to reproduce, publish, or otherwise 
use the work for Federal purposes, and to authorize others to do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including government-wide regulations issued by 
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts and Cooperative Agreements.''
    (c) The Federal Government has the right to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (d) (1) In addition, in response to a Freedom of Information Act 
(FOIA) request for research data relating to published research findings 
produced under an award that were used by the Federal Government in 
developing an agency action that has the force and effect of law, the 
Federal awarding agency shall request, and the recipient shall provide, 
within a reasonable time, the research data so that they can be made 
available to the public through the procedures established under the 
FOIA. If the Federal awarding agency obtains the research data solely in 
response to a FOIA request, the agency may charge the requester a 
reasonable fee equaling the full incremental cost of obtaining the 
research data. This fee should reflect costs incurred by the agency, the 
recipient, and applicable subrecipients. This fee is in addition to any 
fees the agency may assess under the FOIA (5 U.S.C. 552(a)(4)(A)).
    (2) The following definitions apply for purposes of this paragraph 
(d):
    (i) Research data is defined as the recorded factual material 
commonly accepted in the scientific community as necessary to validate 
research findings, but not any of the following: preliminary analyses, 
drafts of scientific papers, plans for future research, peer reviews, or 
communications with colleagues. This ``recorded'' material excludes 
physical objects (e.g., laboratory samples). Research data also do not 
include:
    (A) Trade secrets, commercial information, materials necessary to be 
held confidential by a researcher until they are published, or similar 
information which is protected under law; and
    (B) Personnel and medical information and similar information the 
disclosure of which would constitute a clearly unwarranted invasion of 
personal privacy, such as information that could be used to identify a 
particular person in a research study.
    (ii) Published is defined as either when:
    (A) Research findings are published in a peer-reviewed scientific or 
technical journal; or

[[Page 186]]

    (B) A Federal agency publicly and officially cites the research 
findings in support of an agency action that has the force and effect of 
law.
    (iii) Used by the Federal Government in developing an agency action 
that has the force and effect of law is defined as when an agency 
publicly and officially cites the research findings in support of an 
agency action that has the force and effect of law.
    (e) Title to intangible property and debt instruments acquired under 
an award or subaward vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized purpose, 
and the recipient shall not encumber the property without approval of 
the Federal awarding agency. When no longer needed for the originally 
authorized purpose, disposition of the intangible property shall occur 
in accordance with the provisions of Sec. 3019.34(g).

[60 FR 44124, Aug. 24, 1995, as amended at 65 FR 14407, 14408, Mar. 16, 
2000]



Sec. 3019.37  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. Agencies may 
require recipients to record liens or other appropriate notices of 
record to indicate that personal or real property has been acquired or 
improved with Federal funds and that use and disposition conditions 
apply to the property.

                          Procurement Standards



Sec. 3019.40  Purpose of procurement standards.

    Sections 3019.41 through 3019.48 set forth standards for use by 
recipients in establishing procedures for the procurement of supplies 
and other expendable property, equipment, real property and other 
services with Federal funds. These standards are furnished to ensure 
that such materials and services are obtained in an effective manner and 
in compliance with the provisions of applicable Federal statutes and 
executive orders. No additional procurement standards or requirements 
shall be imposed by the Federal awarding agencies upon recipients, 
unless specifically required by Federal statute or executive order or 
approved by OMB.



Sec. 3019.41  Recipient responsibilities.

    The standards contained in this section do not relieve the recipient 
of the contractual responsibilities arising under its contract(s). The 
recipient is the responsible authority, without recourse to the Federal 
awarding agency, regarding the settlement and satisfaction of all 
contractual and administrative issues arising out of procurements 
entered into in support of an award or other agreement. This includes 
disputes, claims, protests of award, source evaluation or other matters 
of a contractual nature. Matters concerning violation of statute are to 
be referred to such Federal, State or local authority as may have proper 
jurisdiction.



Sec. 3019.42  Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and administration 
of contracts. No employee, officer, or agent shall participate in the 
selection, award, or administration of a contract supported by Federal 
funds if a real or apparent conflict of interest would be involved. Such 
a conflict would arise when the employee, officer, or agent, any member 
of his or her immediate family, his or her partner, or an organization 
which employs or is about to employ any of the parties indicated herein, 
has a financial or other interest in the firm selected for an award. The 
officers, employees, and agents of the recipient shall neither solicit 
nor accept gratuities, favors, or anything of monetary value from 
contractors, or parties to subagreements. However, recipients may set 
standards for situations in which the financial interest is not 
substantial or the gift is an unsolicited item of nominal value. The 
standards of conduct shall provide for disciplinary actions to be 
applied for violations of such standards by officers, employees, or 
agents of the recipient.

[[Page 187]]



Sec. 3019.43  Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. The 
recipient shall be alert to organizational conflicts of interests as 
well as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall be made to the bidder or offeror whose bid or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, price, quality and other factors considered. Solicitations 
shall clearly set forth all requirements that the bidder or offeror 
shall fulfill in order for the bid or offer to be evaluated by the 
recipient. Any and all bids or offers may be rejected when it is in the 
recipient's interest to do so.



Sec. 3019.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide for, at a minimum, that paragraphs 
(a)(1), (a)(2), and (a)(3) of this section apply.
    (1) Recipients avoid purchasing unnecessary items.
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government.
    (3) Solicitations for goods and services provide for all of the 
following:
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description shall not contain features which unduly 
restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical requirements 
in terms of functions to be performed or performance required, including 
the range of acceptable characteristics or minimum acceptable standards.
    (iv) The specific features of ``brand name or equal'' descriptions 
that bidders are required to meet when such items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment and are energy efficient.
    (b) Positive efforts shall be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards shall take all of the 
following steps to further this goal.
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises.
    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract is 
too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Department of 
Commerce's Minority Business Development Agency in the solicitation and 
utilization of small businesses, minority-owned firms and women's 
business enterprises.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but shall

[[Page 188]]

be appropriate for the particular procurement and for promoting the best 
interest of the program or project involved. The ``cost-plus-a-
percentage-of-cost'' or ``percentage of construction cost'' methods of 
contracting shall not be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the term and 
conditions of the proposed procurement. Consideration shall be given to 
such matters as contractor integrity, record of past performance, 
financial and technical resources or accessibility to other necessary 
resources. In certain circumstances, contracts with certain parties are 
restricted by agencies' implementation of E.O.s 12549 and 12689, 
``Debarment and Suspension.''
    (e) Recipients shall, on request, make available for the Federal 
awarding agency, pre-award review and procurement documents, such as 
request for proposals or invitations for bids, independent cost 
estimates, etc., when any of the following conditions apply.
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in the Federal awarding agency's 
implementation of this part.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403(11) (currently $25,000) and is to be 
awarded without competition or only one bid or offer is received in 
response to a solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the amount of the small 
purchase threshold.



Sec. 3019.45  Cost and price analysis.

    Some form of cost or price analysis shall be made and documented in 
the procurement files in connection with every procurement action. Price 
analysis may be accomplished in various ways, including the comparison 
of price quotations submitted, market prices and similar indicia, 
together with discounts. Cost analysis is the review and evaluation of 
each element of cost to determine reasonableness, allocability and 
allowability.



Sec. 3019.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold shall include the following at a minimum:
    (a) Basis for contractor selection,
    (b) Justification for lack of competition bids or offers are not 
obtained, and
    (c) Basis for award cost or price.



Sec. 3019.47  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.



Sec. 3019.48  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all contracts. 
The following provisions shall also be applied to subcontracts.
    (a) Contracts in excess of the small purchase threshold shall 
contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which a 
contractor violates or breaches the contract terms, and provide for such 
remedial actions as may be appropriate.
    (b) All contracts in excess of the small purchase threshold shall 
contain suitable provisions for termination by the recipient, including 
the manner by which termination shall be effected and the basis for 
settlement. In addition, such contracts shall describe conditions under 
which the contract may be terminated for default as well as conditions 
where the contract may be

[[Page 189]]

terminated because of circumstances beyond the control of the 
contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements shall provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction contract or subcontract exceeds $100,00. 
For those contracts or subcontracts exceeding $100,000, the Federal 
awarding agency may accept the bonding policy and requirements of the 
recipient, provided the Federal awarding agency has made a determination 
that the Federal Government's interest is adequately protected. If such 
a determination has not been made, the minimum requirements shall be as 
follows.
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of his bid, execute such contractual documents as may be required within 
the time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is one executed in 
connection with a contract to secure fulfillment of all the contractor's 
obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required in the situations described herein, the 
bonds shall be obtained from companies holding certificates of authority 
as acceptable sureties pursuant to 31 CFR part 223, ``Surety Companies 
Doing Business with the United States.''
    (d) All negotiated contracts (except those for less than the small 
purchase threshold) awarded by recipients shall include a provision to 
the effect that the recipient, the Federal awarding agency, the 
Comptroller General of the United States, or any of their duly 
authorized representatives, shall have access to any books, documents, 
papers and records of the contractor which are directly pertinent to a 
specific program for the purpose of making audits, examinations, 
excerpts and transcriptions.
    (e) All contracts, including small purchases, awarded by recipients 
and their contractors shall contain the procurement provisions of 
Appendix A to this part, as applicable.

                           Reports and Records



Sec. 3019.50  Purpose of reports and records.

    Sections 3019.51 through 3019.53 set forth the procedures for 
monitoring and reporting on the recipient's financial and program 
performance and the necessary standard reporting forms. They also set 
forth record retention requirements.



Sec. 3019.51  Monitoring and reporting program performance.

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function or activity supported by the award. 
Recipients shall monitor subawards to ensure subrecipients have met the 
audit requirements as delineated in Section 3019.26.
    (b) The Federal awarding agency shall prescribe the frequency with 
which the performance reports shall be submitted. Except as provided in 
paragraph (f) of this section, performance reports shall not be required 
more frequently than quarterly or, less frequently than annually. Annual 
reports shall be due 90 calendar days after the grant year; quarterly or 
semi-annual reports shall be due 30 days after the reporting period. The 
Federal awarding agency may require annual reports before the 
anniversary dates of multiple years awards in lieu of these 
requirements. The final performance reports are due 90 calendar days 
after the expiration or termination of the award.
    (c) If inappropriate, a final technical or performance report shall 
not be required after completion of the project.
    (d) When required, performance reports shall generally contain, for 
each

[[Page 190]]

award, brief information on each of the following.
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the investigator, 
or both. Whenever appropriate and the output of programs or projects can 
be readily quantified, such quantitative data should be related to cost 
data for computation of unit costs.
    (2) Reasons why established goals were not met, if appropriate.
    (3) Other pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (e) Recipients shall not be required to submit more than the 
original and two copies of performance reports.
    (f) Recipients shall immediately notify the Federal awarding agency 
of developments that have a significant impact on the award-supported 
activities. Also, notification shall be given in the case of problems, 
delays, or adverse conditions which materially impair the ability to 
meet the objectives of the award. This notification shall include a 
statement of the action taken or contemplated, and any assistance needed 
to resolve the situation.
    (g) Federal awarding agencies may make site visits, as needed.
    (h) Federal awarding agencies shall comply with clearance 
requirements of 5 CFR part 1320 when requesting performance data from 
recipients.



Sec. 3019.52  Financial reporting.

    (a) The following forms or such other forms as may be approved by 
OMB are authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report.
    (i) Each Federal awarding agency shall require recipients to use the 
SF-269 or SF-269A to report the status of funds for all nonconstruction 
projects or programs. A Federal awarding agency may, however, have the 
option of not requiring the SF-269 or SF-269A when the SF-270, Request 
for Advance or Reimbursement, or SF-272, Report of Federal Cash 
Transactions, is determined to provided adequate information to meet its 
needs, except that a final SF-269 or SF-269A shall be required at the 
completion of the project when the SF-270 is used only for advances.
    (ii) The Federal awarding agency shall prescribe whether the report 
shall be on a cash or accrual basis. If the Federal awarding agency 
requires accrual information and the recipient's accounting records are 
not normally kept on the accrual basis, the recipient shall not be 
required to convert its accounting system, but shall develop such 
accrual information through best estimates based on an analysis of the 
documentation on hand.
    (iii) The Federal awarding agency shall determine the frequency of 
the Financial Status Report for each project or program, considering the 
size and complexity of the particular project or program. However, the 
report shall not be required more frequently than quarterly or less 
frequently than annually. A final report shall be required at the 
completion of the agreement.
    (iv) The Federal awarding agency shall require recipients to submit 
the SF-269 or SF-269A (an original and no more than two copies no later 
than 30 days after the end of each specified reporting period for 
quarterly and semi-

annual reports, and 90 calendar days for annual and final reports. 
Extensions of reporting due dates may be approved by the Federal 
awarding agency upon request of the recipient.
    (2) SF-272, Report of Federal Cash Transactions.
    (i) When funds are advanced to recipients the Federal awarding 
agency shall require each recipient to submit the SF-272 and, when 
necessary, its continuation sheet, SF-272a. The Federal awarding agency 
shall use this report to monitor cash advanced to recipients and to 
obtain disbursement information for each agreement with the recipients.
    (ii) Federal awarding agencies may require forecasts of Federal cash 
requirements in the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, Federal awarding agencies 
may require recipients to report in the ``Remarks'' section the amount 
of cash advances received in excess of three days.

[[Page 191]]

Recipients shall provide short narrative explanations of actions taken 
to reduce the excess balances.
    (iv) Recipients shall be required to submit not more than the 
original and two copies of the SF-272 15 calendar days following the end 
of each quarter. The Federal awarding agencies may require a monthly 
report from those recipients receiving advances totaling $1 million or 
more per year.
    (v) Federal awarding agencies may waive the requirement for 
submission of the SF-272 for any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that such advances are monitored through other forms contained 
in this section;
    (B) If, in the Federal awarding agency's opinion, the recipient's 
accounting controls are adequate to minimize excessive Federal advances; 
or
    (C) When the electronic payment mechanisms provide adequate data.
    (b) When the Federal awarding agency needs additional information or 
more frequent reports, the following shall be observed.
    (1) When additional information is needed to comply with legislative 
requirements, Federal awarding agencies shall issue instructions to 
require recipients to submit such information under the ``Remarks'' 
section of the reports.
    (2) When a Federal awarding agency determines that a recipient's 
accounting system does not meet the standards in Sec. 3019.21, 
additional pertinent information to further monitor awards may be 
obtained upon written notice to the recipient until such time as the 
system is brought up to standard. The Federal awarding agency, in 
obtaining this information, shall comply with report clearance 
requirements of 5 CFR part 1320.
    (3) Federal awarding agencies are encouraged to shade out any line 
item on any report if not necessary.
    (4) Federal awarding agencies may accept the identical information 
from the recipients in machine readable format or computer printouts or 
electronic outputs in lieu of prescribed formats.
    (5) Federal awarding agencies may provide computer or electronic 
outputs to recipients when such expedites or contributes to the accuracy 
of reporting.



Sec. 3019.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. Federal awarding agencies 
shall not impose any other record retention or access requirements upon 
recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report, as authorized by the Federal awarding agency. The only 
exceptions are the following.
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until all 
litigation, claims or audit findings involving the records have been 
resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by the Federal 
awarding agency, the 3-year retention requirement is not applicable to 
the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in paragraph (g) of this section.
    (c) Copies of original records may be substituted for the original 
records if authorized by the Federal awarding agency.
    (d) The Federal awarding agency shall request transfer of certain 
records to its custody from recipients when it determines that the 
records possess long term retention value. However, in order to avoid 
duplicate recordkeeping, a Federal awarding agency may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.

[[Page 192]]

    (e) The Federal awarding agency, the Inspector General, Comptroller 
General of the United States, or any of their duly authorized 
representatives, have the right of timely and unrestricted access to any 
books, documents, papers, or other records of recipients that are 
pertinent to the awards, in order to make audits, examinations, 
excerpts, transcripts and copies of such documents. This right also 
includes timely and reasonable access to a recipient's personnel for the 
purpose of interview and discussion related to such documents. The 
rights of access in this paragraph are not limited to the required 
retention period, but shall last as long as records are retained.
    (f) Unless required by statute, no Federal awarding agency shall 
place restrictions on receipts that limit public access to the records 
of recipients that are pertinent to an award, except when the Federal 
awarding agency can demonstrate that such records shall be kept 
confidential and would have been exempted from disclosure pursuant to 
the Freedom of Information Act (5 U.S.C. 552) if the records had 
belonged to the Federal awarding agency.
    (g) Indirect cost rate proposals, cost allocations plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply to the following 
types of documents, and their supporting records: indirect cost rate 
computations or proposals, cost allocation plans, and any similar 
accounting computations of the rate at which a particular group of costs 
is chargeable (such as computer usage chargeback rates or composite 
fringe benefit rates).
    (1) If submitted for negotiation. If the recipient submits to the 
Federal awarding agency or the subrecipient submits to the recipient the 
proposal, plan, or other computation to form the basis for negotiation 
of the rate, then the 3-year retention period for its supporting records 
starts on the date of such submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the Federal awarding agency or the subrecipient is 
not required to submit to the recipient the proposal, plan, or other 
computation for negotiation purposes, then the 3-year retention period 
for the proposal, plan, or other computation and its supporting records 
starts at the end of the fiscal year (or other accounting period) 
covered by the proposal, plan, or other computation.

                       Termination and Enforcement



Sec. 3019.60  Purpose of termination and enforcement.

    Sections 3019.61 and 3019.62 set forth uniform suspension, 
termination and enforcement procedures.



Sec. 3019.61  Termination.

    (a) Awards may be terminated in whole or in part only if paragraphs 
(a)(1), (a)(2) or (a)(3) of this section apply.
    (1) By the Federal awarding agency, if a recipient materially fails 
to comply with the terms and conditions of an award.
    (2) By the Federal awarding agency with the consent of the 
recipient, in which case the two parties shall agree upon the 
termination conditions, including the effective date and, in the case of 
partial termination, the portion to be terminated.
    (3) By the recipient upon sending to the Federal awarding agency 
written notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. However, if the Federal awarding agency determines in the 
case of partial termination that the reduced or modified portion of the 
grant will not accomplish the purposes for which the grant was made, it 
may terminate the grant in its entirety under either paragraphs (a)(1) 
or (2) of this section.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 3019.71(a), including those for property 
management as applicable, shall be considered in the termination of the 
award, and provision shall be made for continuing responsibilities of 
the recipient after termination, as appropriate.



Sec. 3019.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award,

[[Page 193]]

whether stated in a Federal statute, regulation, assurance, application, 
or notice of award, the Federal awarding agency may, in addition to 
imposing any of the special conditions outlined in Sec. 3019.14, take 
one or more of the following actions, as appropriate in the 
circumstances.
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
Federal awarding agency.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the 
awarding agency shall provide the recipient an opportunity for hearing, 
appeal, or other administrative proceeding to which the recipient is 
entitled under any statute or regulation applicable to the action 
involved.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a suspension 
or after termination of an award are not allowable unless the awarding 
agency expressly authorizes them in the notice of suspension of 
termination or subsequently. Other recipient costs during suspension or 
after termination which are necessary and not reasonably avoidable are 
allowable if paragraphs (c)(1) and (c)(2) of this section apply.
    (1) The costs result from obligations which were properly incurred 
by the recipient before the effective date of suspension or termination, 
are not in anticipation of it, and in the case of a termination, are 
noncancellable.
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to debarment 
and suspension under E.O.s 12549 and 12689 and the Federal awarding 
agency implementing regulations (see Sec. 3019.13).



                 Subpart D--After-the-Award Requirements



Sec. 3019.70  Purpose.

    Sections 3019.71 through 3019.73 contain closeout procedures and 
other procedures for subsequent disallowances and adjustments.



Sec. 3019.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports as required by the terms and conditions of the award. The 
Federal awarding agency may approve extensions when requested by the 
recipient.
    (b) Unless the Federal awarding agency authorizes an extension, a 
recipient shall liquidate all obligations incurred under the award not 
later than 90 calendar days after the funding period or the date of 
completion as specified in the terms and conditions of the award or in 
agency implementing instructions.
    (c) The Federal awarding agency shall make prompt payments to a 
recipient for allowable reimbursable costs under the award being closed 
out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that the Federal awarding agency has advanced or paid and that is 
not authorized to be retained by the recipient for use in other 
projects. OMB Circular A-129 governs unreturned amounts that become 
delinquent debts.
    (e) When authorized by the terms and conditions of the award, the 
Federal awarding agency shall make a settlement for any upward or 
downward adjustments to the Federal share of costs after closeout 
reports are received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 3019.31 through 3019.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the Federal awarding agency

[[Page 194]]

shall retain the right to recover an appropriate amount after fully 
considering the recommendations on disallowed costs resulting from the 
final audit.



Sec. 3019.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of the Federal awarding agency to disallow costs and 
recover funds on the basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 3019.26.
    (4) Property management requirements in Secs. 3019.31 through 
3019.37.
    (5) Records retention as required in Sec. 3019.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the Federal awarding agency and the recipient, provided the 
responsibilities of the recipient referred to in Sec. 3019.73(a), 
including those for property management as applicable, are considered 
and provisions made for continuing responsibilities of the recipient, as 
appropriate.



Sec. 3019.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. If 
not paid within a reasonable period after the demand for payment, the 
Federal awarding agency may reduce the debt by:
    (1) Making an administrative offset against other requests for 
reimbursements.
    (2) Withholding advance payments otherwise due to the recipient.
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, the Federal awarding agency 
shall charge interest on an overdue debt in accordance with 4 CFR 
Chapter II, ``Federal Claims Collection Standards.''

              Appendix A to Part 3019--Contract Provisions

    All contracts, awarded by a recipient including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246, ``Equal Employment 
Opportunity,'' as amended by E.O. 11375, ``Amending Executive Order 
11246 Relating to Equal Employment Opportunity,'' and as supplemented by 
regulations at 41 CFR part 60, ``Office of Federal Contract Compliance 
Programs, Equal Employment Opportunity, Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subgrants in excess of $2000 for construction 
or repair awarded by recipients and subrecipients shall include a 
provision for compliance with the Copeland ``Anti-Kickback'' Act (18 
U.S.C. 874), as supplemented by Department of Labor regulations (29 CFR 
part 3, ``Contractors and Subcontractors on Public Building or Public 
Work Financed in Whole or in Part by Loans or Grants from the United 
States''). The Act provides that each contractor or subrecipient shall 
be prohibited from inducing, by any means, any person employed in the 
construction, completion, or repair of public work, to give up any part 
of the compensation to which he is otherwise entitled. The recipient 
shall report all suspected or reported violations to the Federal 
awarding agency.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction contracts 
awarded by the recipients and subrecipients of more than $2000 shall 
include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 
276a to a-7) and as supplemented by Department of Labor regulations (29 
CFR part 5, ``Labor Standards Provisions Applicable to Contracts 
Governing Federally Financed and Assisted Construction''). Under this 
Act, contractors shall be required to pay wages to laborers and 
mechanics at a rate not less than the minimum wages specified in a wage 
determination made by the Secretary of Labor. In addition, contractors 
shall be required to pay wages not less than once a week. The recipient 
shall place a copy of the current prevailing wage determination issued 
by the Department of Labor in each solicitation and the award of a 
contract shall be conditioned upon the acceptance of the wage 
determination. The recipient shall report all suspected or reported 
violations to the Federal awarding agency.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in excess of 
$2000 for construction contracts and in excess of $2500 for other 
contracts that involve the employment of mechanics or laborers

[[Page 195]]

shall include a provision for compliance with Sections 102 and 107 of 
the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
supplemented by Department of Labor regulations (29 CFR part 5). Under 
Section 102 of the Act, each contractor shall be required to compute the 
wages of every mechanic and laborer on the basis of a standard work week 
of 40 hours. Work in excess of the standard work week is permissible 
provided that the worker is compensated at a rate of not less than 1\1/
2\ times the basic rate of pay for all hours worked in excess of 40 
hours in the work week. Section 107 of the Act is applicable to 
construction work and provides that no laborer or mechanic shall be 
required to work in surroundings or under working conditions which are 
unsanitary, hazardous or dangerous. These requirements do not apply to 
the purchases of supplies or materials or articles ordinarily available 
on the open market, or contracts for transportation or transmission of 
intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements,'' and any implementing 
regulations issued by the awarding agency.
    6. Clean Air Act (42 U.S.C. 7401 et. seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--Contracts 
and subgrants of amounts in excess of $100,000 shall contain a provision 
that requires the recipient to agree to comply with all applicable 
standards, orders or regulations issued pursuant to the Clean Air Act 
(42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as 
amended (33 U.S.C. 1251 et seq.). Violations shall be reported to the 
Federal awarding agency and the Regional Office of the Environmental 
Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors who 
apply or bid for an award of $100,000 or more shall file the required 
certification. Each tier certifies to the tier above that it will not 
and has not used Federal appropriated funds to pay any person or 
organization for influencing or attempting to influence an officer or 
employee of any agency, a member of Congress, officer or employee of 
Congress, or an employee of a member of Congress in connection with 
obtaining any Federal contract, grant or any other award covered by 31 
U.S.C. 1352. Each tier shall also disclose any lobbying with non-Federal 
funds that takes place in connection with obtaining any Federal award. 
Such disclosures are forwarded from tier to tier up to the recipient.
    8. Debarment and Suspension (E.O.s 12549 and 12689)--All parties 
doing business with the Department of Agriculture should consult the 
Department's regulations for debarment and suspension found at 7 CFR 
3017. No contract shall be made to parties listed on the General 
Services Administration's List of Parties Excluded from Federal 
Procurement or Nonprocurement Programs in accordance with E.O.s 12549 
and 12689, ``Debarment and Suspension.'' This list contains the names of 
parties debarred, suspended, or otherwise excluded by agencies, and 
contractors declared ineligible under statutory or regulatory authority 
other than E.O. 12549. Contractors with awards that exceed the small 
purchase threshold shall provide the required certification regarding 
its exclusion status and that of its principal employees.



PART 3052--AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS--Table of Contents




                           Subpart A--General

Sec.
3052.100  Purpose.
3052.105  Definitions.

                            Subpart B--Audits

3052.200  Audit requirements.
3052.205  Basis for determining Federal awards expended.
3052.210  Subrecipient and vendor determinations.
3052.215  Relation to other audit requirements.
3052.220  Frequency of audits.
3052.225  Sanctions.
3052.230  Audit costs.
3052.235  Program-specific audits.

                           Subpart C--Auditees

3052.300  Auditee responsibilities.
3052.305  Auditor selection.
3052.310  Financial statements.
3052.315  Audit findings follow-up.
3052.320  Report submission.

          Subpart D--Federal Agencies and Pass-Through Entities

3052.400  Responsibilities.
3052.405  Management decision.

                           Subpart E--Auditors

3052.500  Scope of audit.
3052.505  Audit reporting.
3052.510  Audit findings.
3052.515  Audit working papers.
3052.520  Major program determination.
3052.525  Criteria for Federal program risk.
3052.530  Criteria for a low-risk auditee.


[[Page 196]]


    Authority: 5 U.S.C. 301

    Source: 62 FR 45949, Aug. 29, 1997, unless otherwise noted.



                           Subpart A--General



Sec. 3052.100  Purpose.

    This part sets forth standards for obtaining consistency and 
uniformity among Federal agencies for the audit of non-Federal entities 
expending Federal awards.



Sec. 3052.105  Definitions.

    Audit finding means deficiencies which the auditor is required by 
Sec. 3052.510(a) to report in the schedule of findings and questioned 
costs.
    Auditee means any non-Federal entity that expends Federal awards 
which must be audited under this part.
    Auditor means an auditor, that is a public accountant or a Federal, 
State or local government audit organization, which meets the general 
standards specified in generally accepted government auditing standards 
(GAGAS). The term auditor does not include internal auditors of non-
profit organizations.
    CFDA number means the number assigned to a Federal program in the 
Catalog of Federal Domestic Assistance (CFDA).
    Cluster of programs means a grouping of closely related programs 
that share common compliance requirements. The types of clusters of 
programs are research and development (R&D), student financial aid 
(SFA), and other clusters. ``Other clusters'' are as defined by the 
Office of Management and Budget (OMB) in the compliance supplement or as 
designated by a State for Federal awards the State provides to its 
subrecipients that meet the definition of a cluster of programs. When 
designating an ``other cluster,'' a State shall identify the Federal 
awards included in the cluster and advise the subrecipients of 
compliance requirements applicable to the cluster, consistent with 
Sec. 3052.400(d)(1) and Sec. 3052.400(d)(2), respectively. A cluster of 
programs shall be considered as one program for determining major 
programs, as described in Sec. 3052.520, and, with the exception of R&D 
as described in Sec. 3052.200(c), whether a program-specific audit may 
be elected.
    Cognizant agency for audit means the Federal agency designated to 
carry out the responsibilities described in Sec. 3052.400(a).
    Compliance supplement refers to the Circular A-133 Compliance 
Supplement, included as Appendix B to Circular A-133, or such documents 
as OMB or its designee may issue to replace it. This document is 
available from the Government Printing Office, Superintendent of 
Documents, Washington, DC 20402-9325.
    Corrective action means action taken by the auditee that:
    (1) Corrects identified deficiencies;
    (2) Produces recommended improvements; or
    (3) Demonstrates that audit findings are either invalid or do not 
warrant auditee action.
    Federal agency has the same meaning as the term agency in Section 
551(1) of title 5, United States Code.
    Federal award means Federal financial assistance and Federal cost-
reimbursement contracts that non-Federal entities receive directly from 
Federal awarding agencies or indirectly from pass-through entities. It 
does not include procurement contracts, under grants or contracts, used 
to buy goods or services from vendors. Any audits of such vendors shall 
be covered by the terms and conditions of the contract. Contracts to 
operate Federal Government owned, contractor operated facilities (GOCOs) 
are excluded from the requirements of this part.
    Federal awarding agency means the Federal agency that provides an 
award directly to the recipient.
    Federal financial assistance means assistance that non-Federal 
entities receive or administer in the form of grants, loans, loan 
guarantees, property (including donated surplus property), cooperative 
agreements, interest subsidies, insurance, food commodities, direct 
appropriations, and other assistance, but does not include amounts 
received as reimbursement for services rendered to individuals as 
described in Sec. 3052.205(h) and Sec. 3052.205(i).
    Federal program means:

[[Page 197]]

    (1) All Federal awards to a non-Federal entity assigned a single 
number in the CFDA.
    (2) When no CFDA number is assigned, all Federal awards from the 
same agency made for the same purpose should be combined and considered 
one program.
    (3) Notwithstanding paragraphs (1) and (2) of this definition, a 
cluster of programs. The types of clusters of programs are:
    (i) Research and development (R&D);
    (ii) Student financial aid (SFA); and
    (iii) ``Other clusters,'' as described in the definition of cluster 
of programs in this section.
    GAGAS means generally accepted government auditing standards issued 
by the Comptroller General of the United States, which are applicable to 
financial audits.
    Generally accepted accounting principles has the meaning specified 
in generally accepted auditing standards issued by the American 
Institute of Certified Public Accountants (AICPA).
    Indian tribe means any Indian tribe, band, nation, or other 
organized group or community, including any Alaskan Native village or 
regional or village corporation (as defined in, or established under, 
the Alaskan Native Claims Settlement Act) that is recognized by the 
United States as eligible for the special programs and services provided 
by the United States to Indians because of their status as Indians.
    Internal control means a process, effected by an entity's management 
and other personnel, designed to provide reasonable assurance regarding 
the achievement of objectives in the following categories:
    (1) Effectiveness and efficiency of operations;
    (2) Reliability of financial reporting; and
    (3) Compliance with applicable laws and regulations.
    Internal control pertaining to the compliance requirements for 
Federal programs (Internal control over Federal programs) means a 
process--effected by an entity's management and other personnel--
designed to provide reasonable assurance regarding the achievement of 
the following objectives for Federal programs:
    (1) Transactions are properly recorded and accounted for to:
    (i) Permit the preparation of reliable financial statements and 
Federal reports;
    (ii) Maintain accountability over assets; and
    (iii) Demonstrate compliance with laws, regulations, and other 
compliance requirements;
    (2) Transactions are executed in compliance with:
    (i) Laws, regulations, and the provisions of contracts or grant 
agreements that could have a direct and material effect on a Federal 
program; and
    (ii) Any other laws and regulations that are identified in the 
compliance supplement; and
    (3) Funds, property, and other assets are safeguarded against loss 
from unauthorized use or disposition.
    Loan means a Federal loan or loan guarantee received or administered 
by a non-Federal entity.
    Local government means any unit of local government within a State, 
including a county, borough, municipality, city, town, township, parish, 
local public authority, special district, school district, intrastate 
district, council of governments, and any other instrumentality of local 
government.
    Major program means a Federal program determined by the auditor to 
be a major program in accordance with Sec. 3052.520 or a program 
identified as a major program by a Federal agency or pass-through entity 
in accordance with Sec. 3052.215(c).
    Management decision means the evaluation by the Federal awarding 
agency or pass-through entity of the audit findings and corrective 
action plan and the issuance of a written decision as to what corrective 
action is necessary.
    Non-Federal entity means a State, local government, or non-profit 
organization.
    Non-profit organization means:
    (1) any corporation, trust, association, cooperative, or other 
organization that:
    (i) Is operated primarily for scientific, educational, service, 
charitable, or similar purposes in the public interest;
    (ii) Is not organized primarily for profit; and

[[Page 198]]

    (iii) Uses its net proceeds to maintain, improve, or expand its 
operations; and
    (2) The term non-profit organization includes non-profit 
institutions of higher education and hospitals.
    OMB means the Executive Office of the President, Office of 
Management and Budget.
    Oversight agency for audit means the Federal awarding agency that 
provides the predominant amount of direct funding to a recipient not 
assigned a cognizant agency for audit. When there is no direct funding, 
the Federal agency with the predominant indirect funding shall assume 
the oversight responsibilities. The duties of the oversight agency for 
audit are described in Sec. 3052.400(b).
    Pass-through entity means a non-Federal entity that provides a 
Federal award to a subrecipient to carry out a Federal program.
    Program-specific audit means an audit of one Federal program as 
provided for in Sec. 3052.200(c) and Sec. 3052.235.
    Questioned cost means a cost that is questioned by the auditor 
because of an audit finding:
    (1) Which resulted from a violation or possible violation of a 
provision of a law, regulation, contract, grant, cooperative agreement, 
or other agreement or document governing the use of Federal funds, 
including funds used to match Federal funds;
    (2) Where the costs, at the time of the audit, are not supported by 
adequate documentation; or
    (3) Where the costs incurred appear unreasonable and do not reflect 
the actions a prudent person would take in the circumstances.
    Recipient means a non-Federal entity that expends Federal awards 
received directly from a Federal awarding agency to carry out a Federal 
program.
    Research and development (R&D) means all research activities, both 
basic and applied, and all development activities that are performed by 
a non-Federal entity. Research is defined as a systematic study directed 
toward fuller scientific knowledge or understanding of the subject 
studied. The term research also includes activities involving the 
training of individuals in research techniques where such activities 
utilize the same facilities as other research and development activities 
and where such activities are not included in the instruction function. 
Development is the systematic use of knowledge and understanding gained 
from research directed toward the production of useful materials, 
devices, systems, or methods, including design and development of 
prototypes and processes.
    Single audit means an audit which includes both the entity's 
financial statements and the Federal awards as described in 
Sec. 3052.500.
    State means any State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
American Samoa, the Commonwealth of the Northern Mariana Islands, and 
the Trust Territory of the Pacific Islands, any instrumentality thereof, 
any multi-State, regional, or interstate entity which has governmental 
functions, and any Indian tribe as defined in this section.
    Student Financial Aid (SFA) includes those programs of general 
student assistance, such as those authorized by Title IV of the Higher 
Education Act of 1965, as amended, (20 U.S.C. 1070 et seq.) which is 
administered by the U.S. Department of Education, and similar programs 
provided by other Federal agencies. It does not include programs which 
provide fellowships or similar Federal awards to students on a 
competitive basis, or for specified studies or research.
    Subrecipient means a non-Federal entity that expends Federal awards 
received from a pass-through entity to carry out a Federal program, but 
does not include an individual that is a beneficiary of such a program. 
A subrecipient may also be a recipient of other Federal awards directly 
from a Federal awarding agency. Guidance on distinguishing between a 
subrecipient and a vendor is provided in Sec. 3052.210.
    Types of compliance requirements refers to the types of compliance 
requirements listed in the compliance supplement. Examples include: 
activities allowed or unallowed; allowable costs/cost principles; cash 
management; eligibility; matching, level of effort, earmarking; and, 
reporting.

[[Page 199]]

    Vendor means a dealer, distributor, merchant, or other seller 
providing goods or services that are required for the conduct of a 
Federal program. These goods or services may be for an organization's 
own use or for the use of beneficiaries of the Federal program. 
Additional guidance on distinguishing between a subrecipient and a 
vendor is provided in Sec. 3052.210.



                            Subpart B--Audits



Sec. 3052.200  Audit requirements.

    (a) Audit required. Non-Federal entities that expend $300,000 or 
more in a year in Federal awards shall have a single or program-specific 
audit conducted for that year in accordance with the provisions of this 
part. Guidance on determining Federal awards expended is provided in 
Sec. 3052.205.
    (b) Single audit. Non-Federal entities that expend $300,000 or more 
in a year in Federal awards shall have a single audit conducted in 
accordance with Sec. 3052.500 except when they elect to have a program-
specific audit conducted in accordance with paragraph (c) of this 
section.
    (c) Program-specific audit election. When an auditee expends Federal 
awards under only one Federal program (excluding R&D) and the Federal 
program's laws, regulations, or grant agreements do not require a 
financial statement audit of the auditee, the auditee may elect to have 
a program-specific audit conducted in accordance with Sec. 3052.235. A 
program-specific audit may not be elected for R&D unless all of the 
Federal awards expended were received from the same Federal agency, or 
the same Federal agency and the same pass-through entity, and that 
Federal agency, or pass-through entity in the case of a subrecipient, 
approves in advance a program-specific audit.
    (d) Exemption when Federal awards expended are less than $300,000. 
Non-Federal entities that expend less than $300,000 a year in Federal 
awards are exempt from Federal audit requirements for that year, except 
as noted in Sec. 3052.215(a), but records must be available for review 
or audit by appropriate officials of the Federal agency, pass-through 
entity, and General Accounting Office (GAO).
    (e) Federally Funded Research and Development Centers (FFRDC). 
Management of an auditee that owns or operates a FFRDC may elect to 
treat the FFRDC as a separate entity for purposes of this part.



Sec. 3052.205  Basis for determining Federal awards expended.

    (a) Determining Federal awards expended. The determination of when 
an award is expended should be based on when the activity related to the 
award occurs. Generally, the activity pertains to events that require 
the non-Federal entity to comply with laws, regulations, and the 
provisions of contracts or grant agreements, such as: expenditure/
expense transactions associated with grants, cost-reimbursement 
contracts, cooperative agreements, and direct appropriations; the 
disbursement of funds passed through to subrecipients; the use of loan 
proceeds under loan and loan guarantee programs; the receipt of 
property; the receipt of surplus property; the receipt or use of program 
income; the distribution or consumption of food commodities; the 
disbursement of amounts entitling the non-Federal entity to an interest 
subsidy; and, the period when insurance is in force.
    (b) Loan and loan guarantees (loans). Since the Federal Government 
is at risk for loans until the debt is repaid, the following guidelines 
shall be used to calculate the value of Federal awards expended under 
loan programs, except as noted in paragraphs (c) and (d) of this 
section:
    (1) Value of new loans made or received during the fiscal year; plus
    (2) Balance of loans from previous years for which the Federal 
Government imposes continuing compliance requirements; plus
    (3) Any interest subsidy, cash, or administrative cost allowance 
received.
    (c) Loan and loan guarantees (loans) at institutions of higher 
education. When loans are made to students of an institution of higher 
education but the institution does not make the loans, then only the 
value of loans made during the year shall be considered Federal awards 
expended in that year. The balance of loans for previous years is not 
included as Federal awards expended

[[Page 200]]

because the lender accounts for the prior balances.
    (d) Prior loan and loan guarantees (loans). Loans, the proceeds of 
which were received and expended in prior-years, are not considered 
Federal awards expended under this part when the laws, regulations, and 
the provisions of contracts or grant agreements pertaining to such loans 
impose no continuing compliance requirements other than to repay the 
loans.
    (e) Endowment funds. The cumulative balance of Federal awards for 
endowment funds which are federally restricted are considered awards 
expended in each year in which the funds are still restricted.
    (f) Free rent. Free rent received by itself is not considered a 
Federal award expended under this part. However, free rent received as 
part of an award to carry out a Federal program shall be included in 
determining Federal awards expended and subject to audit under this 
part.
    (g) Valuing non-cash assistance. Federal non-cash assistance, such 
as free rent, food stamps, food commodities, donated property, or 
donated surplus property, shall be valued at fair market value at the 
time of receipt or the assessed value provided by the Federal agency.
    (h) Medicare. Medicare payments to a non-Federal entity for 
providing patient care services to Medicare eligible individuals are not 
considered Federal awards expended under this part.
    (i) Medicaid. Medicaid payments to a subrecipient for providing 
patient care services to Medicaid eligible individuals are not 
considered Federal awards expended under this part unless a State 
requires the funds to be treated as Federal awards expended because 
reimbursement is on a cost-reimbursement basis.
    (j) Certain loans provided by the National Credit Union 
Administration. For purposes of this part, loans made from the National 
Credit Union Share Insurance Fund and the Central Liquidity Facility 
that are funded by contributions from insured institutions are not 
considered Federal awards expended.



Sec. 3052.210  Subrecipient and vendor determinations.

    (a) General. An auditee may be a recipient, a subrecipient, and a 
vendor. Federal awards expended as a recipient or a subrecipient would 
be subject to audit under this part. The payments received for goods or 
services provided as a vendor would not be considered Federal awards. 
The guidance in paragraphs (b) and (c) of this section should be 
considered in determining whether payments constitute a Federal award or 
a payment for goods and services.
    (b) Federal award. Characteristics indicative of a Federal award 
received by a subrecipient are when the organization:
    (1) Determines who is eligible to receive what Federal financial 
assistance;
    (2) Has its performance measured against whether the objectives of 
the Federal program are met;
    (3) Has responsibility for programmatic decision making;
    (4) Has responsibility for adherence to applicable Federal program 
compliance requirements; and
    (5) Uses the Federal funds to carry out a program of the 
organization as compared to providing goods or services for a program of 
the pass-through entity.
    (c) Payment for goods and services. Characteristics indicative of a 
payment for goods and services received by a vendor are when the 
organization:
    (1) Provides the goods and services within normal business 
operations;
    (2) Provides similar goods or services to many different purchasers;
    (3) Operates in a competitive environment;
    (4) Provides goods or services that are ancillary to the operation 
of the Federal program; and
    (5) Is not subject to compliance requirements of the Federal 
program.
    (d) Use of judgment in making determination. There may be unusual 
circumstances or exceptions to the listed characteristics. In making the 
determination of whether a subrecipient or vendor relationship exists, 
the substance of the relationship is more important than the form of the 
agreement. It is not expected that all of the characteristics will be 
present and

[[Page 201]]

judgment should be used in determining whether an entity is a 
subrecipient or vendor.
    (e) For-profit subrecipient. Since this part does not apply to for-
profit subrecipients, the pass-through entity is responsible for 
establishing requirements, as necessary, to ensure compliance by for-
profit subrecipients. The contract with the for-profit subrecipient 
should describe applicable compliance requirements and the for-profit 
subrecipient's compliance responsibility. Methods to ensure compliance 
for Federal awards made to for-profit subrecipients may include pre-
award audits, monitoring during the contract, and post-award audits.
    (f) Compliance responsibility for vendors. In most cases, the 
auditee's compliance responsibility for vendors is only to ensure that 
the procurement, receipt, and payment for goods and services comply with 
laws, regulations, and the provisions of contracts or grant agreements. 
Program compliance requirements normally do not pass through to vendors. 
However, the auditee is responsible for ensuring compliance for vendor 
transactions which are structured such that the vendor is responsible 
for program compliance or the vendor's records must be reviewed to 
determine program compliance. Also, when these vendor transactions 
relate to a major program, the scope of the audit shall include 
determining whether these transactions are in compliance with laws, 
regulations, and the provisions of contracts or grant agreements.



Sec. 3052.215  Relation to other audit requirements.

    (a) Audit under this part in lieu of other audits. An audit made in 
accordance with this part shall be in lieu of any financial audit 
required under individual Federal awards. To the extent this audit meets 
a Federal agency's needs, it shall rely upon and use such audits. The 
provisions of this part neither limit the authority of Federal agencies, 
including their Inspectors General, or GAO to conduct or arrange for 
additional audits (e.g., financial audits, performance audits, 
evaluations, inspections, or reviews) nor authorize any auditee to 
constrain Federal agencies from carrying out additional audits. Any 
additional audits shall be planned and performed in such a way as to 
build upon work performed by other auditors.
    (b) Federal agency to pay for additional audits. A Federal agency 
that conducts or contracts for additional audits shall, consistent with 
other applicable laws and regulations, arrange for funding the full cost 
of such additional audits.
    (c) Request for a program to be audited as a major program. A 
Federal agency may request an auditee to have a particular Federal 
program audited as a major program in lieu of the Federal agency 
conducting or arranging for the additional audits. To allow for 
planning, such requests should be made at least 180 days prior to the 
end of the fiscal year to be audited. The auditee, after consultation 
with its auditor, should promptly respond to such request by informing 
the Federal agency whether the program would otherwise be audited as a 
major program using the risk-based audit approach described in 
Sec. 3052.520 and, if not, the estimated incremental cost. The Federal 
agency shall then promptly confirm to the auditee whether it wants the 
program audited as a major program. If the program is to be audited as a 
major program based upon this Federal agency request, and the Federal 
agency agrees to pay the full incremental costs, then the auditee shall 
have the program audited as a major program. A pass-through entity may 
use the provisions of this paragraph for a subrecipient.



Sec. 3052.220  Frequency of audits.

    Except for the provisions for biennial audits provided in paragraphs 
(a) and (b) of this section, audits required by this part shall be 
performed annually. Any biennial audit shall cover both years within the 
biennial period.
    (a) A State or local government that is required by constitution or 
statute, in effect on January 1, 1987, to undergo its audits less 
frequently than annually, is permitted to undergo its audits pursuant to 
this part biennially. This requirement must still be in effect for the 
biennial period under audit.

[[Page 202]]

    (b) Any non-profit organization that had biennial audits for all 
biennial periods ending between July 1, 1992, and January 1, 1995, is 
permitted to undergo its audits pursuant to this part biennially.



Sec. 3052.225  Sanctions.

    No audit costs may be charged to Federal awards when audits required 
by this part have not been made or have been made but not in accordance 
with this part. In cases of continued inability or unwillingness to have 
an audit conducted in accordance with this part, Federal agencies and 
pass-through entities shall take appropriate action using sanctions such 
as:
    (a) Withholding a percentage of Federal awards until the audit is 
completed satisfactorily;
    (b) Withholding or disallowing overhead costs;
    (c) Suspending Federal awards until the audit is conducted; or
    (d) Terminating the Federal award.



Sec. 3052.230  Audit costs.

    (a) Allowable costs. Unless prohibited by law, the cost of audits 
made in accordance with the provisions of this part are allowable 
charges to Federal awards. The charges may be considered a direct cost 
or an allocated indirect cost, as determined in accordance with the 
provisions of applicable OMB cost principles circulars, the Federal 
Acquisition Regulation (FAR) (48 CFR parts 30 and 31), or other 
applicable cost principles or regulations.
    (b) Unallowable costs. A non-Federal entity shall not charge the 
following to a Federal award:
    (1) The cost of any audit under the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501 et seq.) not conducted in accordance with this 
part.
    (2) The cost of auditing a non-Federal entity which has Federal 
awards expended of less than $300,000 per year and is thereby exempted 
under Sec. 3052.200(d) from having an audit conducted under this part. 
However, this does not prohibit a pass-through entity from charging 
Federal awards for the cost of limited scope audits to monitor its 
subrecipients in accordance with Sec. 3052.400(d)(3), provided the 
subrecipient does not have a single audit. For purposes of this part, 
limited scope audits only include agreed-upon procedures engagements 
conducted in accordance with either the AICPA's generally accepted 
auditing standards or attestation standards, that are paid for and 
arranged by a pass-through entity and address only one or more of the 
following types of compliance requirements: activities allowed or 
unallowed; allowable costs/cost principles; eligibility; matching, level 
of effort, earmarking; and, reporting.



Sec. 3052.235  Program-specific audits.

    (a) Program-specific audit guide available. In many cases, a 
program-specific audit guide will be available to provide specific 
guidance to the auditor with respect to internal control, compliance 
requirements, suggested audit procedures, and audit reporting 
requirements. The auditor should contact the Office of Inspector General 
of the Federal agency to determine whether such a guide is available. 
When a current program-specific audit guide is available, the auditor 
shall follow GAGAS and the guide when performing a program-specific 
audit.
    (b) Program-specific audit guide not available. (1) When a program-
specific audit guide is not available, the auditee and auditor shall 
have basically the same responsibilities for the Federal program as they 
would have for an audit of a major program in a single audit.
    (2) The auditee shall prepare the financial statement(s) for the 
Federal program that includes, at a minimum, a schedule of expenditures 
of Federal awards for the program and notes that describe the 
significant accounting policies used in preparing the schedule, a 
summary schedule of prior audit findings consistent with the 
requirements of Sec. 3052.315(b), and a corrective action plan 
consistent with the requirements of Sec. 3052.315(c).
    (3) The auditor shall:
    (i) Perform an audit of the financial statement(s) for the Federal 
program in accordance with GAGAS;
    (ii) Obtain an understanding of internal control and perform tests 
of internal control over the Federal program consistent with the 
requirements of Sec. 3052.500(c) for a major program;

[[Page 203]]

    (iii) Perform procedures to determine whether the auditee has 
complied with laws, regulations, and the provisions of contracts or 
grant agreements that could have a direct and material effect on the 
Federal program consistent with the requirements of Sec. 3052.500(d) for 
a major program; and
    (iv) Follow up on prior audit findings, perform procedures to assess 
the reasonableness of the summary schedule of prior audit findings 
prepared by the auditee, and report, as a current year audit finding, 
when the auditor concludes that the summary schedule of prior audit 
findings materially misrepresents the status of any prior audit finding 
in accordance with the requirements of Sec. 3052.500(e).
    (4) The auditor's report(s) may be in the form of either combined or 
separate reports and may be organized differently from the manner 
presented in this section. The auditor's report(s) shall state that the 
audit was conducted in accordance with this part and include the 
following:
    (i) An opinion (or disclaimer of opinion) as to whether the 
financial statement(s) of the Federal program is presented fairly in all 
material respects in conformity with the stated accounting policies;
    (ii) A report on internal control related to the Federal program, 
which shall describe the scope of testing of internal control and the 
results of the tests;
    (iii) A report on compliance which includes an opinion (or 
disclaimer of opinion) as to whether the auditee complied with laws, 
regulations, and the provisions of contracts or grant agreements which 
could have a direct and material effect on the Federal program; and
    (iv) A schedule of findings and questioned costs for the Federal 
program that includes a summary of the auditor's results relative to the 
Federal program in a format consistent with Sec. 3052.505(d)(1) and 
findings and questioned costs consistent with the requirements of 
Sec. 3052.505(d)(3).
    (c) Report submission for program-specific audits. (1) The audit 
shall be completed and the reporting required by paragraph (c)(2) or 
(c)(3) of this section submitted within the earlier of 30 days after 
receipt of the auditor's report(s), or nine months after the end of the 
audit period, unless a longer period is agreed to in advance by the 
Federal agency that provided the funding or a different period is 
specified in a program-specific audit guide. (However, for fiscal years 
beginning on or before June 30, 1988, the audit shall be completed and 
the required reporting shall be submitted within the earlier of 30 days 
after receipt of the auditor's report(s), or 13 months after the end of 
the audit period, unless a different period is specified in a program-
specific audit guide.) Unless restricted by law or regulation, the 
auditee shall make report copies available for public inspection.
    (2) When a program-specific audit guide is available, the auditee 
shall submit to the Federal clearinghouse designated by OMB the data 
collection form prepared in accordance with Sec. 3052.320(b), as 
applicable to a program-specific audit, and the reporting required by 
the program-specific audit guide to be retained as an archival copy. 
Also, the auditee shall submit to the Federal awarding agency or pass-
through entity the reporting required by the program-specific audit 
guide.
    (3) When a program-specific audit guide is not available, the 
reporting package for a program-specific audit shall consist of the 
financial statement(s) of the Federal program, a summary schedule of 
prior audit findings, and a corrective action plan as described in 
paragraph (b)(2) of this section, and the auditor's report(s) described 
in paragraph (b)(4) of this section. The data collection form prepared 
in accordance with Sec. 3052.320(b), as applicable to a program-specific 
audit, and one copy of this reporting package shall be submitted to the 
Federal clearinghouse designated by OMB to be retained as an archival 
copy. Also, when the schedule of findings and questioned costs disclosed 
audit findings or the summary schedule of prior audit findings reported 
the status of any audit findings, the auditee shall submit one copy of 
the reporting package to the Federal clearinghouse on behalf of the 
Federal awarding agency, or directly to the pass-through entity in the

[[Page 204]]

case of a subrecipient. Instead of submitting the reporting package to 
the pass-through entity, when a subrecipient is not required to submit a 
reporting package to the pass-through entity, the subrecipient shall 
provide written notification to the pass-through entity, consistent with 
the requirements of Sec. 3052.320(e)(2). A subrecipient may submit a 
copy of the reporting package to the pass-through entity to comply with 
this notification requirement.
    (d) Other sections of this part may apply. Program-specific audits 
are subject to Sec. 3052.100 through Sec. 3052.215(b), Sec. 3052.220 
through Sec. 3052.230, Sec. 3052.300 through Sec. 3052.305, 
Sec. 3052.315, Sec. 3052.320(f) through Sec. 3052.320(j), Sec. 3052.400 
through Sec. 3052.405, Sec. 3052.510 through Sec. 3052.515, and other 
referenced provisions of this part unless contrary to the provisions of 
this section, a program-specific audit guide, or program laws and 
regulations.



                           Subpart C--Auditees



Sec. 3052.300  Auditee responsibilities.

    The auditee shall:
    (a) Identify, in its accounts, all Federal awards received and 
expended and the Federal programs under which they were received. 
Federal program and award identification shall include, as applicable, 
the CFDA title and number, award number and year, name of the Federal 
agency, and name of the pass-through entity.
    (b) Maintain internal control over Federal programs that provides 
reasonable assurance that the auditee is managing Federal awards in 
compliance with laws, regulations, and the provisions of contracts or 
grant agreements that could have a material effect on each of its 
Federal programs.
    (c) Comply with laws, regulations, and the provisions of contracts 
or grant agreements related to each of its Federal programs.
    (d) Prepare appropriate financial statements, including the schedule 
of expenditures of Federal awards in accordance with Sec. 3052.310.
    (e) Ensure that the audits required by this part are properly 
performed and submitted when due. When extensions to the report 
submission due date required by Sec. 3052.320(a) are granted by the 
cognizant or oversight agency for audit, promptly notify the Federal 
clearinghouse designated by OMB and each pass-through entity providing 
Federal awards of the extension.
    (f) Follow up and take corrective action on audit findings, 
including preparation of a summary schedule of prior audit findings and 
a corrective action plan in accordance with Sec. 3052.315(b) and 
Sec. 3052.315(c), respectively.



Sec. 3052.305  Auditor selection.

    (a) Auditor procurement. In procuring audit services, auditees shall 
follow the procurement standards prescribed by the Grants Management 
Common Rule (hereinafter referred to as the ``A-102 Common Rule'') 7 CFR 
Part 3016, Circular A-110, ``Uniform Administrative Requirements for 
Grants and Agreements with Institutions of Higher Education, Hospitals 
and Other Non-Profit Organizations,'' or the FAR (48 CFR part 42), as 
applicable (OMB Circulars are available from the Office of 
Administration, Publications Office, Room 2200, New Executive Office 
Building, Washington, DC 20503). Whenever possible, auditees shall make 
positive efforts to utilize small businesses, minority-owned firms, and 
women's business enterprises, in procuring audit services as stated in 
the A-102 Common Rule, OMB Circular A-110, or the FAR (48 CFR part 42), 
as applicable. In requesting proposals for audit services, the 
objectives and scope of the audit should be made clear. Factors to be 
considered in evaluating each proposal for audit services include the 
responsiveness to the request for proposal, relevant experience, 
availability of staff with professional qualifications and technical 
abilities, the results of external quality control reviews, and price.
    (b) Restriction on auditor preparing indirect cost proposals. An 
auditor who prepares the indirect cost proposal or cost allocation plan 
may not also be selected to perform the audit required by this part when 
the indirect costs recovered by the auditee during the prior year 
exceeded $1 million. This restriction applies to the base year used in 
the preparation of the indirect cost proposal or cost allocation plan 
and

[[Page 205]]

any subsequent years in which the resulting indirect cost agreement or 
cost allocation plan is used to recover costs. To minimize any 
disruption in existing contracts for audit services, this paragraph 
applies to audits of fiscal years beginning after June 30, 1998.
    (c) Use of Federal auditors. Federal auditors may perform all or 
part of the work required under this part if they comply fully with the 
requirements of this part.



Sec. 3052.310  Financial statements.

    (a) Financial statements. The auditee shall prepare financial 
statements that reflect its financial position, results of operations or 
changes in net assets, and, where appropriate, cash flows for the fiscal 
year audited. The financial statements shall be for the same 
organizational unit and fiscal year that is chosen to meet the 
requirements of this part. However, organization-wide financial 
statements may also include departments, agencies, and other 
organizational units that have separate audits in accordance with 
Sec. 3052.500(a) and prepare separate financial statements.
    (b) Schedule of expenditures of Federal awards. The auditee shall 
also prepare a schedule of expenditures of Federal awards for the period 
covered by the auditee's financial statements. While not required, the 
auditee may choose to provide information requested by Federal awarding 
agencies and pass-through entities to make the schedule easier to use. 
For example, when a Federal program has multiple award years, the 
auditee may list the amount of Federal awards expended for each award 
year separately. At a minimum, the schedule shall:
    (1) List individual Federal programs by Federal agency. For Federal 
programs included in a cluster of programs, list individual Federal 
programs within a cluster of programs. For R&D, total Federal awards 
expended shall be shown either by individual award or by Federal agency 
and major subdivision within the Federal agency. For example, the 
National Institutes of Health is a major subdivision in the Department 
of Health and Human Services.
    (2) For Federal awards received as a subrecipient, the name of the 
pass-through entity and identifying number assigned by the pass-through 
entity shall be included.
    (3) Provide total Federal awards expended for each individual 
Federal program and the CFDA number or other identifying number when the 
CFDA information is not available.
    (4) Include notes that describe the significant accounting policies 
used in preparing the schedule.
    (5) To the extent practical, pass-through entities should identify 
in the schedule the total amount provided to subrecipients from each 
Federal program.
    (6) Include, in either the schedule or a note to the schedule, the 
value of the Federal awards expended in the form of non-cash assistance, 
the amount of insurance in effect during the year, and loans or loan 
guarantees outstanding at year end. While not required, it is preferable 
to present this information in the schedule.



Sec. 3052.315  Audit findings follow-up.

    (a) General. The auditee is responsible for follow-up and corrective 
action on all audit findings. As part of this responsibility, the 
auditee shall prepare a summary schedule of prior audit findings. The 
auditee shall also prepare a corrective action plan for current year 
audit findings. The summary schedule of prior audit findings and the 
corrective action plan shall include the reference numbers the auditor 
assigns to audit findings under Sec. 3052.510(c). Since the summary 
schedule may include audit findings from multiple years, it shall 
include the fiscal year in which the finding initially occurred.
    (b) Summary schedule of prior audit findings. The summary schedule 
of prior audit findings shall report the status of all audit findings 
included in the prior audit's schedule of findings and questioned costs 
relative to Federal awards. The summary schedule shall also include 
audit findings reported in the prior audit's summary schedule of prior 
audit findings except audit findings listed as corrected in accordance 
with paragraph (b)(1) of this section, or no longer valid or not 
warranting further action in accordance with paragraph (b)(4) of this 
section.

[[Page 206]]

    (1) When audit findings were fully corrected, the summary schedule 
need only list the audit findings and state that corrective action was 
taken.
    (2) When audit findings were not corrected or were only partially 
corrected, the summary schedule shall describe the planned corrective 
action as well as any partial corrective action taken.
    (3) When corrective action taken is significantly different from 
corrective action previously reported in a corrective action plan or in 
the Federal agency's or pass-through entity's management decision, the 
summary schedule shall provide an explanation.
    (4) When the auditee believes the audit findings are no longer valid 
or do not warrant further action, the reasons for this position shall be 
described in the summary schedule. A valid reason for considering an 
audit finding as not warranting further action is that all of the 
following have occurred:
    (i) Two years have passed since the audit report in which the 
finding occurred was submitted to the Federal clearinghouse;
    (ii) The Federal agency or pass-through entity is not currently 
following up with the auditee on the audit finding; and
    (iii) A management decision was not issued.
    (c) Corrective action plan. At the completion of the audit, the 
auditee shall prepare a corrective action plan to address each audit 
finding included in the current year auditor's reports. The corrective 
action plan shall provide the name(s) of the contact person(s) 
responsible for corrective action, the corrective action planned, and 
the anticipated completion date. If the auditee does not agree with the 
audit findings or believes corrective action is not required, then the 
corrective action plan shall include an explanation and specific 
reasons.



Sec. 3052.320  Report submission.

    (a) General. The audit shall be completed and the data collection 
form described in paragraph (b) of this section and reporting package 
described in paragraph (c) of this section shall be submitted within the 
earlier of 30 days after receipt of the auditor's report(s), or nine 
months after the end of the audit period, unless a longer period is 
agreed to in advance by the cognizant or oversight agency for audit. 
(However, for fiscal years beginning on or before June 30, 1998, the 
audit shall be completed and the data collection form and reporting 
package shall be submitted within the earlier of 30 days after receipt 
of the auditor's report(s), or 13 months after the end of the audit 
period.) Unless restricted by law or regulation, the auditee shall make 
copies available for public inspection.
    (b) Data collection. (1) The auditee shall submit a data collection 
form which states whether the audit was completed in accordance with 
this part and provides information about the auditee, its Federal 
programs, and the results of the audit. The form shall be approved by 
OMB, available from the Federal clearinghouse designated by OMB, and 
include data elements similar to those presented in this paragraph. A 
senior level representative of the auditee (e.g., State controller, 
director of finance, chief executive officer, or chief financial 
officer) shall sign a statement to be included as part of the form 
certifying that: the auditee complied with the requirements of this 
part, the form was prepared in accordance with this part (and the 
instructions accompanying the form), and the information included in the 
form, in its entirety, are accurate and complete.
    (2) The data collection form shall include the following data 
elements:
    (i) The type of report the auditor issued on the financial 
statements of the auditee (i.e., unqualified opinion, qualified opinion, 
adverse opinion, or disclaimer of opinion).
    (ii) Where applicable, a statement that reportable conditions in 
internal control were disclosed by the audit of the financial statements 
and whether any such conditions were material weaknesses.
    (iii) A statement as to whether the audit disclosed any 
noncompliance which is material to the financial statements of the 
auditee.
    (iv) Where applicable, a statement that reportable conditions in 
internal control over major programs were disclosed by the audit and 
whether any such conditions were material weaknesses.

[[Page 207]]

    (v) The type of report the auditor issued on compliance for major 
programs (i.e., unqualified opinion, qualified opinion, adverse opinion, 
or disclaimer of opinion).
    (vi) A list of the Federal awarding agencies which will receive a 
copy of the reporting package pursuant to Sec. 3052.320(d)(2) of OMB 
Circular A-133.
    (vii) A yes or no statement as to whether the auditee qualified as a 
low-risk auditee under Sec. 3052.530 of OMB Circular A-133.
    (viii) The dollar threshold used to distinguish between Type A and 
Type B programs as defined in Sec. 3052.520(b) of OMB Circular A-133.
    (ix) The Catalog of Federal Domestic Assistance (CFDA) number for 
each Federal program, as applicable.
    (x) The name of each Federal program and identification of each 
major program. Individual programs within a cluster of programs should 
be listed in the same level of detail as they are listed in the schedule 
of expenditures of Federal awards.
    (xi) The amount of expenditures in the schedule of expenditures of 
Federal awards associated with each Federal program.
    (xii) For each Federal program, a yes or no statement as to whether 
there are audit findings in each of the following types of compliance 
requirements and the total amount of any questioned costs:
    (A) Activities allowed or unallowed.
    (B) Allowable costs/cost principles.
    (C) Cash management.
    (D) Davis-Bacon Act.
    (E) Eligibility.
    (F) Equipment and real property management.
    (G) Matching, level of effort, earmarking.
    (H) Period of availability of Federal funds.
    (I) Procurement and suspension and debarment.
    (J) Program income.
    (K) Real property acquisition and relocation assistance.
    (L) Reporting.
    (M) Subrecipient monitoring.
    (N) Special tests and provisions.
    (xiii) Auditee Name, Employer Identification Number(s), Name and 
Title of Certifying Official, Telephone Number, Signature, and Date.
    (xiv) Auditor Name, Name and Title of Contact Person, Auditor 
Address, Auditor Telephone Number, Signature, and Date.
    (xv) Whether the auditee has either a cognizant or oversight agency 
for audit.
    (xvi) The name of the cognizant or oversight agency for audit 
determined in accordance with Sec. 3052.400(a) and Sec. 3052.400(b), 
respectively.
    (3) Using the information included in the reporting package 
described in paragraph (c) of this section, the auditor shall complete 
the applicable sections of the form. The auditor shall sign a statement 
to be included as part of the data collection form that indicates, at a 
minimum, the source of the information included in the form, the 
auditor's responsibility for the information, that the form is not a 
substitute for the reporting package described in paragraph (c) of this 
section, and that the content of the form is limited to the data 
elements prescribed by OMB.
    (c) Reporting package. The reporting package shall include the:
    (1) Financial statements and schedule of expenditures of Federal 
awards discussed in Sec. 3052.310(a) and Sec. 3052.310(b), respectively;
    (2) Summary schedule of prior audit findings discussed in 
Sec. 3052.315(b);
    (3) Auditor's report(s) discussed in Sec. 3052.505; and
    (4) Corrective action plan discussed in Sec. 3052.315(c).
    (d) Submission to clearinghouse. All auditees shall submit to the 
Federal clearinghouse designated by OMB the data collection form 
described in paragraph (b) of this section and one copy of the reporting 
package described in paragraph (c) of this section for:
    (1) The Federal clearinghouse to retain as an archival copy; and
    (2) Each Federal awarding agency when the schedule of findings and 
questioned costs disclosed audit findings relating to Federal awards 
that the Federal awarding agency provided directly or the summary 
schedule of prior audit findings reported the status of any audit 
findings relating to Federal

[[Page 208]]

awards that the Federal awarding agency provided directly.
    (e) Additional submission by subrecipients. (1) In addition to the 
requirements discussed in paragraph (d) of this section, auditees that 
are also subrecipients shall submit to each pass-through entity one copy 
of the reporting package described in paragraph (c) of this section for 
each pass-through entity when the schedule of findings and questioned 
costs disclosed audit findings relating to Federal awards that the pass-
through entity provided or the summary schedule of prior audit findings 
reported the status of any audit findings relating to Federal awards 
that the pass-through entity provided.
    (2) Instead of submitting the reporting package to a pass-through 
entity, when a subrecipient is not required to submit a reporting 
package to a pass-through entity pursuant to paragraph (e)(1) of this 
section, the subrecipient shall provide written notification to the 
pass-through entity that: an audit of the subrecipient was conducted in 
accordance with this part (including the period covered by the audit and 
the name, amount, and CFDA number of the Federal award(s) provided by 
the pass-through entity); the schedule of findings and questioned costs 
disclosed no audit findings relating to the Federal award(s) that the 
pass-through entity provided; and, the summary schedule of prior audit 
findings did not report on the status of any audit findings relating to 
the Federal award(s) that the pass-through entity provided. A 
subrecipient may submit a copy of the reporting package described in 
paragraph (c) of this section to a pass-through entity to comply with 
this notification requirement.
    (f) Requests for report copies. In response to requests by a Federal 
agency or pass-through entity, auditees shall submit the appropriate 
copies of the reporting package described in paragraph (c) of this 
section and, if requested, a copy of any management letters issued by 
the auditor.
    (g) Report retention requirements. Auditees shall keep one copy of 
the data collection form described in paragraph (b) of this section and 
one copy of the reporting package described in paragraph (c) of this 
section on file for three years from the date of submission to the 
Federal clearinghouse designated by OMB. Pass-through entities shall 
keep subrecipients' submissions on file for three years from date of 
receipt.
    (h) Clearinghouse responsibilities. The Federal clearinghouse 
designated by OMB shall distribute the reporting packages received in 
accordance with paragraph (d)(2) of this section and Sec. 3052.235(c)(3) 
to applicable Federal awarding agencies, maintain a data base of 
completed audits, provide appropriate information to Federal agencies, 
and follow up with known auditees which have not submitted the required 
data collection forms and reporting packages.
    (i) Clearinghouse address. The address of the Federal clearinghouse 
currently designated by OMB is Federal Audit Clearinghouse, Bureau of 
the Census, 1201 E. 10th Street, Jeffersonville, IN 47132.
    (j) Electronic filing. Nothing in this part shall preclude 
electronic submissions to the Federal clearinghouse in such manner as 
may be approved by OMB. With OMB approval, the Federal clearinghouse may 
pilot test methods of electronic submissions.



          Subpart D--Federal Agencies and Pass-Through Entities



Sec. 3052.400  Responsibilities.

    (a) Cognizant agency for audit responsibilities. Recipients 
expending more than $25 million a year in Federal awards shall have a 
cognizant agency for audit. The designated cognizant agency for audit 
shall be the Federal awarding agency that provides the predominant 
amount of direct funding to a recipient unless OMB makes a specific 
cognizant agency for audit assignment. To provide for continuity of 
cognizance, the determination of the predominant amount of direct 
funding shall be based upon direct Federal awards expended in the 
recipient's fiscal years ending in 1995, 2000, 2005, and every fifth 
year thereafter. For example, audit cognizance for periods ending in 
1997 through 2000 will be determined based on Federal awards expended in 
1995. (However, for States and local

[[Page 209]]

governments that expend more than $25 million a year in Federal awards 
and have previously assigned cognizant agencies for audit, the 
requirements of this paragraph are not effective until fiscal years 
beginning after June 30, 2000.) Notwithstanding the manner in which 
audit cognizance is determined, a Federal awarding agency with 
cognizance for an auditee may reassign cognizance to another Federal 
awarding agency which provides substantial direct funding and agrees to 
be the cognizant agency for audit. Within 30 days after any 
reassignment, both the old and the new cognizant agency for audit shall 
notify the auditee, and, if known, the auditor of the reassignment. The 
cognizant agency for audit shall:
    (1) Provide technical audit advice and liaison to auditees and 
auditors.
    (2) Consider auditee requests for extensions to the report 
submission due date required by Sec. 3052.320(a). The cognizant agency 
for audit may grant extensions for good cause.
    (3) Obtain or conduct quality control reviews of selected audits 
made by non-Federal auditors, and provide the results, when appropriate, 
to other interested organizations.
    (4) Promptly inform other affected Federal agencies and appropriate 
Federal law enforcement officials of any direct reporting by the auditee 
or its auditor of irregularities or illegal acts, as required by GAGAS 
or laws and regulations.
    (5) Advise the auditor and, where appropriate, the auditee of any 
deficiencies found in the audits when the deficiencies require 
corrective action by the auditor. When advised of deficiencies, the 
auditee shall work with the auditor to take corrective action. If 
corrective action is not taken, the cognizant agency for audit shall 
notify the auditor, the auditee, and applicable Federal awarding 
agencies and pass-through entities of the facts and make recommendations 
for follow-up action. Major inadequacies or repetitive substandard 
performance by auditors shall be referred to appropriate State licensing 
agencies and professional bodies for disciplinary action.
    (6) Coordinate, to the extent practical, audits or reviews made by 
or for Federal agencies that are in addition to the audits made pursuant 
to this part, so that the additional audits or reviews build upon audits 
performed in accordance with this part.
    (7) Coordinate a management decision for audit findings that affect 
the Federal programs of more than one agency.
    (8) Coordinate the audit work and reporting responsibilities among 
auditors to achieve the most cost-effective audit.
    (9) For biennial audits permitted under Sec. 3052.220, consider 
auditee requests to qualify as a low-risk auditee under 
Sec. 3052.530(a).
    (b) Oversight agency for audit responsibilities. An auditee which 
does not have a designated cognizant agency for audit will be under the 
general oversight of the Federal agency determined in accordance with 
Sec. 3052.105. The oversight agency for audit:
    (1) Shall provide technical advice to auditees and auditors as 
requested.
    (2) May assume all or some of the responsibilities normally 
performed by a cognizant agency for audit.
    (c) Federal awarding agency responsibilities. The Federal awarding 
agency shall perform the following for the Federal awards it makes:
    (1) Identify Federal awards made by informing each recipient of the 
CFDA title and number, award name and number, award year, and if the 
award is for R&D. When some of this information is not available, the 
Federal agency shall provide information necessary to clearly describe 
the Federal award.
    (2) Advise recipients of requirements imposed on them by Federal 
laws, regulations, and the provisions of contracts or grant agreements.
    (3) Ensure that audits are completed and reports are received in a 
timely manner and in accordance with the requirements of this part.
    (4) Provide technical advice and counsel to auditees and auditors as 
requested.
    (5) Issue a management decision on audit findings within six months 
after receipt of the audit report and ensure that the recipient takes 
appropriate and timely corrective action.
    (6) Assign a person responsible for providing annual updates of the 
compliance supplement to OMB.

[[Page 210]]

    (d) Pass-through entity responsibilities. A pass-through entity 
shall perform the following for the Federal awards it makes:
    (1) Identify Federal awards made by informing each subrecipient of 
CFDA title and number, award name and number, award year, if the award 
is R&D, and name of Federal agency. When some of this information is not 
available, the pass-through entity shall provide the best information 
available to describe the Federal award.
    (2) Advise subrecipients of requirements imposed on them by Federal 
laws, regulations, and the provisions of contracts or grant agreements 
as well as any supplemental requirements imposed by the pass-through 
entity.
    (3) Monitor the activities of subrecipients as necessary to ensure 
that Federal awards are used for authorized purposes in compliance with 
laws, regulations, and the provisions of contracts or grant agreements 
and that performance goals are achieved.
    (4) Ensure that subrecipients expending $300,000 or more in Federal 
awards during the subrecipient's fiscal year have met the audit 
requirements of this part for that fiscal year.
    (5) Issue a management decision on audit findings within six months 
after receipt of the subrecipient's audit report and ensure that the 
subrecipient takes appropriate and timely corrective action.
    (6) Consider whether subrecipient audits necessitate adjustment of 
the pass-through entity's own records.
    (7) Require each subrecipient to permit the pass-through entity and 
auditors to have access to the records and financial statements as 
necessary for the pass-through entity to comply with this part.



Sec. 3052.405  Management decision.

    (a) General. The management decision shall clearly state whether or 
not the audit finding is sustained, the reasons for the decision, and 
the expected auditee action to repay disallowed costs, make financial 
adjustments, or take other action. If the auditee has not completed 
corrective action, a timetable for follow-up should be given. Prior to 
issuing the management decision, the Federal agency or pass-through 
entity may request additional information or documentation from the 
auditee, including a request for auditor assurance related to the 
documentation, as a way of mitigating disallowed costs. The management 
decision should describe any appeal process available to the auditee.
    (b) Federal agency. As provided in Sec. 3052.400(a)(7), the 
cognizant agency for audit shall be responsible for coordinating a 
management decision for audit findings that affect the programs of more 
than one Federal agency. As provided in Sec. 3052.400(c)(5), a Federal 
awarding agency is responsible for issuing a management decision for 
findings that relate to Federal awards it makes to recipients. Alternate 
arrangements may be made on a case-by-case basis by agreement among the 
Federal agencies concerned.
    (c) Pass-through entity. As provided in Sec. 3052.400(d)(5), the 
pass-through entity shall be responsible for making the management 
decision for audit findings that relate to Federal awards it makes to 
subrecipients.
    (d) Time requirements. The entity responsible for making the 
management decision shall do so within six months of receipt of the 
audit report. Corrective action should be initiated within six months 
after receipt of the audit report and proceed as rapidly as possible.
    (e) Reference numbers. Management decisions shall include the 
reference numbers the auditor assigned to each audit finding in 
accordance with Sec. 3052.510(c).



                           Subpart E--Auditors



Sec. 3052.500  Scope of audit.

    (a) General. The audit shall be conducted in accordance with GAGAS. 
The audit shall cover the entire operations of the auditee; or, at the 
option of the auditee, such audit shall include a series of audits that 
cover departments, agencies, and other organizational units which 
expended or otherwise administered Federal awards during such fiscal 
year, provided that each such audit shall encompass the financial 
statements and schedule of expenditures of Federal awards for each such

[[Page 211]]

department, agency, and other organizational unit, which shall be 
considered to be a non-Federal entity. The financial statements and 
schedule of expenditures of Federal awards shall be for the same fiscal 
year.
    (b) Financial statements. The auditor shall determine whether the 
financial statements of the auditee are presented fairly in all material 
respects in conformity with generally accepted accounting principles. 
The auditor shall also determine whether the schedule of expenditures of 
Federal awards is presented fairly in all material respects in relation 
to the auditee's financial statements taken as a whole.
    (c) Internal control. (1) In addition to the requirements of GAGAS, 
the auditor shall perform procedures to obtain an understanding of 
internal control over Federal programs sufficient to plan the audit to 
support a low assessed level of control risk for major programs.
    (2) Except as provided in paragraph (c)(3) of this section, the 
auditor shall:
    (i) Plan the testing of internal control over major programs to 
support a low assessed level of control risk for the assertions relevant 
to the compliance requirements for each major program; and
    (ii) Perform testing of internal control as planned in paragraph 
(c)(2)(i) of this section.
    (3) When internal control over some or all of the compliance 
requirements for a major program are likely to be ineffective in 
preventing or detecting noncompliance, the planning and performing of 
testing described in paragraph (c)(2) of this section are not required 
for those compliance requirements. However, the auditor shall report a 
reportable condition (including whether any such condition is a material 
weakness) in accordance with Sec. 3052.510, assess the related control 
risk at the maximum, and consider whether additional compliance tests 
are required because of ineffective internal control.
    (d) Compliance. (1) In addition to the requirements of GAGAS, the 
auditor shall determine whether the auditee has complied with laws, 
regulations, and the provisions of contracts or grant agreements that 
may have a direct and material effect on each of its major programs.
    (2) The principal compliance requirements applicable to most Federal 
programs and the compliance requirements of the largest Federal programs 
are included in the compliance supplement.
    (3) For the compliance requirements related to Federal programs 
contained in the compliance supplement, an audit of these compliance 
requirements will meet the requirements of this part. Where there have 
been changes to the compliance requirements and the changes are not 
reflected in the compliance supplement, the auditor shall determine the 
current compliance requirements and modify the audit procedures 
accordingly. For those Federal programs not covered in the compliance 
supplement, the auditor should use the types of compliance requirements 
contained in the compliance supplement as guidance for identifying the 
types of compliance requirements to test, and determine the requirements 
governing the Federal program by reviewing the provisions of contracts 
and grant agreements and the laws and regulations referred to in such 
contracts and grant agreements.
    (4) The compliance testing shall include tests of transactions and 
such other auditing procedures necessary to provide the auditor 
sufficient evidence to support an opinion on compliance.
    (e) Audit follow-up. The auditor shall follow-up on prior audit 
findings, perform procedures to assess the reasonableness of the summary 
schedule of prior audit findings prepared by the auditee in accordance 
with Sec. 3052.315(b), and report, as a current year audit finding, when 
the auditor concludes that the summary schedule of prior audit findings 
materially misrepresents the status of any prior audit finding. The 
auditor shall perform audit follow-up procedures regardless of whether a 
prior audit finding relates to a major program in the current year.
    (f) Data collection form. As required in Sec. 3052.320(b)(3), the 
auditor shall complete and sign specified sections of the data 
collection form.

[[Page 212]]



Sec. 3052.505  Audit reporting.

    The auditor's report(s) may be in the form of either combined or 
separate reports and may be organized differently from the manner 
presented in this section. The auditor's report(s) shall state that the 
audit was conducted in accordance with this part and include the 
following:
    (a) An opinion (or disclaimer of opinion) as to whether the 
financial statements are presented fairly in all material respects in 
conformity with generally accepted accounting principles and an opinion 
(or disclaimer of opinion) as to whether the schedule of expenditures of 
Federal awards is presented fairly in all material respects in relation 
to the financial statements taken as a whole.
    (b) A report on internal control related to the financial statements 
and major programs. This report shall describe the scope of testing of 
internal control and the results of the tests, and, where applicable, 
refer to the separate schedule of findings and questioned costs 
described in paragraph (d) of this section.
    (c) A report on compliance with laws, regulations, and the 
provisions of contracts or grant agreements, noncompliance with which 
could have a material effect on the financial statements. This report 
shall also include an opinion (or disclaimer of opinion) as to whether 
the auditee complied with laws, regulations, and the provisions of 
contracts or grant agreements which could have a direct and material 
effect on each major program, and, where applicable, refer to the 
separate schedule of findings and questioned costs described in 
paragraph (d) of this section.
    (d) A schedule of findings and questioned costs which shall include 
the following three components:
    (1) A summary of the auditor's results which shall include:
    (i) The type of report the auditor issued on the financial 
statements of the auditee (i.e., unqualified opinion, qualified opinion, 
adverse opinion, or disclaimer of opinion);
    (ii) Where applicable, a statement that reportable conditions in 
internal control were disclosed by the audit of the financial statements 
and whether any such conditions were material weaknesses;
    (iii) A statement as to whether the audit disclosed any 
noncompliance which is material to the financial statements of the 
auditee;
    (iv) Where applicable, a statement that reportable conditions in 
internal control over major programs were disclosed by the audit and 
whether any such conditions were material weaknesses;
    (v) The type of report the auditor issued on compliance for major 
programs (i.e., unqualified opinion, qualified opinion, adverse opinion, 
or disclaimer of opinion);
    (vi) A statement as to whether the audit disclosed any audit 
findings which the auditor is required to report under Sec. 3052.510(a);
    (vii) An identification of major programs;
    (viii) The dollar threshold used to distinguish between Type A and 
Type B programs, as described in Sec. 3052.520(b); and
    (ix) A statement as to whether the auditee qualified as a low-risk 
auditee under Sec. 3052.530.
    (2) Findings relating to the financial statements which are required 
to be reported in accordance with GAGAS.
    (3) Findings and questioned costs for Federal awards which shall 
include audit findings as defined in Sec. 3052.510(a).
    (i) Audit findings (e.g., internal control findings, compliance 
findings, questioned costs, or fraud) which relate to the same issue 
should be presented as a single audit finding. Where practical, audit 
findings should be organized by Federal agency or pass-through entity.
    (ii) Audit findings which relate to both the financial statements 
and Federal awards, as reported under paragraphs (d)(2) and (d)(3) of 
this section, respectively, should be reported in both sections of the 
schedule. However, the reporting in one section of the schedule may be 
in summary form with a reference to a detailed reporting in the other 
section of the schedule.



Sec. 3052.510  Audit findings.

    (a) Audit findings reported. The auditor shall report the following 
as audit

[[Page 213]]

findings in a schedule of findings and questioned costs:
    (1) Reportable conditions in internal control over major programs. 
The auditor's determination of whether a deficiency in internal control 
is a reportable condition for the purpose of reporting an audit finding 
is in relation to a type of compliance requirement for a major program 
or an audit objective identified in the compliance supplement. The 
auditor shall identify reportable conditions which are individually or 
cumulatively material weaknesses.
    (2) Material noncompliance with the provisions of laws, regulations, 
contracts, or grant agreements related to a major program. The auditor's 
determination of whether a noncompliance with the provisions of laws, 
regulations, contracts, or grant agreements is material for the purpose 
of reporting an audit finding is in relation to a type of compliance 
requirement for a major program or an audit objective identified in the 
compliance supplement.
    (3) Known questioned costs which are greater than $10,000 for a type 
of compliance requirement for a major program. Known questioned costs 
are those specifically identified by the auditor. In evaluating the 
effect of questioned costs on the opinion on compliance, the auditor 
considers the best estimate of total costs questioned (likely questioned 
costs), not just the questioned costs specifically identified (known 
questioned costs). The auditor shall also report known questioned costs 
when likely questioned costs are greater than $10,000 for a type of 
compliance requirement for a major program. In reporting questioned 
costs, the auditor shall include information to provide proper 
perspective for judging the prevalence and consequences of the 
questioned costs.
    (4) Known questioned costs which are greater than $10,000 for a 
Federal program which is not audited as a major program. Except for 
audit follow-up, the auditor is not required under this part to perform 
audit procedures for such a Federal program; therefore, the auditor will 
normally not find questioned costs for a program which is not audited as 
a major program. However, if the auditor does become aware of questioned 
costs for a Federal program which is not audited as a major program 
(e.g., as part of audit follow-up or other audit procedures) and the 
known questioned costs are greater than $10,000, then the auditor shall 
report this as an audit finding.
    (5) The circumstances concerning why the auditor's report on 
compliance for major programs is other than an unqualified opinion, 
unless such circumstances are otherwise reported as audit findings in 
the schedule of findings and questioned costs for Federal awards.
    (6) Known fraud affecting a Federal award, unless such fraud is 
otherwise reported as an audit finding in the schedule of findings and 
questioned costs for Federal awards. This paragraph does not require the 
auditor to make an additional reporting when the auditor confirms that 
the fraud was reported outside of the auditor's reports under the direct 
reporting requirements of GAGAS.
    (7) Instances where the results of audit follow-up procedures 
disclosed that the summary schedule of prior audit findings prepared by 
the auditee in accordance with Sec. 3052.315(b) materially misrepresents 
the status of any prior audit finding.
    (b) Audit finding detail. Audit findings shall be presented in 
sufficient detail for the auditee to prepare a corrective action plan 
and take corrective action and for Federal agencies and pass-through 
entities to arrive at a management decision. The following specific 
information shall be included, as applicable, in audit findings:
    (1) Federal program and specific Federal award identification 
including the CFDA title and number, Federal award number and year, name 
of Federal agency, and name of the applicable pass-through entity. When 
information, such as the CFDA title and number or Federal award number, 
is not available, the auditor shall provide the best information 
available to describe the Federal award.
    (2) The criteria or specific requirement upon which the audit 
finding is based, including statutory, regulatory, or other citation.

[[Page 214]]

    (3) The condition found, including facts that support the deficiency 
identified in the audit finding.
    (4) Identification of questioned costs and how they were computed.
    (5) Information to provide proper perspective for judging the 
prevalence and consequences of the audit findings, such as whether the 
audit findings represent an isolated instance or a systemic problem. 
Where appropriate, instances identified shall be related to the universe 
and the number of cases examined and be quantified in terms of dollar 
value.
    (6) The possible asserted effect to provide sufficient information 
to the auditee and Federal agency, or pass-through entity in the case of 
a subrecipient, to permit them to determine the cause and effect to 
facilitate prompt and proper corrective action.
    (7) Recommendations to prevent future occurrences of the deficiency 
identified in the audit finding.
    (8) Views of responsible officials of the auditee when there is 
disagreement with the audit findings, to the extent practical.
    (c) Reference numbers. Each audit finding in the schedule of 
findings and questioned costs shall include a reference number to allow 
for easy referencing of the audit findings during follow-up.



Sec. 3052.515  Audit working papers.

    (a) Retention of working papers. The auditor shall retain working 
papers and reports for a minimum of three years after the date of 
issuance of the auditor's report(s) to the auditee, unless the auditor 
is notified in writing by the cognizant agency for audit, oversight 
agency for audit, or pass-through entity to extend the retention period. 
When the auditor is aware that the Federal awarding agency, pass-through 
entity, or auditee is contesting an audit finding, the auditor shall 
contact the parties contesting the audit finding for guidance prior to 
destruction of the working papers and reports.
    (b) Access to working papers. Audit working papers shall be made 
available upon request to the cognizant or oversight agency for audit or 
its designee, a Federal agency providing direct or indirect funding, or 
GAO at the completion of the audit, as part of a quality review, to 
resolve audit findings, or to carry out oversight responsibilities 
consistent with the purposes of this part. Access to working papers 
includes the right of Federal agencies to obtain copies of working 
papers, as is reasonable and necessary.



Sec. 3052.520  Major program determination.

    (a) General. The auditor shall use a risk-based approach to 
determine which Federal programs are major programs. This risk-based 
approach shall include consideration of: Current and prior audit 
experience, oversight by Federal agencies and pass-through entities, and 
the inherent risk of the Federal program. The process in paragraphs (b) 
through (I) of this section shall be followed.
    (b) Step 1. (1) The auditor shall identify the larger Federal 
programs, which shall be labeled Type A programs. Type A programs are 
defined as Federal programs with Federal awards expended during the 
audit period exceeding the larger of:
    (i) $300,000 or three percent (.03) of total Federal awards expended 
in the case of an auditee for which total Federal awards expended equal 
or exceed $300,000 but are less than or equal to $100 million.
    (ii) $3 million or three-tenths of one percent (.003) of total 
Federal awards expended in the case of an auditee for which total 
Federal awards expended exceed $100 million but are less than or equal 
to $10 billion.
    (iii) $30 million or 15 hundredths of one percent (.0015) of total 
Federal awards expended in the case of an auditee for which total 
Federal awards expended exceed $10 billion.
    (2) Federal programs not labeled Type A under paragraph (b)(1) of 
this section shall be labeled Type B programs.
    (3) The inclusion of large loan and loan guarantees (loans) should 
not result in the exclusion of other programs as Type A programs. When a 
Federal program providing loans significantly affects the number or size 
of Type A programs, the auditor shall consider

[[Page 215]]

this Federal program as a Type A program and exclude its values in 
determining other Type A programs.
    (4) For biennial audits permitted under Sec. 3052.220, the 
determination of Type A and Type B programs shall be based upon the 
Federal awards expended during the two-year period.
    (c) Step 2. (1) The auditor shall identify Type A programs which are 
low-risk. For a Type A program to be considered low-risk, it shall have 
been audited as a major program in at least one of the two most recent 
audit periods (in the most recent audit period in the case of a biennial 
audit), and, in the most recent audit period, it shall have had no audit 
findings under Sec. 3052.510(a). However, the auditor may use judgment 
and consider that audit findings from questioned costs under 
Sec. 3052.510(a)(3) and Sec. 3052.510(a)(4), fraud under 
Sec. 3052.510(a)(6), and audit follow-up for the summary schedule of 
prior audit findings under Sec. 3052.510(a)(7) do not preclude the Type 
A program from being low-risk. The auditor shall consider: the criteria 
in Sec. 3052.525(c), Sec. 3052.525(d)(1), Sec. 3052.525(d)(2), and 
Sec. 3052.525(d)(3); the results of audit follow-up; whether any changes 
in personnel or systems affecting a Type A program have significantly 
increased risk; and apply professional judgment in determining whether a 
Type A program is low-risk.
    (2) Notwithstanding paragraph (c)(1) of this section, OMB may 
approve a Federal awarding agency's request that a Type A program at 
certain recipients may not be considered low-risk. For example, it may 
be necessary for a large Type A program to be audited as major each year 
at particular recipients to allow the Federal agency to comply with the 
Government Management Reform Act of 1994 (31 U.S.C. 3515). The Federal 
agency shall notify the recipient and, if known, the auditor at least 
180 days prior to the end of the fiscal year to be audited of OMB's 
approval.
    (d) Step 3. (1) The auditor shall identify Type B programs which are 
high-risk using professional judgment and the criteria in Sec. 3052.525. 
However, should the auditor select Option 2 under Step 4 (paragraph 
(e)(2)(i)(B) of this section), the auditor is not required to identify 
more high-risk Type B programs than the number of low-risk Type A 
programs. Except for known reportable conditions in internal control or 
compliance problems as discussed in Sec. 3052.525(b)(1), 
Sec. 3052.525(b)(2), and Sec. 3052.525(c)(1), a single criteria in 
Sec. 3052.525 would seldom cause a Type B program to be considered high-
risk.
    (2) The auditor is not expected to perform risk assessments on 
relatively small Federal programs. Therefore, the auditor is only 
required to perform risk assessments on Type B programs that exceed the 
larger of:
    (i) $100,000 or three-tenths of one percent (.003) of total Federal 
awards expended when the auditee has less than or equal to $100 million 
in total Federal awards expended.
    (ii) $300,000 or three-hundredths of one percent (.0003) of total 
Federal awards expended when the auditee has more than $100 million in 
total Federal awards expended.
    (e) Step 4. At a minimum, the auditor shall audit all of the 
following as major programs:
    (1) All Type A programs, except the auditor may exclude any Type A 
programs identified as low-risk under Step 2 (paragraph (c)(1) of this 
section).
    (2)(i) High-risk Type B programs as identified under either of the 
following two options:
    (A) Option 1. At least one half of the Type B programs identified as 
high-risk under Step 3 (paragraph (d) of this section), except this 
paragraph (e)(2)(i)(A) does not require the auditor to audit more high-
risk Type B programs than the number of low-risk Type A programs 
identified as low-risk under Step 2.
    (B) Option 2. One high-risk Type B program for each Type A program 
identified as low-risk under Step 2.
    (ii) When identifying which high-risk Type B programs to audit as 
major under either Option 1 or 2 in paragraph (e)(2)(i) (A) or (B), the 
auditor is encouraged to use an approach which provides an opportunity 
for different high-risk Type B programs to be audited as major over a 
period of time.
    (3) Such additional programs as may be necessary to comply with the 
percentage of coverage rule discussed in

[[Page 216]]

paragraph (f) of this section. This paragraph (e)(3) may require the 
auditor to audit more programs as major than the number of Type A 
programs.
    (f) Percentage of coverage rule. The auditor shall audit as major 
programs Federal programs with Federal awards expended that, in the 
aggregate, encompass at least 50 percent of total Federal awards 
expended. If the auditee meets the criteria in Sec. 3052.530 for a low-
risk auditee, the auditor need only audit as major programs Federal 
programs with Federal awards expended that, in the aggregate, encompass 
at least 25 percent of total Federal awards expended.
    (g) Documentation of risk. The auditor shall document in the working 
papers the risk analysis process used in determining major programs.
    (h) Auditor's judgment. When the major program determination was 
performed and documented in accordance with this part, the auditor's 
judgment in applying the risk-based approach to determine major programs 
shall be presumed correct. Challenges by Federal agencies and pass-
through entities shall only be for clearly improper use of the guidance 
in this part. However, Federal agencies and pass-through entities may 
provide auditors guidance about the risk of a particular Federal program 
and the auditor shall consider this guidance in determining major 
programs in audits not yet completed.
    (i) Deviation from use of risk criteria. For first-year audits, the 
auditor may elect to determine major programs as all Type A programs 
plus any Type B programs as necessary to meet the percentage of coverage 
rule discussed in paragraph (f) of this section. Under this option, the 
auditor would not be required to perform the procedures discussed in 
paragraphs (c), (d), and (e) of this section.
    (1) A first-year audit is the first year the entity is audited under 
this part or the first year of a change of auditors.
    (2) To ensure that a frequent change of auditors would not preclude 
audit of high-risk Type B programs, this election for first-year audits 
may not be used by an auditee more than once in every three years.



Sec. 3052.525  Criteria for Federal program risk.

    (a) General. The auditor's determination should be based on an 
overall evaluation of the risk of noncompliance occurring which could be 
material to the Federal program. The auditor shall use auditor judgment 
and consider criteria, such as described in paragraphs (b), (c), and (d) 
of this section, to identify risk in Federal programs. Also, as part of 
the risk analysis, the auditor may wish to discuss a particular Federal 
program with auditee management and the Federal agency or pass-through 
entity.
    (b) Current and prior audit experience. (1) Weaknesses in internal 
control over Federal programs would indicate higher risk. Consideration 
should be given to the control environment over Federal programs and 
such factors as the expectation of management's adherence to applicable 
laws and regulations and the provisions of contracts and grant 
agreements and the competence and experience of personnel who administer 
the Federal programs.
    (i) A Federal program administered under multiple internal control 
structures may have higher risk. When assessing risk in a large single 
audit, the auditor shall consider whether weaknesses are isolated in a 
single operating unit (e.g., one college campus) or pervasive throughout 
the entity.
    (ii) When significant parts of a Federal program are passed through 
to subrecipients, a weak system for monitoring subrecipients would 
indicate higher risk.
    (iii) The extent to which computer processing is used to administer 
Federal programs, as well as the complexity of that processing, should 
be considered by the auditor in assessing risk. New and recently 
modified computer systems may also indicate risk.
    (2) Prior audit findings would indicate higher risk, particularly 
when the situations identified in the audit findings could have a 
significant impact on a Federal program or have not been corrected.
    (3) Federal programs not recently audited as major programs may be 
of higher risk than Federal programs recently audited as major programs 
without audit findings.

[[Page 217]]

    (c) Oversight exercised by Federal agencies and pass-through 
entities. (1) Oversight exercised by Federal agencies or pass-through 
entities could indicate risk. For example, recent monitoring or other 
reviews performed by an oversight entity which disclosed no significant 
problems would indicate lower risk. However, monitoring which disclosed 
significant problems would indicate higher risk.
    (2) Federal agencies, with the concurrence of OMB, may identify 
Federal programs which are higher risk. OMB plans to provide this 
identification in the compliance supplement.
    (d) Inherent risk of the Federal program. (1) The nature of a 
Federal program may indicate risk. Consideration should be given to the 
complexity of the program and the extent to which the Federal program 
contracts for goods and services. For example, Federal programs that 
disburse funds through third party contracts or have eligibility 
criteria may be of higher risk. Federal programs primarily involving 
staff payroll costs may have a high-risk for time and effort reporting, 
but otherwise be at low-risk.
    (2) The phase of a Federal program in its life cycle at the Federal 
agency may indicate risk. For example, a new Federal program with new or 
interim regulations may have higher risk than an established program 
with time-tested regulations. Also, significant changes in Federal 
programs, laws, regulations, or the provisions of contracts or grant 
agreements may increase risk.
    (3) The phase of a Federal program in its life cycle at the auditee 
may indicate risk. For example, during the first and last years that an 
auditee participates in a Federal program, the risk may be higher due to 
start-up or closeout of program activities and staff.
    (4) Type B programs with larger Federal awards expended would be of 
higher risk than programs with substantially smaller Federal awards 
expended.



Sec. 3052.530  Criteria for a low-risk auditee.

    An auditee which meets all of the following conditions for each of 
the preceding two years (or, in the case of biennial audits, preceding 
two audit periods) shall qualify as a low-risk auditee and be eligible 
for reduced audit coverage in accordance with Sec. 3052.520:
    (a) Single audits were performed on an annual basis in accordance 
with the provisions of this part. A non-Federal entity that has biennial 
audits does not qualify as a low-risk auditee, unless agreed to in 
advance by the cognizant or oversight agency for audit.
    (b) The auditor's opinions on the financial statements and the 
schedule of expenditures of Federal awards were unqualified. However, 
the cognizant or oversight agency for audit may judge that an opinion 
qualification does not affect the management of Federal awards and 
provide a waiver.
    (c) There were no deficiencies in internal control which were 
identified as material weaknesses under the requirements of GAGAS. 
However, the cognizant or oversight agency for audit may judge that any 
identified material weaknesses do not affect the management of Federal 
awards and provide a waiver.
    (d) None of the Federal programs had audit findings from any of the 
following in either of the preceding two years (or, in the case of 
biennial audits, preceding two audit periods) in which they were 
classified as Type A programs:
    (1) Internal control deficiencies which were identified as material 
weaknesses;
    (2) Noncompliance with the provisions of laws, regulations, 
contracts, or grant agreements which have a material effect on the Type 
A program; or
    (3) Known or likely questioned costs that exceed five percent of the 
total Federal awards expended for a Type A program during the year.

[[Page 219]]



CHAPTER XXXI--OFFICE OF ENVIRONMENTAL QUALITY, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
3100            Cultural and environmental quality..........         221

[[Page 221]]



PART 3100--CULTURAL AND ENVIRONMENTAL QUALITY--Table of Contents




Subparts A-B [Reserved]

   Subpart C--Enhancement, Protection, and Management of the Cultural 
                               Environment

Sec.
3100.40  Purpose.
3100.41  Authorities.
3100.42  Definitions.
3100.43  Policy.
3100.44  Implementation.
3100.45  Direction to agencies.
3100.46  Responsibilities of the Department of Agriculture.

Subparts A-B [Reserved]



   Subpart C--Enhancement, Protection, and Management of the Cultural 
                               Environment

    Authority: Sec. 106, National Historic Preservation Act, as amended 
(16 U.S.C. 470f); National Environmental Policy Act, as amended (42 
U.S.C. 4321 et seq.); E.O. 11593, 36 FR 8921, May 13, 1971.

    Source: 44 FR 66181, Nov. 19, 1979, unless otherwise noted.



Sec. 3100.40  Purpose.

    (a) This subpart establishes USDA policy regarding the enhancement, 
protection, and management of the cultural environment.
    (b) This subpart establishes procedures for implementing Executive 
Order 11593, and regulations promulgated by the Advisory Council on 
Historic Preservation (ACHP) ``Protection of Historical and Cultural 
Properties'' in 36 CFR part 800 as required by Sec. 800.10 of those 
regulations.
    (c) Direction is provided to the agencies of USDA for protection of 
the cultural environment.



Sec. 3100.41  Authorities.

    These regulations are based upon and implement the following laws, 
regulations, and Presidential directives:
    (a) Antiquities Act of 1906 (Pub. L. 59-209; 34 Stat. 225; 16 U.S.C. 
431 et seq.) which provides for the protection of historic or 
prehistoric remains or any object of antiquity on Federal lands; 
establishes criminal sanctions for unauthorized destruction or 
appropriation of antiquities; and authorizes scientific investigation of 
antiquities on Federal lands, subject to permit and regulations. 
Paleontological resources also are considered to fall within the 
authority of this Act.
    (b) Historic Sites Act of 1935 (Pub. L. 74-292; 49 Stat. 666; 16 
U.S.C. 461 et seq.) which authorizes the establishment of National 
Historic Sites and otherwise authorizes the preservation of properties 
of national historical or archeological significance; authorizes the 
designation of National Historic Landmarks; establishes criminal 
sanctions for violation of regulations pursuant to the Act; authorizes 
interagency, intergovernmental, and interdisciplinary efforts for the 
preservation of cultural resources; and other provisions.
    (c) Reservoir Salvage Act of 1960 (Pub. L. 86-521; 74 Stat. 220; 16 
U.S.C. 469-469c.) which provides for the recovery and preservation of 
historical and archeological data, including relics and specimens, that 
might be lost or destroyed as a result of the construction of dams, 
reservoirs, and attendant facilities and activities.
    (d) The National Historic Preservation Act of 1966 as amended (16 
U.S.C. 470), which establishes positive national policy for the 
preservation of the cultural environment, and sets forth a mandate for 
protection in section 106. The purpose of section 106 is to protect 
properties on or eligible for the National Register of Historic Places 
through review and comment by the ACHP of Federal undertakings that 
affect such properties. Properties are listed on the National Register 
or declared eligible for listing by the Secretary of the Interior. As 
developed through the ACHP's regulations, section 106 establishes a 
public interest process in which the Federal agency proposing an 
undertaking, the State Historic Preservation Officer, the ACHP, 
interested organizations and individuals participate. The process is 
designed to insure that properties, impacts on them, and effects to them 
are identified, and that alternatives to avoid or mitigate an adverse 
effect on property eligible for the National Register are adequately 
considered in the planning process.
    (e) The National Environmental Policy Act of 1969 (NEPA) (Pub. L. 
91-190; 83

[[Page 222]]

Stat. 852; 42 U.S.C. 4321 et seq.) which declares that it is the policy 
of the Federal Government to preserve important historic, cultural, and 
natural aspects of our national heritage. Compliance with NEPA requires 
consideration of all environmental concerns during project planning and 
execution.
    (f) Executive Order 11593, ``Protection and Enhancement of the 
Cultural Environment'', which gives the Federal Government the 
responsibility for stewardship of our nation's heritage resources and 
charges Federal agencies with the task of inventorying historic and 
prehistoric sites on their lands. E.O. 11593 also charges agencies with 
the task of identifying and nominating all historic properties under 
their jurisdiction, and exercising caution to insure that they are not 
transferred, sold, demolished, or substantially altered.
    (g) Historical and Archeological Data Preservation Act of 1974. 
(Pub. L. 93-291; 88 Stat. 174.) which amends the Reservoir Salvage Act 
of 1960 to extend its provisions beyond the construction of dams to any 
alteration of the terrain caused as a result of any Federal construction 
project or federally licensed activity or program. In addition, the Act 
provides a mechanism for funding the protection of historical and 
archeological data.
    (h) Presidential memorandum of July 12, 1978, ``Environmental 
Quality and Water Resource Management'' which directs the ACHP to 
publish final regulations, implementing section 106 of the National 
Historic Preservation Act (NHPA), and further directs each agency with 
water and related land resources responsibilities to publish procedures 
implementing those regulations.
    (i) 36 CFR part 800, ``Protection of Historic and Cultural 
Properties'' which establishes procedures for the implementation of 
section 106 of the NHPA, and directs publication of agency implementing 
procedures.
    (j) Land use policy of the USDA (Secretary's Memorandum No. 1827 
Revised, with Supplement) which establishes a commitment by the 
Department to the preservation of farms, rural communities, and rural 
landscapes.
    (k) Public Buildings Cooperative Use Act of 1976 (40 U.S.C. 611) and 
Executive Order 12072 (Federal Space Management). The Act encourages 
adaptive use of historic buildings as administrative facilities for 
Federal agencies and activities; the Executive Order directs Federal 
agencies to locate administrative and other facilities in central 
business districts.
    (l) American Indian Religious Freedom Act of 1978 (42 U.S.C. 1996) 
which declares it to be the policy of the United States to protect and 
preserve for American Indians their inherent right of freedom to 
believe, express, and exercise the traditional religions of the American 
Indian, Eskimo, Aleut, and Native Hawaiians.



Sec. 3100.42  Definitions.

    All definitions are those which appear in 36 CFR part 800. In 
addition, the following apply in this rule:
    Cultural resources (heritage resources) are the remains or records 
of districts, sites, structures, buildings, networks, neighborhoods, 
objects, and events from the past. They may be historic, prehistoric, 
archeological, or architectural in nature. Cultural resources are an 
irreplaceable and nonrenewable aspect of our national heritage.
    Cultural environment is that portion of the environment which 
includes reminders of the rich historic and prehistoric past of our 
nation.



Sec. 3100.43  Policy.

    (a) The nonrenewable cultural environment of our country constitutes 
a valuable and treasured portion of the national heritage of the 
American people. The Department of Agriculture is committed to the 
management--identification, protection, preservation, interpretation, 
evaluation and nomination--of our prehistoric and historic cultural 
resources for the benefit of all people of this and future generations.
    (b) The Department supports the cultural resource goals expressed in 
Federal legislation. Executive orders, and regulations.
    (c) The Department supports the preservation and protection of 
farms, rural landscapes, and rural communities.
    (d) The Department is committed to consideration of the needs of 
American

[[Page 223]]

Indians, Eskimo, Aleut, and Native Hawaiians in the practice of their 
traditional religions.
    (e) The Department will aggressively implement these policies to 
meet goals for the positive management of the cultural environment.



Sec. 3100.44  Implementation.

    (a) It is the intent of the Department to carry out its program of 
management of the cultural environment in the most effective and 
efficient manner possible. Implementation must consider natural resource 
utilization, must exemplify good government, and must constitute a 
noninflationary approach which makes the best use of tax dollars.
    (b) The commitment to cultural resource protection is vital. That 
commitment will be balanced with the multiple departmental goals of food 
and fiber production, environmental protection, natural resource and 
energy conservation, and rural development. It is essential that all of 
these be managed to reduce conflicts between programs. Positive 
management of the cultural environment can contribute to achieving 
better land use, protection of rural communities and farm lands, 
conservation of energy, and more efficient use of resources.
    (c) In reaching decisions, the long-term needs of society and the 
irreversible nature of an action must be considered. The Department must 
act to preserve future options; loss of important cultural resources 
must be avoided except in the face of overriding national interest where 
there are no reasonable alternatives.
    (d) To assure the protection of Native American religious practices, 
traditional religious leaders and other native leaders (or their 
representatives) should be consulted about potential conflict areas in 
the management of the cultural environment and the means to reduce or 
eliminate such conflicts.



Sec. 3100.45  Direction to agencies.

    (a) Each agency of the Department shall consult with OEQ to 
determine whether its programs and activities may affect the cultural 
environment. Then, if needed, the agency, in consultation with the OEQ, 
shall develop its own specific procedures for implementing section 106 
of the National Historic Preservation Act, Executive Order 11593, the 
regulations of the ACHP (36 CFR part 800), the American Indian Religious 
Freedom Act of 1978 and other relevant legislation and regulations in 
accordance with the agency's programs, mission and authorities. Such 
implementing procedures shall be published as proposed and final 
procedures in the Federal Register, and must be consistent with the 
requirements of 36 CFR part 800 and this subpart. Where applicable, each 
agency's procedures must contain mechanisms to insure:
    (1) Compliance with section 106 of NHPA and mitigation of adverse 
effects to cultural properties on or eligible for the National Register 
of Historic Places;
    (2) Clear definition of the kind and variety of sites and properties 
which should be managed;
    (3) Development of a long-term program of management of the cultural 
environment on lands administered by USDA as well as direction for 
project-specific protection;
    (4) Identification of all properties listed on or eligible for 
listing in the National Register that may be affected directly or 
indirectly by a proposed activity;
    (5) Location, identification and nomination to the Register of all 
sites, buildings, objects, districts, neighborhoods, and networks under 
its management which appear to qualify (in compliance with E.O. 11593);
    (6) The exercise of caution to assure that properties managed by 
USDA which may qualify for nomination are not transferred, sold, 
demolished, or substantially altered;
    (7) Early consultation with, and involvement of, the State Historic 
Preservation Officer(s), the ACHP, Native American traditional religious 
leaders and appropriate tribal leaders, and others with appropriate 
interests or expertise;
    (8) Early notification to insure substantive and meaningful 
involvement by the public in the agency's decisionmaking process as it 
relates to the cultural environment;

[[Page 224]]

    (9) Identification and consideration of alternatives to a proposed 
undertaking that would mitigate or minimize adverse effects to a 
property identified under paragraph (a)(4) of this section;
    (10) Funding of mitigation measures where required to minimize the 
potential for adverse effects on the cultural environment. Funds for 
mitigation shall be available and shall be spent when needed during the 
life of the project to mitigate the expected loss; and
    (11) Development of plans to provide for the management, protection, 
maintenance and/or restoration of Register sites under its management.
    (b) Each agency of the Department which conducts programs or 
activities that may have an effect on the cultural environment shall 
recruit, place, develop, or otherwise have available, professional 
expertise in anthropology, archeology, history, historic preservation, 
historic architecture, and/or cultural resource management (depending 
upon specific need). Such arrangements may include internal hiring, 
Intergovernmental Personnel Act assignments, memoranda of agreement with 
other agencies or Departments, or other mechanisms which insure a 
professionally directed program. Agencies should use Department of the 
Interior professional standards (36 CFR 61.5) as guidelines to insure 
Departmentwide competence and consistency.
    (c) Compliance with cultural resource legislation is the 
responsibility of each individual agency. Consideration of cultural 
resource values must begin during the earliest planning stages of any 
undertaking.
    (d) Agency heads shall insure that cultural resource management 
activities meet professional standards as promulgated by the Department 
of the Interior (e.g., 36 CFR parts 60, 63, 66, 1208).
    (e) Cultural resource review requirements and compliance with 
section 106 of NHPA and Executive Order 11593 shall be integrated and 
run concurrently, rather than consecutively, with the other 
environmental considerations under NEPA regulations. As such, direct and 
indirect impacts on cultural resources must be addressed in the 
environmental assessment for every agency undertaking. In meeting these 
requirements, agencies shall be guided by regulations implementing the 
procedural provisions of NEPA (40 CFR parts 1500-1508) and Department of 
Agriculture regulations (7 CFR part 3100, subpart B).
    (f) Each agency shall work closely with the appropriate State 
Historic Preservation Officer(s) in their preparation of State plans, 
determination of inventory needs, and collection of data relevant to 
general plans or specific undertakings in carrying out mutual cultural 
resource responsibilities.
    (g) Each agency shall, to the maximum extent possible, use existing 
historic structures for administrative purposes in compliance with 
Public Buildings Cooperative Use Act of 1976 and Executive Order 12072, 
``Federal Space Management''.
    (h) Each agency should consult with Native American traditional 
religious leaders or their representatives and other native leaders in 
the development and implementation of cultural resource programs which 
may affect their religious customs and practices.



Sec. 3100.46  Responsibilities of the Department of Agriculture.

    (a) Within the Department, the responsibility for the protection of 
the cultural environment is assigned to the Office of Environmental 
Quality (OEQ). The Office is responsible for reviewing the development 
and implementation of agency procedures and insuring Departmental 
commitment to cultural resource goals.
    (b) The Director of the OEQ is the Secretary's Designee to the ACHP.
    (c) In order to carry out cultural resource responsibilities, there 
will be professional expertise within the OEQ to advise agencies, aid 
the Department in meeting its cultural resource management goals, and to 
insure that all Departmental and agency undertakings comply with 
applicable cultural resource protection legislation and regulations.
    (d) The OEQ will be involved in individual compliance cases only 
where resolution cannot be reached at the agency level. Prior to the 
decision to refer a matter to the full Council of the

[[Page 225]]

ACHP, the OEQ will review the case and make recommendations to the 
Secretary regarding the position of the Department. The agency also will 
consult with the OEQ before reaching a final decision in response to the 
Council's comments. Copies of correspondence relevant to compliance with 
Section 106 shall be made available to OEQ.

[[Page 227]]



CHAPTER XXXII--OFFICE OF PROCUREMENT AND PROPERTY MANAGEMENT, DEPARTMENT 
                             OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
3200            Department of Agriculture guidelines for the 
                    acquisition and transfer of excess 
                    personal property.......................         229

3201-3299

[Reserved]

[[Page 229]]



PART 3200--DEPARTMENT OF AGRICULTURE GUIDELINES FOR THE ACQUISITION AND TRANSFER OF EXCESS PERSONAL PROPERTY--Table of Contents




Sec.
3200.1  Purpose.
3200.2  Eligibility.
3200.3  Definitions.
3200.4  Procedures.
3200.5  Dollar limitation.
3200.6  Restrictions.
3200.7  Title.
3200.8  Costs.
3200.9  Accountability and record keeping.
3200.10  Disposal.
3200.11  Liabilities and losses.

    Authority: 5 U.S.C. 301; 7 U.S.C. 2206a.

    Source: 63 FR 57234, Oct. 27, 1998, unless otherwise noted.



Sec. 3200.1  Purpose.

    This Part sets forth the procedures to be utilized by Department of 
Agriculture (USDA) in the acquisition and transfer of excess property to 
the 1890 Land Grant Institutions (including Tuskegee University), 1994 
Land Grant Institutions, and the Hispanic-Serving Institutions in 
support of research, educational, technical, and scientific activities 
or for related programs as authorized by 7 U.S.C. 2206a. Title to the 
personal property shall pass to the institution.



Sec. 3200.2  Eligibility.

    Institutions that are eligible to receive Federal excess personal 
property pursuant to the provisions of this part are the 1890 Land Grant 
Institutions (including Tuskegee University), 1994 Land Grant 
Institutions, and the Hispanic-Serving Institutions conducting research, 
educational, technical, and scientific activities or related programs.



Sec. 3200.3  Definitions.

    (a) 1890 Land grant institutions--any college or university eligible 
to receive funds under the Act of August 30, 1890 (7 U.S.C. 321 
et.seq.), including Tuskegee University.
    (b) 1994 Land grant institutions--any of the tribal colleges or 
universities as defined in section 532 of the Equity in Educational 
Land-Grant Status Act of 1994 (7 U.S.C. 301 note).
    (c) Hispanic-serving institutions--institutions of higher education 
as defined in section 316(b) of the Higher Education Act of 1965 (20 
U.S.C. 1059c (b)).
    (d) Property management officer--is an authorized USDA or 
institution official responsible for property management.
    (e) Screener--is an individual designated by an eligible institution 
and authorized by the General Services Administration (GSA) to visit 
property sites for the purpose of inspecting personal property intended 
for use by the institution.
    (f) Excess personal property--is any personal property under the 
control of a Federal agency that is no longer needed.
    (g) Cannibalization--is the dismantling of equipment for parts to 
repair or enhance other equipment.



Sec. 3200.4  Procedures.

    (a) To receive information concerning the availability of Federal 
excess personal property, an eligible institution's property management 
officer may contact their regional GSA, Area Utilization Officer. All 
property management officers of eligible institutions will be placed on 
the USDA mailing list for information on the availability of property. 
USDA excess property will first be screened by USDA agencies through the 
Departmental Excess Personal Property Coordinator (DEPPC) using the 
PMIS/PROP system.
    (b) Excess property selected by screeners of eligible institutions 
should be inspected whenever possible, or the holding agency should be 
contacted to verify the condition of the items, because interpretation 
of condition codes varies among Federal agencies.
    (c) If the condition of the item is acceptable, the institution 
should ``freeze'' (reserve) items by calling the appropriate GSA office 
or USDA Departmental Excess Personal Property Coordinator (DEPPC). Since 
GSA may have several ``freezes'' on a piece of equipment, it is critical 
that the paperwork be submitted as soon as possible. Further, while 
transfers of excess personal property normally will be approved by GSA 
on a first-come-first-serve basis, consideration will be given

[[Page 230]]

to such factors as national defense requirements, emergency needs, 
preclusion of new procurement, energy conservation, equitable 
distribution, and retention of title in the Government.
    (d) Eligible institutions may submit property requests by mail or 
fax on a Standard Form 122, ``Transfer Order Excess Personal Property,'' 
with a written justification statement (submitted by the recipient) 
explaining how the property will be used for research, educational, 
technical, or scientific activity or for related programs.
    (e) The SF-122 should be signed by the eligible institution's 
property management officer or authorized designee.
    (1) The following information should also be provided:
    (i) Date prepared.
    (ii) GSA/DEPPC address.
    (iii) Ordering Agency and address.
    (iv) Holding Agency and address.
    (v) Name and address of Institution.
    (vi) Location of property.
    (vii) Shipping instruction (including institution contact person and 
phone number).
    (viii) Complete description of property including original 
acquisition cost, serial number, condition code, and quantity.
    (2) This statement needs to be added following the property 
description but does not serve as a justification statement:

    The property requested hereon is certified to be used in support of 
research, educational, technical, and scientific activities or for 
related programs. This transfer is requested pursuant to the provisions 
of section 923 of Pub. L. 104-127 (7 U.S.C. 2206a).

    (f) The SF-122 should be forwarded to USDA for approval and 
signature by an authorized USDA official. As confirmation of approval, 
the eligible institution's property management officer will receive a 
stamped copy of the SF-122. If the request is disapproved, it will be 
returned to the property management officer of the eligible institution 
with an appropriate explanation. All USDA approved SF-122's will be 
forwarded to DEPPC or the appropriate GSA office for final approval.
    (g) Once the excess personal property is physically received, the 
institution is required to immediately return a copy of the SF-122 to 
USDA indicating receipt of requested items. Cancellations should also be 
reported to USDA.

    Note: USDA shall send an informational copy of all SF-122's 
transactions to GSA.



Sec. 3200.5  Dollar limitation.

    There is no dollar limitation on excess personal property obtained 
under these procedures.



Sec. 3200.6  Restrictions.

    (a) The authorized USDA official will approve the transfer of excess 
personal property in the following groups for the 1890 Land Grant 
Institutions (including Tuskegee University), 1994 Land Grant 
Institutions and the Hispanic-Serving Institutions in support of 
research, educational, technical, and scientific activities or for 
related programs:

                   Eligible Federal Supply Code Groups
------------------------------------------------------------------------
              FSC group                              Name
------------------------------------------------------------------------
12..................................  Fire Control Equipment.
19..................................  Ships, Small Crafts, Pontoons, and
                                       Floating Docks.
22..................................  Railway Equipment.
23..................................  Vehicles, Motor Vehicles, Trailers
                                       and Cycles.
24..................................  Tractors.
26..................................  Tires and Tubes.
28..................................  Engines, Turbines and Components.
29..................................  Engine Accessories.
30..................................  Mechanical Power Transmission
                                       Equipment.
31..................................  Bearings.
32..................................  Woodworking Machinery and
                                       Equipment.
34..................................  Metal Working Machinery.
35..................................  Service and Trade Equipment.
36..................................  Special Industry Machinery.
37..................................  Agricultural Machinery and
                                       Equipment.
38..................................  Construction, Mining, Excavating,
                                       and Highway Maintenance
                                       Equipment.
39..................................  Material Handling Equipment.
40..................................  Rope, Cable, Chain, and Fittings.
41..................................  Refrigeration, Air Conditioning
                                       and Air Circulating Equipment.
42..................................  Fire Fighting, Rescue, and Safety
                                       Equipment.
43..................................  Pumps, Compressors.
44..................................  Furnace, Steam Plant, and Drying.
45..................................  Plumbing, Heating, and Sanitation
                                       Equipment; and Nuclear Reactors.
46..................................  Water Purification and Sewage
                                       Treatment Equipment.
47..................................  Pipe, Tubing, Hose, and Fittings.
49..................................  Maintenance and Repair Shop
                                       Equipment.
51..................................  Hand Tools.
52..................................  Measuring Tools.
53..................................  Hardware and Abrasives.
54..................................  Prefabricated Structures and
                                       Scaffolding.
55..................................  Lumber, Millwork, Plywood, and
                                       Veneer.
56..................................  Construction and Building
                                       Materials.

[[Page 231]]

 
58..................................  Communication, Detection, and
                                       Coherent Radiation Equipment.
59..................................  Electrical and Electronic
                                       Equipment Components.
60..................................  Fiber Optics Materials,
                                       Components, Assemblies, and
                                       Accessories.
61..................................  Electric Wire, and Power and
                                       Distribution Equipment.
62..................................  Lighting Fixtures and Lamps.
63..................................  Alarm, Signal, and Security
                                       Detection Systems.
65..................................  Medical, Dental, and Veterinary
                                       Equipment and Supplies.
66..................................  Instruments and Laboratory
                                       Equipment.
67..................................  Photographic Equipment.
69..................................  Training Aids and Devices.
70..................................  General Purposes Automatic Data
                                       Processing Equipment (Including
                                       Firmware) Software, and Support
                                       Equipment.
71..................................  Furniture.
72..................................  Household and Commercial
                                       Furnishings and Appliances.
73..................................  Food Preparation and Serving
                                       Equipment.
74..................................  Office Machines, Text Processing
                                       Systems and Visible Record
                                       Equipment.
75..................................  Office Supplies and Devices.
76..................................  Books, Maps, and Other
                                       Publications.
77..................................  Musical Instruments, Phonographs,
                                       and Home-type Radios.
78..................................  Recreational and Athletic
                                       Equipment.
79..................................  Cleaning Equipment and Supplies.
80..................................  Brushes, Paints, Sealers, and
                                       Adhesives.
81..................................  Containers, Packaging and Packing
                                       Supplies.
83..................................  Textiles, Leather, Furs, Apparel
                                       and Shoe Findings, Tents, and
                                       Flags.
84..................................  Clothing, Individual Equipment and
                                       Insignia.
85..................................  Toiletries.
87..................................  Agricultural Supplies.
88..................................  Live Animals.
91..................................  Fuels, Lubricants, Oils and Waxes.
93..................................  Nonmetallic Fabricated Materials.
94..................................  Nonmetallic Crude Materials.
95..................................  Metal Bars, Sheets, and Shapes.
96..................................  Ores, Minerals and their Primary
                                       Products.
99..................................  Miscellaneous.
------------------------------------------------------------------------


    Note to paragraph (a): Requests for items in Federal Supply Code 
Groups other than those listed in this paragraph shall be referred to 
the Director of OPPM for consideration and approval.

    (b) Excess personal property may be transferred for the purpose of 
cannibalization, provided the eligible institution submits a supporting 
statement which clearly indicates that cannibalizing the requested 
property for secondary use has greater benefit than utilization of the 
item in its existing form.
    (c) Use of the procedures in this part for the purpose of 
stockpiling of excess personal property for future cannibalization is 
prohibited. Transfer requests for the purpose of cannibalization will be 
considered, but are normally subordinate to requests for complete items.



Sec. 3200.7  Title.

    Title to excess personal property obtained under Part 3200 will 
automatically pass to the 1890 Land Grant Institutions (including 
Tuskegee University), 1994 Land Grant Institutions, and the Hispanic-
Serving Institutions once USDA receives the SF-122 indicating that the 
institution has received the property. Note: When competing Federal 
claims are made for particular items of excess personal property held by 
agencies other than USDA, with or without payment of reimbursement, GSA 
will give preference to the Federal agency that will retain title in the 
Government.



Sec. 3200.8  Costs.

    Excess personal property obtained under this part is provided free 
of charge. However, the institution must pay all costs associated with 
packaging and transportation. The institution should specify the method 
of shipment on the SF-122.



Sec. 3200.9  Accountability and record keeping.

    USDA requires that Federal excess personal property received by an 
eligible institution pursuant to this part shall be placed into use for 
a research, educational, technical, or scientific activity, or for a 
related purpose, within 1 year of receipt of the property, and used for 
such purpose for at least 1 year thereafter. The institution's property 
management officer must establish and maintain accountable records 
identifying the property's location, description, utilization and value. 
To ensure that the excess personal property is being used for its 
intended purpose under this part, compliance reviews will be conducted 
by an authorized representative of USDA. The review will include site 
visit inspections of the property and the accountability and record 
keeping systems.

[[Page 232]]



Sec. 3200.10  Disposal.

    When the property is no longer needed by the institution, it may be 
used in support of other Federal projects or sold, and the proceeds used 
for research, educational, technical, and scientific activities, or for 
related programs of the recipient institution.



Sec. 3200.11  Liabilities and losses.

    USDA assumes no liability with respect to accidents, bodily injury, 
illness, or any other damages or loss related to excess personal 
property transferred under this part.

                       PARTS 3201-3299  [RESERVED]

[[Page 233]]



   CHAPTER XXXIII--OFFICE OF TRANSPORTATION, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
3300            Agreement on the international carriage of 
                    perishable foodstuffs and on the special 
                    equipment to be used for such carriage 
                    (ATP); inspection, testing, and 
                    certification of special equipment......         235

3305

[Reserved]

[[Page 235]]



    PART 3300--AGREEMENT ON THE INTERNATIONAL CARRIAGE OF PERISHABLE FOODSTUFFS AND ON THE SPECIAL EQUIPMENT TO BE USED FOR SUCH CARRIAGE (ATP); INSPECTION, 
TESTING, AND CERTIFICATION OF SPECIAL EQUIPMENT--Table of Contents




                         Subpart A--Introduction

Sec.
3300.1  Scope of authority and purpose.
3300.4  Definitions.

             Subpart B--Procedures for Testing of Equipment

3300.7  General.
3300.10  Measurement of the K-coefficient of an insulated body.
3300.13  Determination of the efficiency of the thermal appliances as 
          installed in the insulated body.

                 Subpart C--Approval of Testing Stations

3300.16  General.
3300.19  Application for approval.
3300.22  Response to application for approval.
3300.25  Application for renewal of approval.
3300.28  Response to application for renewal of approval.
3300.31  Termination of approval.

 Subpart D--Procedures for Separate Testing of Mechanical Refrigerating 
                               Appliances

3300.34  General.
3300.37  Testing of a mechanical refrigerating appliance.

               Subpart E--Approval of Testing Laboratories

3300.40  General.
3300.43  Application for approval.
3300.46  Response to application for approval.
3300.49  Application for renewal of approval.
3300.52  Response to application for renewal of approval.
3300.55  Termination of approval.

                Subpart F--Certification of New Equipment

3300.58  General.
3300.61  Testing and verification requirements.
3300.64  Application for certificate for new equipment produced or 
          assembled in the United States or in a foreign country which 
          is not a contracting party to the ATP.
3300.67  Application for certificate for new equipment produced or 
          assembled in a foreign country which is a contracting party to 
          the ATP.
3300.70  Issuance of certificate.
3300.73  Period of validity of certificates.

            Subpart G--Certification of Equipment in Service

3300.76  General.
3300.79  Application for certificate.
3300.82  Issuance of certificate.
3300.85  Period of validity of certificates.

                       Subpart H--Other Provisions

3300.88  Fees for U.S. ATP certificates.
3300.91  List of approved testing stations, approved testing 
          laboratories, and fees for certificates.
3300.94  Appeals.

    Authority: Sec. 4, Pub. L. 97-325, International Carriage of 
Perishable Foodstuffs Act (7 U.S.C. 4403).

    Source: 51 FR 33879, Sept. 24, 1986, unless otherwise noted.



                         Subpart A--Introduction



Sec. 3300.1  Scope of authority and purpose.

    The International Carriage of Perishable Foodstuffs Act assigns to 
the Secretary of Agriculture the responsibility for implementation of 
the Agreement on the International Carriage of Perishable Foodstuffs and 
on the Special Equipment to be Used for Such Carriage (ATP). The purpose 
of this rule is to establish procedures for the inspection, testing, and 
certification of insulated, refrigerated, mechanically refrigerated, and 
heated transport equipment in accordance with the Act and the standards 
specified in the Agreement. In the process, the intent is to utilize 
existing industry organizations and facilities for testing and 
inspection of equipment. The Secretary is the sole authority to issue 
certificates of compliance.



Sec. 3300.4  Definitions.

    Administrator means the Administrator, Office of Transportation, 
U.S. Department of Agriculture, whose address is: 1405 Auditors 
Building, 201 14th Street, SW., Washington, DC 20250.

[[Page 236]]

    ATP means the Agreement on the International Carriage of Perishable 
Foodstuffs and on the Special Equipment to be Used for Such Carriage 
(ATP), and the annexes and appendices thereto, done at Geneva, September 
1, 1970, under the auspices of the Economic Commission for Europe, and 
any subsequent amendments thereto.\1\
---------------------------------------------------------------------------

    \1\ A copy of the agreement can be obtained by request to the ATP 
Manager, Office of Transportation, U.S. Department of Agriculture, 1405 
Auditors Building, 201 14th Street, SW., Washington, DC 20250.
---------------------------------------------------------------------------

    ATP manager means the person designated by the Administrator to 
manage the program established by this rule, whose address is: ATP 
Manager, Office of Transportation, U.S Department of Agriculture, 1405 
Auditors Building, 201 14th Street, SW., Washington, DC 20250.
    Contracting party means a country which is signatory to the ATP.
    Domestic owner means an organization incorporated or chartered under 
the laws of, and with principal office in, the United States, and to 
which one of the following applies:
    (a) The organization owns and operates the equipment directly.
    (b) The organization owns and operates the equipment through a 
wholly owned subsidiary in a foreign country.
    (c) The organization is a lessee or bailee of the equipment, and a 
written lease or bailment provides that the organization is responsible 
for any inspection, testing, and certification of the equipment with 
respect to the ATP rule.
    Equipment means the special transport equipment that meets the 
definitions and standards set forth in ATP, Annex 1, including, but not 
limited to, railcars, trucks, trailers, semitrailers, and intermodal 
freight containers that have an insulated body only, or an insulated 
body equipped with a refrigerating, mechanically refrigerating, or 
heating appliance.
    Equipment manufacturer means an organization which producers or 
assembles the complete unit of equipment, that is, the insulated body 
with the thermal appliance installed.
    Foreign owner means an organization registered under the laws of, or 
with principal office in, a country outside the United States, and which 
owns or operates the equipment.
    Foreign-ATP certificate means a certificate issued by a foreign 
country which is a contracting party to the ATP, attesting that the 
equipment listed in the certificate complies with pertinent standards in 
the ATP.
    Identical mechanical refrigerating appliance means an appliance 
which is of the same model number and design as the reference mechanical 
refrigerating appliance.
    Insulated body means the six-sided structural component of 
equipment, consisting of insulated doors, sidewalls, roof, floor, and 
endwall, inside which perishable foodstuffs are carried.
    International carriage means transportation of perishable foodstuffs 
if such foodstuffs are loaded in equipment or the equipment containing 
them is loaded onto a rail or road vehicle, in the territory of any 
country and such foodstuffs are, or the equipment containing them is, 
unloaded in the territory of another country that is a contracting 
party, where such transportation is by:
    (a) Rail,
    (b) Road,
    (c) Any combination of rail and road, or
    (d) Any sea crossing of less than one hundred and fifty kilometers, 
if preceded or followed by one or more land journeys as referred to in 
clauses (a), (b), and (c) of this definition, and the perishable 
foodstuffs are shipped in the same equipment used for such land journeys 
without transloading of such foodstuffs.

In the case of any transportation that involves one or more sea 
crossings other than as specified in clause (d) of this definition, each 
land journey shall be considered separately.
    New equipment means equipment produced or assembled on or after the 
effective date of this rule.
    Perishable foodstuffs means the quick deep-frozen and frozen food 
products listed in Annex 2, and the chilled food products listed in 
Annex 3 to the ATP.
    Reference equipment means a unit of equipment which has passed a 
test in an approved testing station, and can thereby serve as a basis 
for certification of related serially-produced equipment.

[[Page 237]]

    Reference insulated body means an insulated body which has passed a 
test in an approved testing station for measurement of the K-coefficient 
of the body, and can thereby serve as the basis for approval of 
serially-produced bodies in the case in which the body and the 
mechanical refrigerating appliance of the equipment are tested 
separately.
    Reference mechanical refrigerating appliance means an appliance 
which has passed a test in an approved testing laboratory, and can 
thereby serve as the basis for approval of identical mechanical 
refrigerating appliances in the case in which the appliance and the 
insulated body of the equipment are tested separately.
    Serially-produced bodies means insulated bodies which meet the 
definition in ATP, Annex 1 Appendix 1, paragraph 2(c)(i).
    Serially-produced equipment means equipment of a specific type 
(container, semi-trailer, trailer, truck, or container), which meets the 
definition in ATP, Annex 1, Appendix 1, paragraphs 2(c), (i), (ii), 
(iii), and (iv).
    Thermal appliance means the refrigerating, mechanical refrigerating, 
or heating appliance which is installed in the insulated body of the 
equipment.
    United States means the fifty States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, Guam, American 
Samoa, the Virgin Islands of the United States, the Commonwealth of the 
Northern Mariana Islands, and any other territory or possession of the 
United States.
    U.S. ATP certificate means a certificate issued by the U.S. 
Department of Agriculture, attesting that the equipment listed in the 
certificate complies with pertinent standards in the ATP.
    U.S. ATP testing laboratory means a facility in the United States 
which has been approved by the Administrator to conduct tests of 
mechanical refrigerating appliances.
    U.S. ATP testing station means a facility in the United States which 
has been approved by the Administrator to conduct tests of equipment.



             Subpart B--Procedures for Testing of Equipment



Sec. 3300.7  General.

    Testing of equipment according to the ATP is basically done in two 
phases:
    (a) Measurement of the insulating capacity, that is, the K-
coefficient, of the insulated body.
    (b) Determination of the efficiency of the thermal appliance as 
installed in the insulated body. In the case of mechanically 
refrigerated equipment, the mechanical refrigerating appliance may be 
tested separate from the body.



Sec. 3300.10  Measurement of the K-coefficient of an insulated body.

    The K-coefficient shall be measured according to the procedures in 
ATP, Annex 1, Appendix 2, paragraphs 1-28, and the following shall 
apply:
    (a) The internal heating method shall be used.
    (b) In ATP, Annex 1, Appendix 2, paragraph 8, last line, ``about +20 
 deg.C for the mean temperature of the walls of the body shall be 
interpreted to mean between +19  deg.C (+66  deg.F) and 21  deg.C (+70 
deg.F).
    (c) A report of each test shall be completed on a form corresponding 
to the pertinent test report model prescribed in ATP, Annex 1, Appendix 
2. Report forms may be obtained by a request to the ATP manager.



Sec. 3300.13  Determination of the efficiency of the thermal appliances as installed in the insulated body.

    In determining the efficiency of a thermal appliance with respect to 
maintaining a prescribed temperature inside the body, the procedures in 
ATP, Annex 1, Appendix 2, paragraphs 31-40 and 43-47 shall be used. A 
report of each test shall be completed on a form corresponding to the 
pertinent test report model prescribed in ATP, Annex 1, Appendix 2. 
Report forms may be obtained by a request to the ATP manager.

[[Page 238]]



                 Subpart C--Approval of Testing Stations



Sec. 3300.16  General.

    Any public or private organization incorporated or chartered under 
the laws of, and with principal office in, the United States may apply 
to have one or more of its facilities in the United States designated as 
a U.S. ATP testing station.



Sec. 3300.19  Application for approval.

    An application by an officer of the organization shall be submitted 
to the Administrator for each facility for which approval is sought. 
Copies of the Form, Application for Approval as a U.S. ATP Testing 
Station, may be obtained by a request to the ATP manager. The following 
information must be supplied in the application:
    (a) A statement that the organization is incorporated or chartered 
under the laws of, and that it has its principal office in, the United 
States, including the name, address, and telephone number of the 
principal office.
    (b) The address and telephone number of the testing station, and 
name and title of person in charge of the station.
    (c) A summary of experience at the facility which would indicate the 
capability to conduct tests of equipment according to Supart B of this 
rule.
    (d) A general description of the station, including drawings on 
letter size (8 \1/2\  x  11 inches) paper to show the floor plan and 
cross-sections of the test chamber, basic dimensions, location of heat 
exchangers and instruments, and any other pertinent information.
    (e) An indication of which of the following types of equipment, as 
defined in ATP, Annex 1, that the station is capable of testing: 
intermodal freight containers, semi-trailers, trailers, railcars, and 
trucks.
    (f) A statement that the ATP manager or other representative of the 
Administrator may, before a decision is made concerning the application, 
observe a test at the station of a Class ``C'' mechanically refrigerated 
container or semi-trailer, with Class ``C'' being defined as in ATP, 
Annex 1, paragraph 3.
    (g) A statement that the station will be open to public use, that 
is, to manufacturers and owners of equipment which may apply to have 
equipment tested.
    (h) A statement that the fees to be charged by the organization for 
testing will be reasonable with respect to costs involved, and that such 
fees will be payable directly to the organization by those who seek 
testing of their equipment.
    (i) A statement that the station will maintain records of basic data 
developed in each test conducted under this rule, such records to be 
available for review by the ATP manager or other representative of the 
Administrator upon request. The record for each test shall be maintained 
for a period of three years.
    (j) A statement that the organization will advise the ATP manager as 
soon as practicable of its intent to conduct a test under this rule and 
that it will, as soon as possible, advise when a firm test date has been 
set so that the ATP manager or other representative of the Administrator 
may observe the test.
    (k) A statement that the organization will send to the ATP manager a 
copy of each test report for equipment tested at the station according 
to this rule, within 30 days after completion of the test.
    (l) A statement that, should any significant change occur in the 
facility with respect to structure or test equipment as a result of 
redesign or other cause during the period of approval, the organization 
will so advise the ATP manager within 30 days after such change.
    (m) Any other pertinent information.



Sec. 3300.22  Response to application for approval.

    The Administrator will, within 30 days of receipt of the application 
and any relevant information required, advise the applicant whether or 
not the facility is approved as a testing station. Approval is for a 5-
year period.



Sec. 3300.25  Application for renewal of approval.

    If an organization wishes to have an approval renewed at the end of 
a 5-year

[[Page 239]]

period, it shall submit a request for renewal to the Administrator 90 
days before expiration of the existing approval. The request for renewal 
shall contain the same type of information as required in the original 
application, that is, the information called for in Sec. 3300.19 of 
subpart C.



Sec. 3300.28  Response to application for renewal of approval.

    The Administrator will, within 30 days of receipt of application and 
any relevant information required, advise the applicant whether or not 
approval is renewed. A renewal is good for 5 years.



Sec. 3300.31  Termination of approval.

    An approved testing station may at any time withdraw as an approved 
testing station by written notice to the Administrator. Similarly, the 
Administrator may suspend or terminate for cause the approved status of 
a testing station by written notice to the organization, setting forth 
the reasons for such action. Examples of causes for suspension or 
termination of approval of a testing station would be a change in 
equipment or operations at the station which would render the station 
incapable of performing tests according to the standards in the ATP, or 
noncompliance of the station with pertinent portions of this rule.



 Subpart D--Procedures for Separate Testing of Mechanical Refrigerating 
                               Appliances



Sec. 3300.34  General.

    ATP, Annex 1, Appendix 2, paragraph 41, provides that approval of 
mechanically refrigerated equipment may be done on the basis of separate 
testing of the mechanical refrigerating appliance.



Sec. 3300.37  Testing of a mechanical refrigerating appliance.

    For separate testing of a mechanical refrigerating appliance, the 
following shall pertain:
    (a) The calibrated-box method shall be used, as set forth in ARI 
Standard 1110, Standard for Mechanical Refrigeration Units, of the Air-
Conditioning and Refrigeration Institute.
    (b) The appliance shall be rated according to the class, or classes, 
of service for which the appliance is intended, with classes being 
defined as in ATP, Annex 1, paragraph 3.
    (c) A report of each test shall be completed on a form corresponding 
to the pertinent test report model prescribed in ATP, Annex 1, Appendix 
2. Report forms may be obtained by a request to the ATP manager.



               Subpart E--Approval of Testing Laboratories



Sec. 3300.40  General.

    Any public or private organization incorporated or chartered under 
the laws of, and with principal office in, the United States may apply 
to have one or more of its facilities in the United States designated as 
a U.S. ATP testing laboratory.



Sec. 3300.43  Application for approval.

    An application by an officer of the organization shall be submitted 
to the Administrator for each facility for which approval is sought. 
Copies of the Form, Application for Approval as a U.S. ATP Testing 
Laboratory, may be obtained by a request to the ATP manager. The 
following information must be supplied in the application:
    (a) A statement that the organization is incorporated or chartered 
under the laws of, and that it has its principal office in, the United 
States, including the address and telephone number of the principal 
office.
    (b) The address and telephone number of the testing laboratory, and 
name and title of person in charge of the laboratory.
    (c) A summary of the experience at the facility which would indicate 
a capability to conduct tests of mechanical refrigerating appliances 
according to subpart D of this rule.
    (d) A general description of the laboratory, including drawings on 
letter size (8\1/2\  x  11 inches) paper to show the floor plan and 
cross-section of the test chamber, basic dimensions, location of heat 
exchangers and instruments, and any other pertinent information.
    (e) A statement that the ATP manager or other representative of the 
Administrator may, before a decision is

[[Page 240]]

made concerning the application, observe a test at the laboratory of a 
mechanical refrigerating appliance for a Class ``C'' mechanically 
refrigerated container or trailer, with Class ``C'' as defined in ATP, 
Annex 1, paragraph 3.
    (f) A statement that the laboratory will maintain records of basic 
data developed in each test conducted under this rule, such records to 
be available for review by the ATP manager or other representative of 
the Administrator, upon request. The record for each test shall be 
maintained for a period of three years.
    (g) A statement that the organization will advise the ATP manager as 
soon as practicable of its intent to conduct a test under this rule and 
that it will, as soon as possible, advise when a firm test has been set 
so that the ATP manager or other representative of the Administrator may 
observe the test.
    (h) A statement that the organization will send to the ATP manager a 
copy of each test report for an appliance tested at the laboratory 
according to this rule, within 30 days after completion of the test.
    (i) A statement that, should any significant change occur in the 
facility with respect to structure or test equipment as a result of 
redesign or other cause during the period of approval, the organization 
will so advise the ATP manager within 30 days after such change.
    (j) Any other pertinent information.



Sec. 3300.46  Response to application for approval.

    The Administrator will, within 30 days of receipt of an application 
and any relevant information required, advise the applicant whether or 
not the facility is approved as a testing laboratory. Approval is for a 
5-year period from date of approval.



Sec. 3300.49  Application for renewal of approval.

    If an organization wishes to have an approval renewed at the end of 
a 5-year period, it shall submit a request for renewal to the 
Administrator 90 days before expiration of the existing approval. The 
request for renewal shall contain the same type of information as 
required in the original application, that is, the information called 
for in Sec. 3300.43 of subpart E.



Sec. 3300.52  Response to application for renewal of approval.

    The Administrator will, within 30 days of receipt of application and 
any relevant information required, advise the applicant whether or not 
approval is renewed. A renewal extends the period of approval for 5 
years.



Sec. 3300.55  Termination of approval.

    An approved testing laboratory may at any time withdraw as an 
approved testing laboratory by written notice to the Administrator. 
Similarly, the Administrator may suspend or terminate for cause the 
approved status of a testing laboratory by written notice to the 
organization, setting forth the reasons for such action. Examples of 
causes for suspension or termination of approval would be a change in 
equipment or operations at the laboratory which would render it 
incapable of performing tests according to the standards in the ATP, or 
noncompliance of the laboratory with pertinent portions of this rule.



                Subpart F--Certification of New Equipment



Sec. 3300.58  General.

    The following shall apply for certification of new equipment:
    (a) Domestic owners are eligible to receive U.S. ATP certificates 
for equipment produced or assembled in the United States or in a foreign 
country.
    (b) Foreign owners are eligible to receive U.S. ATP certificates 
only for equipment produced or assembled in the United States.
    (c) For equipment manufactured (i.e., produced or assembled) in the 
United States:
    (1) When the complete unit of equipment is tested, the test shall be 
performed in a U.S. ATP testing station.
    (2) When the mechanical refrigerating appliance and the insulated 
body are tested separately, such tests shall be performed in approved 
testing facilities in the United States or in test facilities located 
in, and approved by, a foreign country which is a Contracting Party.

[[Page 241]]

    (d) For equipment manufactured in a foreign country which is a 
Contracting Party, a domestic owner may receive a U.S. ATP certiticate 
in exchange for the Foreign-ATP certificate issued by the country of 
manufacture.
    (e) For equipment manufactured in a foreign country which is not a 
Contracting Party, tests shall be performed in approved testing 
facilities in the United States or in facilities located in and approved 
by a foreign country which is a Contracting Party.
    (f) In accordance with ATP, Annex 1, Appendix 1, paragraphs 2(a) and 
(d), the validity of a test report for a reference equipment shall 
expire at the end of a period of 3 years or at the end of the 
manufacture of 1,000 units of serially-produced equipment, whichever 
occurs first.
    (g) The validity of a test report for a reference mechanical 
refrigerating appliance shall expire at the end of a period of three 
years, or at the end of the manufacture of 1,000 identical mechanical 
refrigerating appliances, whichever occurs first.
    (h) The validity of a test report for a reference insulated body 
shall expire at the end of a period of three years, or at the end of the 
manufacture of 1,000 serially-produced bodies, whichever occurs first.
    (i) Serially-produced equipment shall be produced or assembled by 
the same manufacturer and at the same manufacturing plant as the 
reference equipment.
    (j) Identical mechanical refrigerating appliances shall be 
manufactured by the same manufacturer and at the same manufacturing 
plant as the reference mechanical refrigerating appliance.
    (k) Serially-produced bodies shall be manufactured by the same 
manufacturer and at the same manufacturing plant as the reference 
insulated body.
    (l) Equipment manufacturers shall notify the ATP manager 30 days 
before start of manufacture so that the ATP manager or other 
representative of the Administrator may observe the manufacturing 
operation.
    (m) Owners who receive a U.S. ATP certificate have the 
responsibility to manitain the equipment in good repair and operating 
condition with the understanding that the certificate is valid only so 
long as:
    (1) The insulated body and the thermal appliance are maintained in 
good condition;
    (2) No material alteration is made to the thermal appliance which 
decreases its refrigerating capacity, and;
    (3) If the thermal appliance is replaced, it is replaced by an 
appliance of equal or greater refrigerating capacity.



Sec. 3300.61  Testing and verification requirements.

    In accordance with ATP, Annex 1, Appendix 1, paragraphs 1, 1(a), 
2(a), 2(b), 2(c) and 3, and Appendix 2, paragraph 41, certification of 
new equipment is based upon the following:
    (a) For a unit of equipment, a test of the equipment in an approved 
testing station.
    (b) For serially-produced equipment:
    (1) A test of one unit of equipment in an approved testing station, 
such unit to serve as the reference equipment.
    (2) Verification that production of other units of equipment is in 
conformity with the reference equipment.
    (c) For mechanically refrigerated equipment, certification may be 
based upon a separate test of the mechanical refrigerating appliance and 
a separate test of the insulated body.



Sec. 3300.64  Application for certificate for new equipment produced or assembled in the United States or in a foreign country which is not a contracting party 
          to the ATP.

    Application for certification shall be submitted to the ATP manager 
by an officer in the organization of the owner of the equipment. In the 
case of equipment manufactured in the United States, application may be 
made by an officer in the organization of the equipment manufacturer, 
acting on behalf of the owner. Copies of the Form, Application for U.S. 
ATP Certificate for New Equipment Produced or Assembled in the United 
States or in a Foreign Country Which is not a Contracting Party to the 
ATP, may be obtained by a request to the ATP manager. The following 
information must be supplied in the application:
    (a) A statement whether the owner is a domestic owner or a foreign 
owner, with the name, address and telephone

[[Page 242]]

number of its principal office, and the name and title of person to 
contact.
    (b) If the operator of the equipment is different from the owner, 
the name and address of the operator.
    (c) Type of equipment (intermodal freight container, semi-trailer, 
trailer, railcar, or truck).
    (d) Total number of units of equipment.
    (e) Definition and distinguishing mark of the equipment for which 
certification is sought, referring to ATP, Annex 1, paragraph 3 and 
Appendix 4.
    (f) Name, address, and telephone number of the principal office of 
the equipment manufacturer, and name and title of the person to contact.
    (g) Name and address of the plant at which the equipment was 
manufactured.
    (h) In the case of a unit of equipment (i.e., the insulated body 
with its mechanical refrigerating appliance installed) that has been 
tested to serve as the reference equipment for serially-produced 
equipment:
    (1) The original or certified true copy of the test report for the 
reference equipment.
    (2) For the serially-produced equipment:
    (i) The manufacturer's make and model number for the equipment, 
including a brief description of the equipment and enclosure of any 
brochure on the equipment which might be available.
    (ii) The basis upon which the equipment meets the definition of 
serially-produced equipment, with respect to the reference equipment.
    (iii) A statement that the equipment was manufactured at the same 
plant at which the reference equipment was manufactured.
    (iv) A statement that production of the equipment was in conformity 
with the reference equipment.
    (i) In the case where the mechanical refrigerating appliance and the 
insulated body have been tested separately:
    (1) For the reference mechanical refrigerating appliance:
    (i) The original or certified true copy of the test report.
    (ii) From the test report, the effective refrigerating capacity, W, 
in watts, of the appliance at an outside temperature of +30  deg.C and 
the inside temperature (see ATP, Annex 1, paragraph 3 and Appendix 4) 
for the class of equipment for which certification is sought. ``W'' must 
be equal to, or greater than, the increased heat transfer rate, 
Hi, for the reference insulated body. See paragraph (3)(iii) 
below.
    (2) For the identical mechanical refrigerating appliances:
    (i) Name and address of the plant at which the identical appliances 
and reference appliance were manufactured.
    (ii) The manufacturer's make, model number, and a brief description 
of the appliances with enclosure of any brochure on the appliances which 
might be available.
    (iii) A statement that the appliances meet the definition of 
identical mechanical refrigerating appliances.
    (3) For the reference insulated body:
    (i) The original or certified true copy of the test report.
    (ii) The total heat transfer rate of the body, 
Ht=S x K x  T, in watts, where: ``S'' is the mean 
surface area of the body, from the test report; ``K'' is the heat 
transfer coefficient of the body, from the test report; and, `` 
T'' is the difference in degrees Kelvin between an outside temperature 
of +30  deg.C and the inside temperature for the class of equipment for 
which certification is sought.
    (iii) The increased beat transfer rate, Hi, obtained by 
multiplying the total heat transfer rate Ht, by the factor of 
1.75.
    (4) For the serially-produced insulated bodies:
    (i) Name and address of the plant at which the serially-produced 
bodies and reference body were manufactured.
    (ii) The manufacturer's make, model number, and a brief description 
of the bodies, with any brochure on the bodies which might be available.
    (iii) The basis upon which the bodies meet the definition of 
serially-produced bodies, with respect to the reference insulated body.
    (iv) A statement that production of the bodies was in conformity 
with the reference insulated body.
    (j) Information on the equipment after manufacture:

[[Page 243]]

    (1) A statement that each mechanical refrigerating appliance, after 
it was installed in the body, was operated and thoroughly checked and 
that each appliance functioned properly.
    (2) A statement that each body and each appliance has affixed to it 
a manufacturer's plate or other means of identification which shows the 
items of information required by ATP, Annex 1, paragraph 6.
    (3) A statement that each unit of equipment, before it is put into 
service, will have affixed to it a certification plate and 
distinguishing mark as specified in ATP, Annex 1, Appendix 1, paragraphs 
4 and 5, and Appendixes 3 and 4.
    (4) A list showing, for each unit of equipment, the serial number of 
the body and the corresponding owner's equipment identification number.



Sec. 3300.67  Application for certificate for new equipment produced or assembled in a foreign country which is a contracting party to the ATP.

    An application for certification of equipment shall be submitted to 
the ATP manager by an officer in the organization of the owner of the 
equipment. Copies of the Form, Application for U.S. ATP Certificate for 
New Equipment Produced or Assembled in a Foreign Country Which is a 
Contracting Party, may be obtained by a request to the ATP manager. The 
following information must be submitted in the application:
    (a) A statement that the owner is a domestic owner, with the name, 
address and telephone number of its principal office, and the name and 
title of the person to contact.
    (b) If the operator of the equipment is different from the owner, 
the name and address of the operator.
    (c) The type of equipment (intermodal freight container, trailer, 
semi-trailer, railcar, or truck.)
    (d) Total number of units of equipment.
    (e) Definition of the equipment for which certification is sought, 
referring to ATP, Annex 1, paragraph 3, and Appendix 4.
    (f) Name, address, and telephone number of the manufacturer of the 
equipment, and the name and title of the person to contact.
    (g) The manufacturer's make and model number for the equipment, 
including a brief description of the equipment and any brochure on the 
equipment which might be available.
    (h) The original or certified true copy of the test report for the 
reference equipment.
    (i) The original or certified true copy of the Foreign-ATP 
certificate issued for the equipment.
    (j) A statement that each unit of equipment, before it is put into 
service, will have affixed to it a certification plate and 
distinguishing mark as specified in ATP, Annex 1, Appendix 1, paragraphs 
4 and 5, and Appendixes 3 and 4.
    (k) A list showing, for each unit of equipment, the serial number of 
the body and the corresponding owner's equipment identification number.



Sec. 3300.70  Issuance of certificate.

    The ATP manager will evaluate the documents received and, for 
equipment deemed qualified, will issue a U.S. ATP certificate to the 
applicant within 30 days of the receipt of an application and any 
relevant information required. The certificate will be in the format 
prescribed in ATP, Annex 1, Appendix 3. For equipment deemed not 
qualified, the applicant will be advised of the reasons for non-
qualification within 30 days of the receipt of an application and any 
relevant information required.



Sec. 3300.73  Period of validity of certificates.

    In accordance with ATP, Annex 1, Appendix 1, paragraphs 1(a) and 
1(b), certificates issued for new equipment are valid for a period of 6 
years from date of issue.



            Subpart G--Certification of Equipment in Service



Sec. 3300.76  General.

    Only domestic owners are eligible to receive U.S. ATP certificates 
for equipment in service, with certification based upon the following:
    (a) For equipment which has not previously been certified:
    (1) For each unit of equipment, a test in a U.S. ATP testing station 
or in a testing station located in and approved by a country which is a 
Contracting

[[Page 244]]

Party, to measure the K-coefficient of the insulated body and the 
efficiency of the thermal appliance in accordance with Sec. 3300.10 and 
Sec. 3300.13 of this rule.
    (2) If the equipment consists of serially-produced equipment 
manufactured by a particular equipment manufacturer, and belonging to 
one owner, certification may be based upon the following:
    (i) A test of 1 percent of the units of equipment as prescribed in 
preceding paragraph (a)(1) of this section, the units tested to serve as 
reference equipment.
    (ii) An inspection of each unit of equipment, using the procedures 
set forth in ATP, Annex 1, Appendix 2, paragraphs 29 and 49. The 
inspections shall be performed by one of the following, at the choice of 
the owner:
    (A) Persons in the owner's organization whom the owner deems 
qualified to perform inspections, or;
    (B) By an independent inspection agency which the owner deems 
competent to perform inspections. Fees charged by such inspection agency 
shall be payable directly to the agency by the owner.
    (iii) A report of each inspection shall be completed on a form 
corresponding to the pertinent test report model in ATP, Annex 1, 
Appendix 2. Report forms may be obtained by a request to the ATP 
manager.
    (b) For renewal of a U.S. ATP certificate which is nearing its 
expiration date, any of the following three procedures:
    (1) For each unit of equipment, a test as prescribed in preceding 
paragraph (a)(1) of this section, or;
    (2) If the equipment is serially-produced by a particular 
manufacturer and belongs to one owner, test and inspection of the 
equipment according to the procedures prescribed in preceding paragraphs 
(a)(2)(i), (ii), and (iii) of this section, or;
    (3) An inspection of each unit of equipment as prescribed in 
paragraphs (a)(2)(ii) and (iii) of this section.
    (c) For equipment which is currently certified according to a U.S. 
ATP certificate, and which has been transferred from one domestic owner 
to another, the new owner may obtain a U.S. ATP certificate by 
submitting the original or certified true copy of the certificate issued 
to the previous owner, and by performing an inspection and submitting an 
inspection report for each unit of equipment.
    (d) For equipment which is currently certified according to a 
Foreign-ATP certificate, and which has been transferred from a foreign 
owner to a domestic owner, the domestic owner may obtain a U.S. ATP 
certificate by submitting the original or certified true copy of the 
test report for the reference equipment and the original or certified 
true copy of the foreign certificate, and by performing an inspection 
and submitting an inspection report for each unit of equipment.
    (e) Owners who receive a U.S. ATP certificate have the 
responsibility to maintain equipment in good repair and operating 
condition with the understanding that the certificate is valid only so 
long as:
    (1) The insulated body and the thermal appliance are maintained in 
good condition;
    (2) No material alteration is made to the thermal appliance which 
decreases its refrigeration capacity, and;
    (3) If the thermal appliance is replaced, it is replaced by an 
appliance of equal or greater refrigerating capacity.



Sec. 3300.79  Application for certificate.

    An application shall be submitted to the ATP manager by an officer 
in the organization of the owner of the equipment. Copies of the Form, 
Application for U.S. ATP Certificate for Equipment in Service, may be 
obtained by a request to the ATP manager. The following information is 
requested in the application:
    (a) A statement that the owner is a domestic owner, with the name, 
address, and telephone number of its principal office, and name and 
title of person to contact.
    (b) If the operator of the equipment is different from the owner, 
the name and address of the operator.
    (c) The type of equipment (intermodal freight container, trailer, 
semi-trailer, railcar, or truck).
    (d) The total number of units of equipment.

[[Page 245]]

    (e) The definition of the equipment for which certification is 
sought, referring to ATP, Annex 1, paragraph 3 and Appendix 4.
    (f) For equipment which has not been previously certified, one of 
the following:
    (1) For each unit of equipment, the original or certified true copy 
of the test report, or;
    (2) If the equipment is serially-produced by one manufacturer:
    (i) Name of manufacturer.
    (ii) The original or certified true copy of the test report(s) of 1 
percent of the equipment which was tested to serve as reference 
equipment.
    (iii) A report of inspection for each unit of equipment.
    (g) For renewal of a U.S. ATP Certificate which is nearing its 
expiration date:
    (1) The original or certified true copy of that certificate, and;
    (2) One of the following, (i) (ii), or (iii):
    (i) For each unit of equipment, the original or certified true copy 
of the test report.
    (ii) If the equipment is serially-produced by one manufacturer:
    (A) Name of manufacturer.
    (B) The original or certified true copy of the test report(s) of 1 
percent of the equipment which was tested to serve as reference 
equipment.
    (C) A report of inspection from each unit of equipment.
    (iii) A report of inspection for each unit of equipment.
    (h) For equipment which is currently certified according to a U.S. 
ATP certificate, and which has been transferred from one domestic owner 
to another:
    (1) The original or certified true copy of that certificate.
    (2) A report of inspection for each unit of equipment.
    (i) For equipment which is currently certified according to a 
Foreign-ATP certificate, and which has been transferred from a foreign 
owner to a domestic owner:
    (1) The original or certified true copy of the test report for the 
reference equipment.
    (2) The original or certified true copy of the Foreign-ATP 
certificate.
    (3) A report of inspection for each unit of equipment.
    (j) A statement that each unit of equipment has, or will have, 
affixed to it a certification plate and distinguishing mark as 
prescribed in ATP, Annex 1, Appendix 1, paragraphs 4 and 5, and 
Appendices 3 and 4.
    (k) A list showing, for each unit of equipment, the serial number of 
the body and the corresponding owner's equipment identification number.



Sec. 3300.82  Issuance of certificate.

    The ATP manager will evaluate documents received and, for equipment 
deemed qualified, will issue a U.S. ATP certificate to the applicant 
within 30 days of receipt of the application and any relevant 
information required. The certificate will be in the format prescribed 
in ATP, Annex 1, Appendix 3. For equipment deemed not qualified, the 
applicant will be advised of reasons for non-qualification within 30 
days of receipt of an application and any relevant information required.



Sec. 3300.85  Period of validity of certificates.

    In accordance with ATP, Annex 1, Appendix 1, paragraphs 1(b), and 
Appendix 2, paragraphs 29(c) and 49(b) and (d), considered in 
combination, certificates will be valid for periods as follows:
    (a) For equipment which passes a test, 6 years.
    (b) For serially-produced equipment of which 1 percent have passed a 
test, and all units have been inspected and passed such inspection, 6 
years.
    (c) For renewal of a U.S. ATP certificate which is nearing its 
expiration date, where the equipment has passed an inspection but has 
not been tested, 3 years.
    (d) For equipment currently certified according to a U.S. ATP 
certificate, where the equipment has been transferred from one domestic 
owner to another and the equipment has passed an inspection, 3 years or 
the date of expiration of the current U.S. ATP certificate, whichever 
gives the later expiration date on the new U.S. ATP certificate.

[[Page 246]]

    (e) For equipment currently certified according to a Foreign-ATP 
certificate, where the equipment has been transferred from a foreign 
owner to a domestic owner and the equipment has passed an inspection, 3 
years or the date of expiration of the foreign certificate, whichever 
gives the later expiration date on the newly issued U.S. ATP 
certificate.



                       Subpart H--Other Provisions



Sec. 3300.88  Fees for U.S. ATP certificates.

    The fee schedule for issuance of U.S. ATP certificates by the U.S. 
Department of Agriculture will be calculated according to the criteria 
in Circular A-25 \2\, issued by the Office of Management and Budget. 
Fees may be revised as required on an annual basis.
---------------------------------------------------------------------------

    \2\ A copy of Circular A-25 can be obtained by a request to the 
Office of Management and Budget (OMB), 17th Street and Pennsylvania 
Avenue, NW., Washington, DC 20503.
---------------------------------------------------------------------------



Sec. 3300.91  List of approved testing stations, approved testing laboratories, and fees for certificates.

    A current list of U.S. ATP testing stations, U.S. ATP testing 
laboratories, and fees for issuance of U.S. ATP certificates may be 
obtained by request to the ATP manager.



Sec. 3300.94  Appeals.

    Any organization aggrieved by an action in connection with this rule 
may obtain a review of such action by submitting pertinent information 
by letter to the Administrator. The decision of the Administrator is the 
final agency action.

                          PART 3305  [RESERVED]

[[Page 247]]



  CHAPTER XXXIV--COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION 
                   SERVICE, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter XXXIV appear at 59 FR 
68073, Dec. 30, 1994.
Part                                                                Page
3400            Special Research Grants Program.............         249
3401            Rangeland Research Grants Program...........         259
3402            Food and Agricultural Sciences National 
                    Needs Graduate Fellowship Grants Program         269
3403            Small Business Innovation Research Grants 
                    Program.................................         279
3404            Public information..........................         289
3405            Higher Education Challenge Grants Program...         290
3406            1890 Institution Capacity Building Grants 
                    Program.................................         306
3407            Implementation of National Environmental 
                    Policy Act..............................         336
3411            National Research Initiative Competitive 
                    Grants Program..........................         341
3415            Biotechnology Risk Assessment Research 
                    Grants Program..........................         353
3418            Stakeholder input requirements for 
                    recipients of agricultural research, 
                    education, and extension formula funds..         364
3419            Matching funds requirement for agricultural 
                    research and extension formula funds at 
                    1890 land-grant institutions, including 
                    Tuskegee University, and at 1862 land-
                    grant institutions in insular areas.....         366

[[Page 249]]



PART 3400--SPECIAL RESEARCH GRANTS PROGRAM--Table of Contents




                           Subpart A--General

Sec.
3400.1  Applicability of regulations.
3400.2  Definitions.
3400.3  Eligibility requirements.
3400.4  How to apply for a grant.
3400.5  Evaluation and disposition of applications.
3400.6  Grant awards.
3400.7  Use of funds; changes.
3400.8  Other Federal statutes and regulations that apply.
3400.9  Other conditions.

    Subpart B--Scientific Peer Review of Research Grant Applications

3400.10  Establishment and operation of peer review groups.
3400.11  Composition of peer review groups.
3400.12  Conflicts of interest.
3400.13  Availability of information.
3400.14  Proposal review.
3400.15  Review criteria.

          Subpart C--Peer and Merit Review Arranged by Grantees

3400.20  Grantee review prior to award.
3400.21  Scientific peer review for research activities.
3400.22  Merit review for education and extension activities.

                        Subpart D--Annual Reports

3400.23  Annual reports.

    Authority: 7 U.S.C. 450i(c).

    Source: 56 FR 58147, Nov 15, 1991, unless otherwise noted.



                           Subpart A--General



Sec. 3400.1  Applicability of regulations.

    (a) The regulations of this part apply to special research grants 
awarded under the authority of subsection (c) of the Competitive, 
Special, and Facilities Research Grant Act, as amended (7 U.S.C. 450i 
(c)), to facilitate or expand promising breakthroughs in areas of the 
food and agricultural sciences of importance to the United States. 
Subparts A and B, excepting this section, apply only to special research 
grants awarded under subsection (c)(1)(A). Subpart C, Peer and Merit 
Review Arranged by Grantees, and Subpart D, Annual Reports, apply to all 
grants awarded under subsection (c).
    (b) Each year the Administrator of CSREES shall determine and 
announce through publication of a Notice in such publications as the 
Federal Register, professional trade journals, agency or program 
handbooks, the Catalog of Federal Domestic Assistance, or any other 
appropriate means, research program areas for which proposals will be 
solicited competitively, to the extent that funds are available.
    (c) The regulations of this part do not apply to research, extension 
or education grants awarded by the Department of Agriculture under any 
other authority.

[64 FR 34103, June 24, 1999]



Sec. 3400.2  Definitions.

    As used in this part:
    (a) Administrator means the Administrator of the Cooperative State 
Research, Education, and Extension Service (CSREES) and any other 
officer or employee of the Department of Agriculture to whom the 
authority involved may be delegated.
    (b) Department means the Department of Agriculture.
    (c) Principal investigator means a single individual designated by 
the grantee in the grant application and approved by the Administrator 
who is responsible for the scientific and technical direction of the 
project.
    (d) Grantee means the entity designated in the grant award document 
as the responsible legal entity to whom a grant is awarded under this 
part.
    (e) Research project grant means the award by the Administrator of 
funds to a grantee to assist in meeting the costs of conducting, for the 
benefit of the public, an identified project which is intended and 
designed to establish, discover, elucidate, or confirm information or 
the underlying mechanisms relating to a research program area identified 
in the annual solicitation of applications.
    (f) Project means the particular activity within the scope of one or 
more of the research program areas identified in the annual solicitation 
of applications, which is supported by a grant award under this part.

[[Page 250]]

    (g) Project period means the total length of time that is approved 
by the Administrator for conducting the research project as outlined in 
an approved grant application.
    (h) Budget period means the interval of time (usually 12 months) 
into which the project period is divided for budgetary and reporting 
purposes.
    (i) Awarding official means the Administrator and any other officer 
or employee of the Department to whom the authority to issue or modify 
research project grant instruments has been delegated.
    (j) Peer review group means an assembled group of experts or 
consultants qualified by training and experience in particular 
scientific or technical fields to give expert advice, in accordance with 
the provisions of this part, on the scientific and technical merit of 
grant applications in those fields.
    (k) Ad hoc reviewers means experts or consultants qualified by 
training and experience in particular scientific or technical fields to 
render special expert advice, whose written evaluations of grant 
applications are designed to complement the expertise of the peer review 
group, in accordance with the provisions of this part, on the scientific 
or technical merit of grant applications in those fields.
    (l) Research means any systematic study directed toward new or 
fuller knowledge and understanding of the subject studied.
    (m) Methodology means the project approach to be followed and the 
resources needed to carry out the project.



Sec. 3400.3  Eligibility requirements.

    (a) Except where otherwise prohibited by law, any State agricultural 
experiment station, all colleges and universities, other research 
institutions and organizations, Federal agencies, private organizations 
or corporations, and individuals, shall be eligible to apply for and to 
receive a special research project grant under this part, provided that 
the applicant qualifies as a responsible grantee under the criteria set 
forth in paragraph (b) of this section.
    (b) To qualify as responsible, an applicant must meet the following 
standards as they relate to a particular project:
    (1) Have adequate financial resources for performance, the necessary 
experience, organizational and technical qualifications, and facilities, 
or a firm commitment, arrangement, or ability to obtain such (including 
proposed subagreements);
    (2) Be able to comply with the proposed or required completion 
schedule for the project;
    (3) Have a satisfactory record of integrity, judgment, and 
performance, including, in particular, any prior performance under 
grants and contracts from the Federal Government;
    (4) Have an adequate financial management system and audit procedure 
which provides efficient and effective accountability and control of all 
property, funds, and other assets; and
    (5) Be otherwise qualified and eligible to receive a research 
project grant under applicable laws and regulations.
    (c) Any applicant who is determined to be not responsible will be 
notified in writing of such findings and the basis therefor.



Sec. 3400.4  How to apply for a grant.

    (a) A request for proposals will be prepared and announced through 
publications such as the Federal Register, professional trade journals, 
agency or program handbooks, the Catalog of Federal Domestic Assistance, 
or any other appropriate means of solicitation, as early as practicable 
each fiscal year. It will contain information sufficient to enable all 
eligible applicants to prepare special research grant proposals and will 
be as complete as possible with respect to:
    (1) Descriptions of specific research program areas which the 
Department proposes to support during the fiscal year involved, 
including anticipated funds to be awarded;
    (2) Deadline dates for having proposal packages postmarked;
    (3) Name and address where proposals should be mailed;
    (4) Number of copies to be submitted;
    (5) Forms required to be used when submitting proposals; and
    (6) Special requirements.
    (b) Grant Application Kit. A Grant Application Kit will be made 
available to

[[Page 251]]

any potential grant applicant who requests a copy. This kit contains 
required forms, certifications, and instructions applicable to the 
submission of grant proposals.
    (c) Format for research grant proposals. Unless otherwise stated in 
the specific program solicitation, the following applies:
    (1) Grant Application. All research grant proposals submitted by 
eligible applicants should contain a Grant Application form, which must 
be signed by the proposing principal investigator(s) and endorsed by the 
cognizant authorized organizational representative who possesses the 
necessary authority to commit the applicant's time and other relevant 
resources.
    (2) Title of Project. The title of the project must be brief (80-
character maximum), yet represent the major thrust of the research. This 
title will be used to provide information to the Congress and other 
interested parties who may be unfamiliar with scientific terms; 
therefore, highly technical words or phraseology should be avoided where 
possible. In addition, phrases such as ``investigation of'' or 
``research on'' should not be used.
    (3) Objectives. Clear, concise, complete, enumerated, and logically 
arranged statement(s) of the specific aims of the research must be 
included in all proposals.
    (4) Procedures. The procedures or methodology to be applied to the 
proposed research plan should be explicitly stated. This section should 
include but not necessarily be limited to:
    (i) A description of the proposed investigations and/or experiments 
in the sequence in which it is planned to carry them out;
    (ii) Techniques to be employed, including their feasibility;
    (iii) Kinds of results expected;
    (iv) Means by which data will be analyzed or interpreted;
    (v) Pitfalls which might be encountered; and
    (vi) Limitations to proposed procedures.
    (5) Justification. This section should describe:
    (i) The importance of the problem to the needs of the Department and 
to the Nation, including estimates of the magnitude of the problem.
    (ii) The importance of starting the work during the current fiscal 
year, and
    (iii) Reasons for having the work performed by the proposing 
organization.
    (6) Literature review. A summary of pertinent publications with 
emphasis on their relationship to the research should be provided and 
should include all important and recent publications. The citations 
should be accurate, complete, written in acceptable journal format, and 
be appended to the proposal.
    (7) Current research. The relevancy of the proposed research to 
ongoing and, as yet, unpublished research of both the applicant and any 
other institutions should be described.
    (8) Facilities and equipment. All facilities, including 
laboratories, which are available for use or assignment to the proposed 
research project during the requested period of support, should be 
reported and described. Any materials, procedures, situations, or 
activities, whether or not directly related to a particular phase of the 
proposed research, and which may be hazardous to personnel, must be 
fully explained, along with an outline of precautions to be exercised. 
All items of major instrumentation available for use or assignment to 
the proposed research project during the requested period of support 
should be itemized. In addition, items of nonexpendable equipment needed 
to conduct and bring the proposed project to a successful conclusion 
should be listed.
    (9) Collaborative arrangements. If the proposed project requires 
collaboration with other research scientists, corporations, 
organizations, agencies, or entities, such collaboration must be fully 
explained and justified. Evidence should be provided to assure peer 
reviewers that the collaborators involved agree with the arrangements. 
It should be specifically indicated whether or not such collaborative 
arrangements have the potential for any conflict(s) of interest. 
Proposals which indicate collaborative involvement must state which 
proposer is to receive any resulting grant award, since only one 
eligible applicant, as provided in Sec. 3400.3 of this

[[Page 252]]

part, may be the recipient of a research project grant under one 
proposal.
    (10) Research timetable. The applicant should outline all important 
research phases as a function of time, year by year.
    (11) Personnel support. All personnel who will be involved in the 
research effort must be clearly identified. For each scientist involved, 
the following should be included:
    (i) An estimate of the time commitments necessary;
    (ii) Vitae of the principal investigator(s), senior associate(s), 
and other professional personnel to assist reviewers in evaluating the 
competence and experience of the project staff. This section should 
include curricula vitae of all key persons who will work on the proposed 
research project, whether or not Federal funds are sought for their 
support. The vitae are to be no more than two pages each in length, 
excluding publications listings; and
    (iii) A chronological listing of the most representative 
publications during the past five years shall be provided for each 
professional project member for whom a curriculum vitae appears under 
this section. Authors should be listed in the same order as they appear 
on each paper cited, along with the title and complete reference as 
these usually appear in journals.
    (12) Budget. A detailed budget is required for each year of 
requested support. In addition, a summary budget is required detailing 
requested support for the overall project period. A copy of the form 
which must be used for this purpose, along with instructions for 
completion, is included in the Grant Application Kit identified under 
Sec. 3400.4(b) of this part and may be reproduced as needed by 
applicants. Funds may be requested under any of the categories listed, 
provided that the item or service for which support is requested is 
allowable under applicable Federal cost principles and can be identified 
as necessary for successful conduct of the proposed research project. No 
funds will be awarded for the renovation or refurbishment of research 
spaces; purchases or installation of fixed equipment in such spaces; or 
for the planning, repair, rehabilitation, acquisition, or construction 
of a building or facility. All research project grants awarded under 
this part shall be issued without regard to matching funds or cost 
sharing.
    (13) Research involving special considerations. A number of 
situations encountered in the conduct of research require special 
information and supporting documentation before funding can be approved 
for the project. If such situations are anticipated, the proposal must 
so indicate. It is expected that a significant number of special 
research grant proposals will involve the following:
    (i) Recombinant DNA molecules. All key personnel identified in a 
proposal and all endorsing officials of a proposed performing entity are 
required to comply with the guidelines established by the National 
Institutes of Health entitled, ``Guidelines for Research Involving 
Recombinant DNA Molecules,'' as revised. The Grant Application Kit, 
identified above in Sec. 3400.4(b), contains forms which are suitable 
for such certification of compliance.
    (ii) Human subjects at risk. Responsibility for safeguarding the 
rights and welfare of human subjects used in any research project 
supported with grant funds provided by the Department rests with the 
performing entity. Regulations have been issued by the Department under 
7 CFR Part 1c, Protection of Human Subjects. In the event that a project 
involving human subjects at risk is recommended for award, the applicant 
will be required to submit a statement certifying that the research plan 
has been reviewed and approved by the Institutional Review Board at the 
proposing organization or institution. The Grant Application Kit, 
identified above in Sec. 3400.4(b), contains forms which are suitable 
for such certification.
    (iii) Laboratory animal care. The responsibility for the humane care 
and treatment of any laboratory animal, which has the same meaning as 
``animal'' in section 2(g) of the Animal Welfare Act of 1966, as amended 
(7 U.S.C. 2132(g)), used in any research project supported with Special 
Research Grants Program funds rests with the performing organization. In 
this regard, all key personnel identified in a proposal and all 
endorsing officials of

[[Page 253]]

the proposed performing entity are required to comply with applicable 
provisions of the Animal Welfare Act of 1966, as amended (7 U.S.C. 2131 
et. seq.) and the regulation promulgated thereunder by the Secretary of 
Agriculture in 9 CFR parts 1, 2, 3, and 4. In the event that a project 
involving the use of a laboratory animal is recommended for award, the 
applicant will be required to submit a statement certifying such 
compliance. The Grant Application Kit, identified above in 
Sec. 3400.4(b), contains forms which are suitable of such certification.
    (14) Current and pending support. All proposals must list any other 
current public or private research support, in addition to the proposed 
project, to which key personnel listed in the proposal under 
consideration have committed portions of their time, whether or not 
salary support for the person(s) involved is included in the budgets of 
the various projects. This section must also contain analogous 
information for all projects underway and for pending research proposals 
which are currently being considered by, or which will be submitted in 
the near future to, other possible sponsors, including other 
Departmental programs or agencies. Concurrent submission of identical or 
similar projects to other possible sponsors will not prejudice its 
review or evaluation by the Administrator or experts or consultants 
engaged by the Administrator for this purpose. The Grant Application 
Kit, identified above in Sec. 3400.4(b), contains a form which is 
suitable for listing current and pending support.
    (15) Additions to project description. Each project description is 
expected by the Administrator, members of peer review groups, and the 
relevant program staff to be complete in itself. However, in those 
instances in which the inclusion of additional information is necessary, 
the number of copies submitted should match the number of copies of the 
application requested in the annual solicitation of proposals as 
indicated in Sec. 3400.4(a)(4). Each set of such materials must be 
identified with the title of the research project as it appears in the 
Grant Application and the name(s) of the principal investigator(s). 
Examples of additional materials may include photographs which do not 
reproduce well, reprints, and other pertinent materials which are deemed 
to be unsuitable for inclusion in the proposal.
    (16) Organizational management information. Specific management 
information relating to an applicant shall be submitted on a one-time 
basis prior to the award of a research project grant identified under 
this part if such information has not been provided previously under 
this or another program for which the sponsoring agency is responsible. 
Copies of forms recommended for use in fulfilling the requirements 
contained in this section will be provided by the agency specified in 
this part once a research project grant has been recommended for 
funding.



Sec. 3400.5  Evaluation and disposition of applications.

    (a) Evaluation. All proposals received from eligible applicants in 
accordance with eligible research problem or program areas and deadlines 
established in the applicable request for proposals shall be evaluated 
by the Administrator through such officers, employees, and others as the 
Administrator determines are uniquely qualified in the areas of research 
represented by particular projects. To assist in equitably and 
objectively evaluating proposals and to obtain the best possible balance 
of viewpoints, the Administrator shall solicit the advice of peer 
scientists, ad hoc reviewers, or others who are recognized specialists 
in the research program areas covered by the applications received and 
whose general roles are defined in Secs. 3400.2(j) and 3400.2(k). 
Specific evaluations will be based upon the criteria established in 
subpart B Sec. 3400.15, unless CSREES determines that different criteria 
are necessary for the proper evaluation of proposals in one or more 
specific program areas, and announces such criteria and their relative 
importance in the annual program solicitation. The overriding purpose of 
such evaluations is to provide information upon which the Administrator 
can make informed judgments in selecting proposals for ultimate support. 
Incomplete, unclear, or poorly organized applications will work to the 
detriment of applicants during

[[Page 254]]

the peer evaluation process. To ensure a comprehensive evaluation, all 
applications should be written with the care and thoroughness accorded 
papers for publication.
    (b) Disposition. On the basis of the Administrator's evaluation of 
an application in accordance with paragraph (a) of this section, the 
Administrator will
    (1) Approve support using currently available funds,
    (2) Defer support due to lack of funds or a need for further 
evaluations, or
    (3) Disapprove support for the proposed project in whole or in part.

With respect to approved projects, the Administrator will determine the 
project period (subject to extension as provided in Sec. 3400.7(c)) 
during which the project may be supported. Any deferral or disapproval 
of an application will not preclude its reconsideration or a 
reapplication during subsequent fiscal years.



Sec. 3400.6  Grant awards.

    (a) General. Within the limit of funds available for such purpose, 
the awarding official shall make research project grants to those 
responsible, eligible applicants whose proposals are judged most 
meritorious in the announced program areas under the evaluation criteria 
and procedures set forth in this part. The date specified by the 
Administrator as the beginning of the project period shall be no later 
than September 30 of the Federal fiscal year in which the project is 
approved for support and funds are appropriated for such purpose, unless 
otherwise permitted by law. All funds granted under this part shall be 
expended solely for the purpose for which the funds are granted in 
accordance with the approved application and budget, the regulations of 
this part, the terms and conditions of the award, the applicable Federal 
cost principles, and the Department's ``Uniform Federal Assistance 
Regulations'' (part 3015 of this title).
    (b) Grant award document and notice of grant award--(1) Grant award 
document. The grant award document shall include at a minimum the 
following:
    (i) Legal name and address of performing organization or institution 
to whom the Administrator has awarded a special research project grant 
under the terms of this part;
    (ii) Title of project;
    (iii) Name(s) and address(es) of principal investigator(s) chosen to 
direct and control approved activities;
    (iv) Identifying grant number assigned by the Department;
    (v) Project period, which specifies how long the Department intends 
to support the effort without requiring recompetition for funds;
    (vi) Total amount of Departmental financial assistance approved by 
the Administrator during the project period;
    (vii) Legal authority(ies) under which the research project grant is 
awarded to accomplish the purpose of the law;
    (viii) Approved budget plan for categorizing allocable project funds 
to accomplish the stated purpose of the research project grant award; 
and
    (ix) Other information or provisions deemed necessary by the 
Department to carry out its granting activities or to accomplish the 
purpose of a particular research project grant.
    (2) Notice of grant award. The notice of grant award, in the form of 
a letter, will be prepared and will provide pertinent instructions or 
information to the grantee that is not included in the grant award 
document.
    (c) Categories of grant instruments. The major categories of grant 
instruments shall be as follows:
    (1) Standard grant. This is a grant instrument by which the 
Department agrees to support a specified level of research effort for a 
predetermined project period without the announced intention of 
providing additional support at a future date. This type of research 
project grant is approved on the basis of peer review and recommendation 
and is funded for the entire project period at the time of award.
    (2) Renewal grant. This is a document by which the Department agrees 
to provide additional funding under a standard grant as specified in 
paragraph (c)(1) of this section for a project period beyond that 
approved in an original or amended award, provided that the cumulative 
period does not exceed the statutory limitation. When a renewal 
application is submitted, it should include a summary of progress

[[Page 255]]

to date under the previous grant instrument. Such a renewal shall be 
based upon new application, de novo peer review and staff evaluation, 
new recommendation and approval, and a new award instrument.
    (3) Continuation grant. This is a grant instrument by which the 
Department agrees to support a specified level of effort for a 
predetermined period of time with a statement of intention to provide 
additional support at a future date, provided that performance has been 
satisfactory, appropriations are available for this purpose, and 
continued support would be in the best interests of the Federal 
Government and the public. It involves a long-term research project that 
is considered by peer reviewers and Departmental officers to have an 
unusually high degree of scientific merit, the results of which are 
expected to have a significant impact on the food and agricultural 
sciences, and it supports the efforts of experienced scientists with 
records of outstanding research accomplishments. This kind of document 
will normally be awarded for an initial one-year period and any 
subsequent continuation research project grants will also be awarded in 
one-year increments. The award of a continuation research project grant 
to fund an initial or succeeding budget period does not constitute an 
obligation to fund any subsequent budget period. A grantee must submit a 
separate application for continued support for each subsequent fiscal 
year. Requests for such continued support must be submitted in duplicate 
at least three months prior to the expiration date of the budget period 
currently being funded. Such requests must include: an interim progress 
report detailing all work performed to date; a Grant Application; a 
proposed budget for the ensuing period, including an estimate of funds 
anticipated to remain unobligated at the end of the current budget 
period; and current information regarding other extramural support for 
senior personnel. Decisions regarding continued support and the actual 
funding levels of such support in future years will usually be made 
administratively after consideration of such factors as the grantee's 
progress and management practices and within the context of available 
funds. Since initial peer reviews were based upon the full term and 
scope of the original special research grant application, additional 
evaluations of this type generally are not required prior to successive 
years' support. However, in unusual cases (e.g., when the nature of the 
project or key personnel change or when the amount of future support 
requested substantially exceeds the grant application originally 
reviewed and approved), additional reviews may be required prior to 
approving continued funding.
    (4) Supplemental grant. This is an instrument by which the 
Department agrees to provide small amounts of additional funding under a 
standard, renewal, or continuation grant as specified in paragraphs 
(c)(1), (c)(2), and (c)(3) of this section and may involve a short-term 
(usually six months or less) extension of the project period beyond that 
approved in an original or amended award, but in no case may the 
cumulative period of the project, including short term extensions, 
exceed the statutory time limitation. A supplement is awarded only if 
required to assure adequate completion of the original scope of work and 
if there is sufficient justification of need to warrant such action. A 
request of this nature normally does not require additional peer review.
    (d) Obligation of the Federal Government. Neither the approval of 
any application nor the award of any research project grant shall commit 
or obligate the United States in any way to make any renewal, 
supplemental, continuation, or other award with respect to any approved 
application or portion of an approved application.



Sec. 3400.7  Use of funds; changes.

    (a) Delegation of fiscal responsibility. The grantee may not 
delegate or transfer in whole or in part, to another person, 
institution, or organization the responsibility for use or expenditure 
of grant funds.
    (b) Change in project plans. (1) The permissible changes by the 
grantee, principal investigator(s), or other key project personnel in 
the approved research project grant shall be limited to changes in 
methodology, techniques, or

[[Page 256]]

other aspects of the project to expedite achievement of the projects' 
approved goals. If the grantee or the principal investigator(s) is 
uncertain as to whether a change complies with this provision, the 
question must be referred to the Administrator for a final 
determination.
    (2) Changes in approved goals, or objectives, shall be requested by 
the grantee and approved in writing by the Department prior to effecting 
such changes. In no event shall requests for such changes be approved 
which are outside the scope of the original approved project.
    (3) Changes in approved project leadership or the replacement or 
reassignment of other key project personnel shall be requested by the 
grantee and approved in writing by the Department prior to effecting 
such changes.
    (4) Transfers of actual performance of the substantive programmatic 
work in whole or in part and provisions for payment of funds, whether or 
not Federal funds are involved, shall be requested by the grantee and 
approved in writing by the Department prior to effecting such changes, 
except as may be allowed in the terms and conditions of the grant award.
    (c) Changes in project period. The project period determined 
pursuant to Sec. 3400.5(b) may be extended by the Administrator without 
additional financial support for such additional period(s) as the 
Administrator determines may be necessary to complete or fulfill the 
purposes of an approved project. Any extension, when combined with the 
originally approved or amended project period shall not exceed three (3) 
years (the limitation established by statute) and shall be further 
conditioned upon prior request by the grantee and approval in writing by 
the Department, unless prescribed otherwise in the terms and conditions 
of a grant award.
    (d) Changes in approved budget. The terms and conditions of a grant 
will prescribe circumstances under which written Departmental approval 
will be requested and obtained prior to instituting changes in an 
approved budget.

[56 FR 58147, Nov 15, 1991, as amended at 64 FR 34103, June 24, 1999]



Sec. 3400.8  Other Federal statutes and regulations that apply.

    Several other Federal statutes and/or regulations apply to grant 
proposals considered for review or to research project grants awarded 
under this part. These include but are not limited to:

7 CFR Part 1c--USDA implementation of the Federal Policy for the 
Protection of Human Subjects.
7 CFR 1.1--USDA implementation of Freedom of Information Act.
7 CFR Part 3--USDA implementation of OMB Circular A-129 regarding debt 
collection.
7. CFR Part 15, Subpart A--USDA implementation of Title VI of the Civil 
Rights Act of 1964.
7 CFR Part 3015--USDA Uniform Federal Assistance Regulations, 
implementing OMB directives (i.e., Circular Nos. A-110, A-21, and A-122) 
and incorporating provisions of 31 U.S.C. 6301-6308 (formerly, the 
Federal Grant and Cooperative Agreement Act of 1977, Pub. L. 95-224), as 
well as general policy requirements applicable to recipients of 
Departmental financial assistance.
7 CFR Part 3016--USDA Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments, implementing OMB 
directives (i.e., Circular Nos. A-102 and A-87).
7 CFR Part 3017, as amended--USDA implementation of Governmentwide 
Debarment and Suspension (Nonprocurement) and Governmentwide 
Requirements for Drug-Free Workplace (Grants).
7 CFR Part 3018--USDA implementation of New Restrictions on Lobbying. 
Imposes new prohibitions and requirements for disclosure and 
certification related to lobbying on recipients of Federal contracts, 
grants, cooperative agreements, and loans.
7 CFR Part 3407--CSREES procedures to implement the National 
Environmental Policy Act.
29 U.S.C. 794, section 504--Rehabilitation Act of 1973, and 7 CFR part 
15B (USDA implementation of statute), prohibiting discrimination based 
upon physical or mental handicap in Federally assisted programs.
35 U.S.C. 200 et seq.--Bayh-Dole Act, controlling allocation of rights 
to inventions made by employees of small business firms and domestic 
nonprofit organizations, including universities, in Federally assisted 
programs (implementing regulations are contained in 37 CFR part 401).



Sec. 3400.9  Other conditions.

    The Administrator may, with respect to any research project grant or 
to any class of awards, impose additional conditions prior to or at the 
time of any

[[Page 257]]

award when, in the Administrator's judgment, such conditions are 
necessary to assure or protect advancement of the approved project, the 
interests of the public, or the conservation of grant funds.



    Subpart B--Scientific Peer Review of Research Grant Applications



Sec. 3400.10  Establishment and operation of peer review groups.

    Subject to Sec. 3400.5, the Administrator will adopt procedures for 
the conduct of peer reviews and the formulation of recommendations under 
Sec. 3400.14.



Sec. 3400.11  Composition of peer review groups.

    (a) Peer review group members will be selected based upon their 
training and experience in relevant scientific or technical fields, 
taking into account the following factors:
    (1) The level of formal scientific or technical education by the 
individual;
    (2) The extent to which the individual has engaged in relevant 
research, the capacities in which the individual has done so (e.g., 
principal investigator, assistant), and the quality of such research;
    (3) Professional recognition as reflected by awards and other honors 
received from scientific and professional organizations outside of the 
Department;
    (4) The need of the group to include within its membership experts 
from various areas of specialization within relevant scientific or 
technical fields;
    (5) The need of the group to include within its membership experts 
from a variety of organizational types (e.g., universities, industry, 
private consultant(s)) and geographic locations; and
    (6) The need of the group to maintain a balanced membership, e.g., 
minority and female representation and an equitable age distribution.
    (b) [Reserved]



Sec. 3400.12  Conflicts of interest.

    Members of peer review groups covered by this part are subject to 
relevant provisions contained in Title 18 of the United States Code 
relating to criminal activity, Department regulations governing employee 
responsibilities and conduct (part O of this title), and Executive Order 
11222, as amended.



Sec. 3400.13  Availability of information.

    Information regarding the peer review process will be made available 
to the extent permitted under the Freedom of Information Act (5 U.S.C. 
552), the Privacy Act (5 U.S.C. 552a), and implementing Departmental 
regulations (part 1 of this title).



Sec. 3400.14  Proposal review.

    (a) All research grant applications will be acknowledged. Prior to 
technical examination, a preliminary review will be made for 
responsiveness to the request for proposals (e.g., relationship of 
application to research program area). Proposals which do not fall 
within the guidelines as stated in the annual request for proposals will 
be eliminated from competition and will be returned to the applicant. 
Proposals whose budgets exceed the maximum allowable amount for a 
particular program area as announced in the request for proposals may be 
considered as lying outside the guidelines.
    (b) All applications will be carefully reviewed by the 
Administrator, qualified officers or employees of the Department, the 
respective peer review group, and ad hoc reviewers, as required. Written 
comments will be solicited from ad hoc reviewers when required, and 
individual written comments and in-depth discussions will be provided by 
peer review group members prior to recommending applications for 
funding. Applications will be ranked and support levels recommended 
within the limitation of total available funding for each research 
program area as announced in the applicable request for proposals.
    (c) No awarding official will make a research project grant based 
upon an application covered by this part unless the application has been 
reviewed by a peer review group and/or ad hoc reviewers in accordance 
with the provisions of this part and said reviewers have made 
recommendations concerning the scientific merit of such application.
    (d) Except to the extent otherwise provided by law, such 
recommendations are advisory only and are not

[[Page 258]]

binding on program officers or on the awarding official.



Sec. 3400.15  Review criteria.

    (a) Subject to the varying conditions and needs of States, Federal 
funded agricultural research supported under these provisions shall be 
designed to, among other things, accomplish one or more of the following 
purposes:
    (1) Continue to satisfy human food and fiber needs;
    (2) Enhance the long-term viability and competitiveness of the food 
production and agricultural system of the United States within the 
global economy;
    (3) Expand economic opportunities in rural America and enhance the 
quality of life for farmers, rural citizens, and society as a whole;
    (4) Improve the productivity of the American agricultural system and 
develop new agricultural crops and new uses for agricultural 
commodities;
    (5) Develop information and systems to enhance the environment and 
the natural resource base upon which a sustainable agricultural economy 
depends; or
    (6) Enhance human health.

In carrying out its review under Sec. 3400.14, the peer review group 
will use the following form upon which the evaluation criteria to be 
used are enumerated, unless pursuant to Sec. 3400.5(a), different 
evaluation criteria are specified in the annual solicitation of 
proposals for a particular program.

                         Peer Panel Scoring Form

Proposal Identification No._____________________________________________

Institution and Project Title___________________________________________

                          I. Basic Requirement:

    Proposal falls within guidelines? __________ Yes __________ No. If 
no, explain why proposal does not meet guidelines under comment section 
of this form.

                         II. Selection Criteria:

------------------------------------------------------------------------
                                                       Score X
                                       Score   Weight   weight  Comments
                                       1-10    factor   factor
------------------------------------------------------------------------
1. Overall scientific and technical   ......       10  .......  ........
 quality of proposal................
2. Scientific and technical quality   ......       10  .......  ........
 of the approach....................
3. Relevance and importance of        ......        6  .......  ........
 proposed research to solution of
 specific areas of inquiry..........
4. Feasibility of attaining           ......        5  .......  ........
 objectives; adequacy of
 professional training and
 experience, facilities and
 equipment..........................
------------------------------------------------------------------------

Score___________________________________________________________________

Summary Comments________________________________________________________

    (b) Proposals satisfactorily meeting the guidelines will be 
evaluated and scored by the peer review panel for each criterion 
utilizing a scale of 1 through 10. A score of one (1) will be considered 
low and a score of ten (10) will be considered high for each selection 
criterion. A weighted factor is used for each criterion.



          Subpart C--Peer and Merit Review Arranged by Grantees

    Source: 64 FR 34104, June 24, 1999, unless otherwise noted.



Sec. 3400.20  Grantee review prior to award.

    (a) Review requirement. Prior to the award of a standard or 
continuation grant by CSREES, any proposed project shall have undergone 
a review arranged by the grantee as specified in this subpart. For 
research projects, such review must be a scientific peer review 
conducted in accordance with Sec. 3400.21. For education and extension 
projects, such review must be a merit review conducted in accordance 
with Sec. 3400.22.
    (b) Credible and independent. Review arranged by the grantee must 
provide for a credible and independent assessment of the proposed 
project. A credible review is one that provides an appraisal of 
technical quality and relevance sufficient for an organizational 
representative to make an informed judgment as to whether the proposal 
is appropriate for submission for Federal support. To provide for an 
independent review, such review may include USDA employees, but should 
not be conducted solely by USDA employees.

[[Page 259]]

    (c) Notice of completion and retention of records. A notice of 
completion of review shall be conveyed in writing to CSREES either as 
part of the submitted proposal or prior to the issuance of an award, at 
the option of CSREES. The written notice constitutes certification by 
the applicant that a review in compliance with these regulations has 
occurred. Applicants are not required to submit results of the review to 
CSREES; however, proper documentation of the review process and results 
should be retained by the applicant.
    (d) Renewal and supplemental grants. Review by the grantee is not 
automatically required for renewal or supplemental grants as defined in 
Sec. 3400.6. A subsequent grant award will require a new review if, 
according to CSREES, either the funded project has changed 
significantly, other scientific discoveries have affected the project, 
or the need for the project has changed. Note that a new review is 
necessary when applying for another standard or continuation grant after 
expiration of the grant term.



Sec. 3400.21  Scientific peer review for research activities.

    Scientific peer review is an evaluation of a proposed project for 
technical quality and relevance to regional or national goals performed 
by experts with the scientific knowledge and technical skills to conduct 
the proposed research work. Peer reviewers may be selected from an 
applicant organization or from outside the organization, but shall not 
include principals, collaborators or others involved in the preparation 
of the application under review.



Sec. 3400.22  Merit review for education and extension activities.

    Merit review is an evaluation of a proposed project or elements of a 
proposed program whereby the technical quality and relevance to regional 
or national goals are assessed. The merit review shall be performed by 
peers and other individuals with expertise appropriate to evaluate the 
proposed project. Merit reviewers may not include principals, 
collaborators or others involved in the preparation of the application 
under review.



                        Subpart D--Annual Reports



Sec. 3400.23  Annual reports.

    (a) Reporting requirement. The recipient shall submit an annual 
report describing the results of the research, extension, or education 
activity and the merit of the results.
    (b) Report type and content. Unless otherwise stipulated, grant 
recipients will have met the reporting requirement under this subpart by 
complying with the reporting requirements as set forth in the terms and 
conditions of the grant at the time of award.

[64 FR 34104, June 24, 1999]



PART 3401--RANGELAND RESEARCH GRANTS PROGRAM--Table of Contents




                           Subpart A--General

Sec.
3401.1   Applicability of regulations of this part.
3401.2   Definitions.
3401.3   Eligibility requirements.
3401.4   Matching funds requirement.
3401.5   Indirect costs and tuition remission costs.
3401.6   How to apply for a grant.
3401.7   Evaluation and disposition of applications.
3401.8   Grant awards.
3401.9   Use of funds; changes.
3401.10  Other Federal statutes and regulations that apply.
3401.11  Other conditions.

 Subpart B--Scientific Peer Review of Research Applications for Funding

3401.12  Establishment and operation of peer review groups.
3401.13  Composition of peer review groups.
3401.14  Conflicts of interest.
3401.15  Availability of information.
3401.16  Proposal review.
3401.17  Review criteria.

    Authority: Section 1470 of the National Agricultural Research, 
Extension and Teaching Policy Act of 1977 (7 U.S.C. 3316).

    Source: 61 FR 27753, May 31, 1996, unless otherwise noted.



                           Subpart A--General



Sec. 3401.1  Applicability of regulations of this part.

    (a) The regulations of this part apply to rangeland research grants 
awarded

[[Page 260]]

under the authority of section 1480 of the National Agricultural 
Research, Extension, and Teaching Policy Act of 1977, as amended (7 
U.S.C. 3333) to land-grant colleges and universities, State agricultural 
experiment stations, and colleges, universities, and Federal 
laboratories having a demonstrable capacity in rangeland research, as 
determined by the Secretary, to carry out rangeland research. The 
Administrator of the Cooperative State Research, Education, and 
Extension Service (CSREES) shall determine and announce, through 
publication each year of a Notice in the Federal Register, professional 
trade journals, agency or program handbooks, the catalog of Federal 
Domestic Assistance or any other appropriate means, research program 
areas for which proposals will be solicited, to the extent that funds 
are available.
    (b) The regulations of this part do not apply to research grants 
awarded by the Department of Agriculture under any other authority.



Sec. 3401.2  Definitions.

    As used in this part:
    (a) Administrator means the Administrator of CSREES and any other 
officer or employee of the Department of Agriculture to whom the 
authority involved may be delegated.
    (b) Department means the Department of Agriculture.
    (c) Principal investigator means a single individual designated by 
the grantee in the application for funding and approved by the 
Administrator who is responsible for the scientific and technical 
direction of the project.
    (d) Grantee means the entity designated in the grant award document 
as the responsible legal entity to whom a grant is awarded under this 
part.
    (e) Research project grant means the award by the Administrator of 
funds to a grantee to assist in meeting the costs of conducting, for the 
benefit of the public, an identified project which is intended and 
designed to establish, discover, elucidate, or confirm information or 
the underlying mechanisms relating to a research program area identified 
in the annual solicitation of applications.
    (f) Project means the particular activity within the scope of one or 
more of the research program areas identified in the annual solicitation 
of applications, which is supported by a grant award under this part.
    (g) Project period means the total length of time that is approved 
by the Administrator for conducting the research project as outlined in 
an approved application for funding.
    (h) Budget period means the interval of time (usually 12 months) 
into which the project period is divided for budgetary and reporting 
purposes.
    (i) Awarding official means the Administrator and any other officer 
or employee of the Department to whom the authority to issue or modify 
research project grant instruments has been delegated.
    (j) Peer review group means an assembled group of experts or 
consultants qualified by training or experience in particular scientific 
or technical fields to give expert advice, in accordance with the 
provisions of this part, on the scientific and technical merit of 
applications for funding in those fields.
    (k) Ad hoc reviewers means experts or consultants qualified by 
training or experience in particular scientific or technical fields to 
render special expert advice, whose written evaluations of applications 
for funding are designed to complement the expertise of the peer review 
group, in accordance with the provisions of this part, on the scientific 
or technical merit of applications for Funding in those fields.
    (l) Research means any systematic study directed toward new or 
fuller knowledge and understanding of the subject studied.
    (m) Methodology means the project approach to be followed and the 
resources needed to carry out the project.



Sec. 3401.3  Eligibility requirements.

    (a) Except where otherwise prohibited by law, any land-grant college 
and university, State agricultural experiment station, and college, 
university, and Federal laboratory having a demonstrable capacity in 
rangeland research, as determined by the Secretary, shall be eligible to 
apply for and to receive a project grant under

[[Page 261]]

this part, provided that the applicant qualifies as a responsible 
grantee under the criteria set forth in paragraph (b) of this section.
    (b) To qualify as responsible, an applicant must meet the following 
standards as they relate to a particular project:
    (1) Have adequate financial resources for performance, the necessary 
experience, organizational and technical qualifications, and facilities, 
or a firm commitment, arrangement, or ability to obtain such (including 
proposed subagreements);
    (2) Be able to comply with the proposed or required completion 
schedule for the project;
    (3) Have a satisfactory record of integrity, judgment, and 
performance, including, in particular, any prior performance under 
grants and contracts from the Federal government;
    (4) Have an adequate financial management system and audit procedure 
which provides efficient and effective accountability and control of all 
property, funds, and other assets; and
    (5) Be otherwise qualified and eligible to receive a research 
project grant under applicable laws and regulations.
    (c) Any applicant who is determined to be not responsible will be 
notified in writing of such findings and the basis therefor.



Sec. 3401.4  Matching funds requirement.

    In accordance with section 1480 of the National Agricultural 
Research, Extension, and Teaching Policy Act of 1977, as amended (7 
U.S.C. 3333), except in the case of Federal laboratories, each grant 
recipient must match the Federal funds expended on a research project 
based on a formula of 50 percent Federal and 50 percent non-Federal 
funding.



Sec. 3401.5  Indirect costs and tuition remission costs.

    Pursuant to section 1473 of the National Agricultural Research, 
Extension, and Teaching Policy Act of 1977, as amended (7 U.S.C. 3319), 
funds made available under this program to recipients other than Federal 
laboratories shall not be subject to reduction for indirect costs or 
tuition remission costs. Since indirect costs and tuition remission 
costs, except in the case of Federal laboratories, are not allowable 
costs for purposes of this program, such costs may not be used to 
satisfy the matching requirement set forth in Sec. 3401.4.



Sec. 3401.6  How to apply for a grant.

    (a) General. After consultation with the Rangeland Research Advisory 
Board, established pursuant to section 1482 of the National Agricultural 
Research, Extension, and Teaching Policy Act of 1977, as amended (7 
U.S.C. 3335), a request for proposals will be prepared and announced 
through publications such as the Federal Register, professional trade 
journals, agency or program handbooks, the Catalog of Federal Domestic 
Assistance, or any other appropriate means of solicitation, as early as 
practicable each fiscal year. It will contain information sufficient to 
enable all eligible applicants to prepare rangeland research grant 
proposals and will be as complete as possible with respect to:
    (1) Descriptions of specific research program areas which the 
Department proposes to support during the fiscal year involved, 
including anticipated funds to be awarded;
    (2) Deadline dates for having proposal packages postmarked;
    (3) Name and address where proposals should be mailed;
    (4) Number of copies to be submitted;
    (5) Forms required to be used when submitting proposals; and
    (6) Special requirements.
    (b) Application kit. An Application Kit will be made available to 
any potential grant applicant who requests a copy. This kit contains 
required forms, certifications, and instructions applicable to the 
submission of grant proposals.
    (c) Format for research grant proposals. Unless otherwise stated in 
the specific program solicitation, the following format applies:
    (1) Application for funding. All research grant proposals submitted 
by eligible applicants should contain an Application for Funding form, 
which must

[[Page 262]]

be signed by the proposing principal investigator(s) and endorsed by the 
cognizant authorized organizational representative who possesses the 
necessary authority to commit the applicant's time and other relevant 
resources.
    (2) Title of project. The title of the project must be brief (80-
character maximum), yet represent the major thrust of the research. This 
title will be used to provide information to the Congress and other 
interested parties who may be unfamiliar with scientific terms; 
therefore, highly technical words or phraseology should be avoided where 
possible. In addition, phrases such as ``investigation of'' or 
``research on'' should not be used.
    (3) Objectives. Clear, concise, complete, enumerated, and logically 
arranged statement(s) of the specific aims of the research must be 
included in all proposals.
    (4) Procedures. The procedures of methodology to be applied to the 
proposed research plan should be stated explicitly. This section should 
include but not necessarily be limited to:
    (i) A description of the proposed investigations and/or experiments 
in the sequence in which it is planned to carry them out;
    (ii) Techniques to be employed, including their feasibility;
    (iii) Kinds of results expected;
    (iv) Means by which data will be analyzed or interpreted;
    (v) Pitfalls which might be encountered; and
    (vi) Limitations to proposed procedures.
    (5) Justification. This section of the grant proposal should 
describe:
    (i) The importance of the problem to the needs of the Department and 
to the Nation, including estimates of the magnitude of the problem;
    (ii) The importance of starting the work during the current fiscal 
year; and
    (iii) Reasons for having the work performed by the proposing 
organization.
    (6) Literature review. A summary of pertinent publications with 
emphasis on their relationship to the research should be provided and 
should include all important and recent publications. The citations 
should be accurate, complete, written in acceptable journal format, and 
be appended to the proposal.
    (7) Current research. The relevancy of the proposed research to 
ongoing and, as yet, unpublished research of both the applicant and any 
other institutions should be described.
    (8) Facilities and equipment. All facilities, including 
laboratories, that are available for use or assignment to the proposed 
research project during the requested period of support, should be 
reported and described. Any materials, procedures, situations, or 
activities, whether or nor directly related to a particular phase of the 
proposed research, and which may be hazardous to personnel, must be 
explained fully, along with an outline of precautions to be exercised. 
All items of major instrumentation available for use or assignment to 
the proposed research project during the requested period of support 
should be itemized. In addition, items of nonexpendable equipment needed 
to conduct and bring the proposed project to a successful conclusion 
should be listed.
    (9) Collaborative arrangements. If the proposed project requires 
collaboration with other research scientists, corporations, 
organizations, agencies, or entities, such collaboration must be 
explained fully and justified. Evidence should be provided to assure 
peer reviewers that the collaborators involved agree with the 
arrangements. It should be specifically indicated whether or not such 
collaborative arrangements have the potential for any conflict(s) of 
interest. Proposals which indicate collaborative involvements must state 
which applicant is to receive any resulting grant award, since only one 
eligible applicant, as provided in Sec. 3401.3 may be the recipient of a 
research project grant under one proposal.
    (10) Research timetable. The applicant should outline all important 
research phases as a function of time, year by year.
    (11) Personnel support. All personnel who will be involved in the 
research effort must be identified clearly. For each scientist involved, 
the following should be included:
    (i) An estimate of the time commitments necessary;

[[Page 263]]

    (ii) Vitae of the principal investigator(s), senior associate(s), 
and other professional personnel to assist reviewers in evaluating the 
competence and experience of the project staff. This section should 
include curricula vitae of all key persons who will work on the proposed 
research project, whether or not Federal funds are sought for their 
support. The vitae are to be no more than two pages each in length, 
excluding publication listings; and
    (iii) A chronological listing of the most representative 
publications during the past five years shall be provided for each 
professional project member of whom a curriculum vitae appears under 
this section. Authors should be listed in the same order as they appear 
on each paper cited, along with the title and complete reference as 
these usually appear in journals.
    (12) Budget. A detailed budget is required for each year of 
requested support. In addition, a summary budget is required detailing 
requested support for the overall project period. A copy of the form 
which must be used for this purpose, along with instructions for 
completion, is included in the Application Kit identified under 
Sec. 3401.6(b) and may be reproduced as needed by applicants. Funds may 
be requested under any of the categories listed, provided that the item 
or service for which support is requested is allowable under applicable 
Federal cost principles and can be identified as necessary for 
successful conduct of the proposed research project. As stated in 
Sec. 3401.4 each grant recipient must match the Federal funds expended 
on a research project based on a formula of 50 percent Federal and 50 
percent non-Federal funding. As stated in Sec. 3401.5, indirect costs 
and tuition remission costs are not allowable costs for purposes of this 
program and , thus, may not be used to satisfy the matching requirement 
set forth in Sec. 3401.4.
    (13) Research involving special considerations. A number of 
situations encountered in the conduct of research require special 
information and supporting documentation before funding can be approved 
for the project. If such situations are anticipated, the proposal must 
so indicate. It is expected that a significant number of rangeland grant 
proposals will involve the following:
    (i) Recombinant DNA molecules. All key personnel identified in a 
proposal and all endorsing officials of a proposed performing entity are 
required to comply with the guidelines establishing by the National 
Institutes of Health entitled, ``Guidelines for Research Involving 
Recombinant DNA Molecules,'' as revised. The Application Kit, identified 
above in Sec. 3401.6(b), contains a form which is suitable for such 
certification of compliance. In the event a project involving 
recombinant DNA and RNA molecules results in a grant award, the 
Institutional Biosafety Committee must approve the research before 
CSREES funds will be released.
    (ii) Human subjects at risk. Responsibility for safeguarding the 
rights and welfare of human subjects used in any research project 
supported with grant funds provided by the Department rests with the 
performing entity. Regulations have been issued by the Department under 
7 CFR part 1c, Protection of Human Subjects. In the event that a project 
involving human subjects at risk is recommended for award, the applicant 
will be required to submit a statement certifying that the research plan 
has been reviewed and approved by the Institutional Review Board at the 
proposing organization or institution. The Application Kit, identified 
above in Sec. 3401.6(b), contains a form which is suitable for such 
certification. In the event a project involving human subjects results 
in a grant award, funds will be released only after the Institutional 
Committee has approved the project.
    (iii) Laboratory animal care. The responsibility for the humane care 
and treatment of any laboratory animal, which has the same meaning as 
``animal'' in section 2(g) of the Animal Welfare Act of 1966, as amended 
(7 U.S.C. 2132(g)), used in any research project supported with 
Rangeland Research Grant Program funds rests with the performing 
organization. In this regard, all key personnel identified in a proposal 
and all endorsing officials of the proposed performing entity are 
required to comply with the applicable provisions of the Animal Welfare 
Act of 1966, as amended (7 U.S.C. 2131 et seq.)

[[Page 264]]

and the regulations promulgated thereunder by the Secretary of 
Agriculture in 9 CFR parts 1, 2, 3, and 4. In the event that a project 
involving the use of a laboratory animal is recommended for award, the 
applicant will be required to submit a statement certifying such 
compliance. The Application Kit, identified above in Sec. 3401.6(b), 
contains a form which is suitable for such certification. In the event a 
project involving the use of living vertebrate animals results in a 
grant award, funds will be released only after the Institutional Animal 
Care and Use Committee has approved the project.
    (14) Current and pending support. All proposals must list any other 
current public or private research support, in addition to the proposed 
project, to which key personnel listed in the proposal under 
consideration have committed portions of their time, whether or not 
salary support for the person(s) involved is included in the budgets of 
the various projects. This section must also contain analogous 
information for all projects underway and for pending research proposals 
which are currently being considered by, or which will be submitted in 
the near future to, other possible sponsors, including other 
Departmental programs or agencies. Concurrent submission of identical or 
similar projects to other possible sponsors will not prejudice its 
review or evaluation by the Administrator or experts or consultants 
engaged by the Administrator for this purpose. The Application Kit, 
identified above in Sec. 3401.6(b), contains a form which is suitable 
for listing current and pending support.
    (15) Additions to project description. Each project description is 
expected by the Administrator, members of peer review groups, and the 
relevant program staff to be complete in itself. However, in those 
instances in which the inclusion of additional information is necessary, 
the number of copies submitted should match the number of copies of the 
application requested in the annual solicitation of proposals as 
indicated in Sec. 3401.6(a)(4). Each set of such materials must be 
identified with the title of the research project as it appears in the 
Application for Funding and the name(s) of the principal 
investigator(s). Examples of additional materials may include 
photographs which do not reproduce well, reprints, and other pertinent 
materials which are deemed to be unsuitable for inclusion in the 
proposal.
    (16) National Environmental Policy Act. As outlined in CSREES's 
implementing regulations of the National Environmental Policy Act of 
1969 (NEPA) at 7 CFR part 3407, environmental data or documentation for 
the proposed project is to be provided to CSREES in order to assist 
CSREES in carrying out its responsibilities under NEPA. These 
responsibilities include determining whether the project requires an 
Environmental Assessment or an Environmental Impact Statement or whether 
it can be excluded from this requirement on the basis of several 
categorical exclusions listed in 7 CFR part 3407. In this regard, the 
applicant should review the categories defined for exclusion to 
ascertain whether the proposed project may fall within one or more of 
the exclusions, and should indicate if it does so on the National 
Environmental Policy Act Exclusions Form (Form CSREES--1234) provided in 
the Application Kit. Even though the applicant considers that a proposed 
project may fall within a categorical exclusion, CSREES may determine 
that an Environmental Assessment or an Environmental Impact Statement is 
necessary for a proposed project should substantial controversy on 
environmental grounds exist or if other extraordinary conditions or 
circumstances are present that may cause such activity to have a 
significant environmental effect.
    (17) Organizational management information. Specific management 
information relating to an applicant shall be submitted on an one-time 
basis prior to the award of a research project grant identified under 
this part if such information has not been provided previously under 
this or another program for which the sponsoring agency is responsible. 
Copies of forms recommended for use in fulfilling the requirements 
contained in this section will be provided by the agency specified in 
this part once a research project grant has been recommended for 
funding.

[[Page 265]]



Sec. 3401.7  Evaluation and disposition of applications.

    (a) Evaluation. All proposals received from eligible applicants in 
accordance with eligible research problem or program areas and deadlines 
established in the applicable request for proposals shall be evaluated 
by the Administrator through such officers, employees, and others as the 
Administrator determines are particularly qualified in the areas of 
research represented by particular projects. To assist in equitably and 
objectively evaluating proposals and to obtain the best possible balance 
of viewpoints, the Administrator may solicit the advice of peer 
scientists, ad hoc reviewers, or others who are recognized specialists 
in the research program areas covered by the applications received. 
Specific evaluations will be based upon the criteria established in 
subpart B of this part, Sec. 3401.17, unless CSREES determines that 
different criteria are necessary for the proper evaluation of proposals 
in one or more specific program areas, and announces such criteria and 
their relative importance in the annual program solicitation. The 
overriding purpose of such evaluations is to provide information upon 
which the Administrator can make informed judgments in selecting 
proposals for ultimate support. Incomplete, unclear, or poorly organized 
applications will work to the detriment of applicants during the peer 
evaluation process. To ensure a comprehensive evaluation, all 
applications should be written with the care and thoroughness accorded 
papers for publication.
    (b) Disposition. On the basis of the Administrator's evaluation of 
an application in accordance with paragraph (a) of this section, the 
Administrator will approve using currently available funds, defer 
support due to lack of funds or a need for further evaluations, or 
disapprove support for the proposed project in whole or in part. With 
respect to approved projects, the Administrator will determine the 
project period (subject to extension as provided in Sec. 3401.9(c)) 
during which the project may be supported. Any deferral or disapproval 
of an application will not preclude its reconsideration or a 
reapplication during subsequent fiscal years.



Sec. 3401.8  Grant awards.

    (a) General. Within the limit of funds available for such purpose, 
the awarding official shall make research project grants to those 
responsible, eligible applicants whose proposals are judged most 
meritorious in the announced program areas under the evaluation criteria 
and procedures set forth in this part. The date specified by the 
Administrator as the beginning of the project period shall be no later 
than September 30 of the Federal fiscal year in which the project is 
approved for support and funds are appropriated for such purpose, unless 
otherwise permitted by law. All funds granted under this part shall be 
expended solely for the purpose for which the funds are granted in 
accordance with the approved application and budget, the regulations of 
this part, the terms and conditions of the award, the applicable Federal 
cost principles, and the Department's ``Uniform Federal Assistance 
Regulations'' (parts 3015 and 3019 of this title).
    (b) Grant award document and notice of grant award--(1) Grant award 
documents. The grant award document shall include at a minimum the 
following:
    (i) Legal name and address of performing organization or institution 
to whom the Administrator has awarded a rangeland research project grant 
under the terms of this part;
    (ii) Title of project;
    (iii) Name(s) and address(es) of principal investigator(s) chosen to 
direct and control approved activities;
    (iv) Identifying grant number assigned by the Department;
    (v) Project period, which specifies how long the Department intends 
to support the effort without requiring recompetition for funds;
    (vi) Total amount of Departmental financial assistance approved by 
the Administrator during the project period;
    (vii) Legal authority(ies) under which the research project grant is 
awarded to accomplish the purpose of the law;
    (viii) Approved budget plan for categorizing allocable project funds 
to accomplish the stated purpose of the research project grant award; 
and

[[Page 266]]

    (ix) Other information or provisions deemed necessary by the 
Department to carry out its granting activities or to accomplish the 
purpose of a particular research project grant.
    (2) Notice of grant award. The notice of grant award, in the form of 
a letter, will be prepared and will provide pertinent instructions or 
information to the grantee that is not included in the grant award 
document.
    (c) Categories of grant instruments. The major categories of grant 
instruments by which the Department may provide support are as follows:
    (1) Standard grant. This is a grant instrument by which the 
Department agrees to support a specified level of research effort for a 
predetermined project period without the announced intention of 
providing additional support at a future date. This type of research 
project grant is approved on the basis of peer review and recommendation 
and is funded for the entire project period at the time of award.
    (2) Renewal grant. This is a document by which the Department agrees 
to provide additional funding under a standard grant as specified in 
paragraph (c)(1) of this section for a project period beyond that 
approved in an original or amended award, provided that the cumulative 
period does not exceed the statutory limitation. When a renewal 
application is submitted, it should include a summary of progress to 
date under the previous grant instrument. Such a renewal shall be based 
upon new application, de novo peer review and staff evaluation, new 
recommendation and approval, and a new award instrument.
    (3) Continuation grant. This is a grant instrument by which the 
Department agrees to support a specified level of effort for a 
predetermined period of time with a statement of intention to provide 
additional support at a future date, provided that performance has been 
satisfactory, appropriations are available for this purpose, and 
continued support would be in the best interests of the Federal 
government and the public. It involves a long-term research project that 
is considered by peer reviewers and Departmental officers to have an 
unusually high degree of scientific merit, the results of which are 
expected to have a significant impact on the productivity of the 
Nation's rangelands, and it supports the efforts of experienced 
scientists with records of outstanding research accomplishments. This 
kind of document normally will be awarded for an initial one-year period 
and any subsequent continuation research project grants also will be 
awarded in one-year increments, but in no case may the cumulative period 
of the project exceed the statutory limit. The award of a continuation 
research project grant to fund an initial or succeeding budget period 
does not constitute an obligation to fund any subsequent budget period. 
A grantee must submit a separate application for continued support for 
each subsequent fiscal year. Requests for such continued support must be 
submitted in duplicate at least three months prior to the expiration 
date of the budget period currently being funded. Such requests must 
include: an interim progress report detailing all work performed to 
date; an Application for Funding; a proposed budget for the enuring 
period, including an estimate of funds anticipated to remain unobligated 
at the end of the current budget period; and current information 
regarding other extramural support for senior personnel. Decisions 
regarding continued support and the actual funding levels of such 
support in future years usually will be made administratively after 
consideration of such factors as the grantee's progress and management 
practices and within the context of available funds. Since initial peer 
reviews were based upon the full term and scope of the original 
rangeland research application for funding, additional evaluations of 
this type generally are not required prior to successive years' support. 
However, in unusual cases (e.g., when the nature of the project or key 
personnel change or when the amount of future support requested 
substantially exceeds the application for funding originally reviewed 
and approved), additional reviews may be required prior to approval of 
continued funding.
    (4) Supplemental grant. This is an instrument by which the 
Department

[[Page 267]]

agrees to provide small amounts of additional funding under a standard, 
renewal, or continuation grant as specified in paragraphs (c)(1), 
(c)(2), and (c)(3) of this section and may involve a short-term (usually 
six months or less) extension of the project period beyond that approved 
in an original or amended award, but in no case may the cumulative 
period of the project, including short term extensions, exceed the 
statutory time limitation. A supplement is awarded only if required to 
assure adequate completion of the original scope of work and if there is 
sufficient justification of need to warrant such action. A request of 
this nature normally does not require additional peer review.
    (d) Obligation of the Federal government. Neither the approval of 
any application nor the award of any research project grant shall commit 
or obligate the United States in any way to make any renewal, 
supplemental, continuation, or other award with respect to any approved 
application or portion of an approved application.



Sec. 3401.9  Use of funds; changes.

    (a) Delegation of fiscal responsibility. The grantee may not 
delegate or transfer in whole or in part, to another person, 
institution, or organization the responsibility for use or expenditure 
of grant funds.
    (b) Change in project plans. (1) The permissible changes by the 
grantee, principal investigator(s), or other key project personnel in 
the approved research project grant shall be limited to changes in 
methodology, techniques, or other aspects of the project to expedite 
achievement of the projects' approved goals. If the grantee or the 
principal investigator(s) is uncertain as to whether a change complies 
with this provision, the question shall be referred to the Administrator 
for a final determination.
    (2) Changes in approved goals, or objectives, shall be requested by 
the grantee and approved in writing by the Department prior to effecting 
such changes. In no event shall requests for such changes be approved 
which are outside the scope of the original approved project.
    (3) Changes in approved project leadership or the replacement or 
reassignment of other key project personnel shall be requested by the 
grantee and approved in writing by the Department prior to effecting 
such changes.
    (4) Transfers of actual performance of the substantive programmatic 
work in whole or in part and provisions for payment of funds, whether or 
not Federal funds are involved, shall be requested by the grantee and 
approved in writing by the Department prior to effecting such changes, 
except as may be allowed in the terms and conditions of a grant award.
    (c) Changes in project period. The project period determined 
pursuant to Sec. 3401.7(b) may be extended by the Administrator without 
additional financial support, for such additional period(s) as the 
Administrator determines may be necessary to complete, or fulfill the 
purposes of, an approved project. Any extension, when combined with the 
originally approved or amended project period, shall be conditioned upon 
prior request by the grantee and approval in writing by the Department, 
unless prescribed otherwise in the terms and conditions of a grant 
award.
    (d) Changes in approved budget. The terms and conditions of a grant 
will prescribe circumstances under which written Departmental approval 
will be requested and obtained prior to instituting changes in an 
approved budget.



Sec. 3401.10  Other Federal statutes and regulations that apply.

    Several other Federal statutes and/or regulations apply to grant 
proposals considered for review or to research project grants awarded 
under this part. These include but are not limited to:

7 CFR Part 1c--USDA implementation of the Federal Policy for the 
Protection of Human Subjects;
7 CFR Part 1.1--USDA implementation of Freedom of Information Act:
7 CFR Part 3--USDA implementation of OMB Circular A-129 regarding debt 
collection;
7 CFR Part 15, Subpart A--USDA implementation of Title VI of the Civil 
Rights Act of 1964;
7 CFR Part 3015--USDA Uniform Federal Assistance Regulations, 
implementing OMB directives (i.e., Circular Nos. A-110, A-21, and A-122) 
and incorporating provisions of

[[Page 268]]

31 U.S.C. 6301-6308 (formerly, the Federal Grant and Cooperative 
Agreement Act of 1977), as well as general policy requirements 
applicable to recipients of Departmental financial assistance;
7 CFR Part 3017, as amended--USDA implementation of Governmentwide 
Debarment and Suspension (Nonprocurement) and Governmentwide 
Requirements for Drug-Free Workplace (Grants);
7 CFR Part 3018--USDA implementation of New Restrictions on Lobbying. 
Imposes new prohibitions and requirements for disclosure and 
certification related to lobbying on recipients of Federal contracts, 
grants, cooperative agreements, and loans;
7 CFR Part 3019--USDA Uniform Administrative Requirements for Grants and 
Agreements with Institutions of Higher Education, Hospitals, and Other 
Non-profit Organizations;
7 CFR Part 3051--Audits of Institutions of Higher Education and Other 
Nonprofit Institutions;
7 CFR Part 3407--CSREES procedures to implement the National 
Environmental Policy Act;
29 U.S.C. 794 (section 504, Rehabilitation Act of 1973) and 7 CFR Part 
15B (USDA implementation of statute)--prohibiting discrimination based 
upon physical or mental handicap in Federally assisted programs; and
35 U.S.C. 200 et seq.--Bayh-Dole Act, controlling allocation of rights 
to inventions made by employees of small business firms and domestic 
nonprofit organizations, including universities, in Federally assisted 
programs (implementing regulations are contained in 37 CFR part 401).



Sec. 3401.11  Other conditions.

    The Administrator may, with respect to any research project grant or 
to any class of awards, impose additional conditions prior to or at the 
time of any award when, in the Administrator's judgment, such conditions 
are necessary to assure or protect advancement of the approved project, 
the interests of the public, or the conservation of grant funds.



 Subpart B--Scientific Peer Review of Research Applications for Funding



Sec. 3401.12  Establishment and operation of peer review groups.

    Subject to Sec. 3401.7, the Administrator will adopt procedures for 
the conduct of peer reviews and the formulation of recommendations under 
Sec. 3401.16.



Sec. 3401.13  Composition of peer review groups.

    Peer review group members will be selected based upon their training 
or experience in relevant scientific or technical fields, taking into 
account the following factors:
    (a) The level of formal scientific or technical education by the 
individual;
    (b) The extent to which the individual has engaged in relevant 
research, the capacities in which the individual has done so (e.g., 
principal investigator, assistant), and the quality of such research;
    (c) Professional recognition as reflected by awards and other honors 
received from scientific and professional organizations outside of the 
Department;
    (d) The need of the group to include within its membership experts 
from various areas of specialization within relevant scientific or 
technical fields;
    (e) The need of the group to include within its membership experts 
from a variety of organizational types (e.g., universities, industry, 
private consultant(s)) and geographic locations; and
    (f) The need of the group to maintain a balanced membership, e.g., 
minority and female representation and an equitable age distribution.



Sec. 3401.14  Conflicts of interest.

    Members of peer review groups covered by this part are subject to 
relevant provisions contained in Title 18 of the United States Code 
relating to criminal activity, Department regulations governing employee 
responsibilities and conduct (part 0 of this title), and Executive Order 
11222 (3 CFR, 1964-1965 Comp., p. 306), as amended.



Sec. 3401.15  Availability of information.

    Information regarding the peer review process will be made available 
to the extent permitted under the Freedom of Information Act (5 U.S.C. 
552), the Privacy Act (5 U.S.C. 552a.), and implementing Departmental 
regulations (part 1 of this title).



Sec. 3401.16  Proposal review.

    (a) All research Applications for Funding will be acknowledged. 
Prior to technical examination, a preliminary review will be made for 
responsiveness

[[Page 269]]

to the request for proposals (e.g., relationship of application to 
research program area). Proposals that do not fall within the guidelines 
as stated in the annual request for proposals will be eliminated from 
competition and will be returned to the applicant. Proposals whose 
budgets exceed the maximum allowable amount for a particular program 
area as announced in the request for proposals may be considered as 
lying outside the guidelines.
    (b) All applications will be reviewed carefully by the 
Administrator, qualified officers or employees of the Department, the 
respective merit review panel, and ad hoc reviewers, as required. 
Written comments will be solicited from ad hoc reviewers, when required, 
and individual written comments and in-depth discussions will be 
provided by peer review group members prior to recommending applications 
for funding. Applications will be ranked and support levels recommended 
within the limitation of total available funding for each research 
program area as announced in the applicable request for proposals.
    (c) Except to the extent otherwise provided by law, such 
recommendations are advisory only and are not binding on program 
officers or on the awarding official.



Sec. 3401.17  Review criteria.

    (a) Federally funded research supported under these provisions shall 
be designed to, among other things, accomplish one or more of the 
following purposes:
    (1) Improve management of rangelands as an integrated system and/or 
watershed;
    (2) Remedy unstable or unsatisfactory rangeland conditions;
    (3) Increase revegetation and/or rehabilitation of rangelands;
    (4) Examine the health of rangelands; and
    (5) Define economic parameters associated with rangelands.
    (b) In carrying out its review under Sec. 3401.16, the peer review 
panel will use the following form upon which the evaluation criteria to 
be used are enumerated, unless, pursuant to Sec. 3401.7(a), different 
evaluation criteria are specified in the annual solicitation of 
proposals for a particular program:

                         Peer Panel Scoring Form

Proposal Identification No._____________________________________________

Institution and Project Title___________________________________________

                          I. Basic Requirement:

    Proposal falls within guidelines? __________ Yes __________ No. If 
no, explain why proposal does not meet guidelines under comment section 
of this form.

                         II. Selection Criteria:

------------------------------------------------------------------------
                                                       Score X
                                       Score   Weight   weight  Comments
                                       1-10    factor   factor
------------------------------------------------------------------------
1. Overall scientific and technical   ......       10  .......  ........
 quality of proposal................
2. Scientific and technical quality   ......       10  .......  ........
 of the approach....................
3. Relevance and importance of        ......        6  .......  ........
 proposed research to solution of
 specific areas of inquiry..........
4. Feasibility of attaining           ......        5  .......  ........
 objectives; adequacy of
 professional training and
 experience, facilities and
 equipment..........................
------------------------------------------------------------------------

Score___________________________________________________________________

Summary Comments________________________________________________________

    (c) Proposals satisfactorily meeting the guidelines will be 
evaluated and scored by the peer review panel for each criterion 
utilizing a scale of 1 through 10. A score of one (1) will be considered 
low and a score of ten (10) will be considered high for each selection 
criterion. A weighted factor is used for each criterion.



PART 3402--FOOD AND AGRICULTURAL SCIENCES NATIONAL NEEDS GRADUATE FELLOWSHIP GRANTS PROGRAM--Table of Contents




                     Subpart A--General Introduction

Sec.
3402.1  Applicability of regulations.
3402.2  Definitions.
3402.3  Institutional eligibility.

                     Subpart B--Program Description

3402.4  Food and agricultural sciences areas targeted for national needs 
          graduate fellowship grants support.

[[Page 270]]

3402.5  Overview of National Needs Graduate Fellowship Grants Program.
3402.6  Fellowship appointments.
3402.7  Fellowship activities.
3402.8  Financial provisions.

                  Subpart C--Preparation of a Proposal

3402.9  Application package.
3402.10  Proposal cover page.
3402.11  National need summary.
3402.12  National need narrative.
3402.13  Budget.
3402.14  Faculty vitae.
3402.15  Appendix.

                   Subpart D--Submission of a Proposal

3402.16  Intent to submit a proposal.
3402.17  Where to submit a proposal.

                Subpart E--Proposal Review and Evaluation

3402.18  Proposal review.
3402.19  Evaluation criteria.

                  Subpart F--Supplementary Information

3402.20  Terms and conditions of grant awards.
3402.21  Grant awards.
3402.22  Other Federal statutes and regulations that apply.
3402.23  Confidential aspects of proposals and awards.
3402.24  Access to peer review information.
3402.25  Documentation of progress on funded projects.
3402.26  Evaluation of program.

    Authority: 7 U.S.C. 3316.

    Source: 59 FR 68073, Dec. 30, 1994, unless otherwise noted.



                     Subpart A--General Introduction



Sec. 3402.1  Applicability of regulations.

    (a) The regulations of this part apply to competitive grants awarded 
under the provisions of section 1417(b)(6) of the National Agricultural 
Research, Extension and Teaching Policy Act of 1977, as amended, 7 
U.S.C. 3152(b)(6). This statute designates the U.S. Department of 
Agriculture (USDA) as the lead Federal agency for agricultural research, 
extension, and teaching in the food and agricultural sciences. It 
authorizes the Secretary of Agriculture, who has delegated the authority 
to the Cooperative State Research, Education, and Extension Service 
(CSREES), to make competitive grants to land-grant colleges and 
universities, colleges and universities having significant minority 
enrollments and a demonstrable capacity to carry out the teaching of 
food and agricultural sciences, and to other colleges and universities 
having a demonstrable capacity to carry out the teaching of food and 
agricultural sciences, to administer and conduct graduate fellowship 
programs to help meet the Nation's needs for development of scientific 
and professional expertise in the food and agricultural sciences. The 
fellowships are intended to encourage outstanding students to pursue and 
complete graduate degrees in the areas of food and agricultural sciences 
designated by CSREES through the Office of Higher Education Programs 
(HEP) as national needs.
    (b) The regulations of this part do not apply to grants awarded by 
the Department of Agriculture under any other authority.



Sec. 3402.2  Definitions.

    As used in this part:
    Citizen or national of the United States means
    (1) A citizen or native resident of a State; or,
    (2) A person defined in the Immigration and Nationality Act, 8 
U.S.C. 1101(a)(22), who, though not a citizen of the United States, owes 
permanent allegiance to the United States.
    College and university means an educational institution in any State 
which
    (1) Admits as regular students only persons having a certificate of 
graduation from a school providing secondary education, or the 
recognized equivalent of such a certificate,
    (2) Is legally authorized within such State to provide a program of 
education beyond secondary education,
    (3) Provides an educational program for which a bachelor's degree or 
any other higher degree is awarded,
    (4) Is a public or other nonprofit institution, and
    (5) Is accredited by a nationally recognized accrediting agency or 
association.
    Food and agricultural sciences means basic, applied, and 
developmental research, extension, and teaching activities in the food, 
agricultural, renewable natural resources, forestry, and

[[Page 271]]

physical and social sciences in the broadest sense of these terms 
including but not limited to research, extension and teaching activities 
concerned with the production, processing, marketing, distribution, 
conservation, consumption, research, and development of food and 
agriculturally related products and services, inclusive of programs in 
agriculture, natural resources, aquaculture, forestry, veterinary 
medicine, home economics, rural development, and closely allied fields.
    Graduate degree means a Master's or doctoral degree.
    State means any one of the fifty States, the Commonwealth of Puerto 
Rico, Guam, American Samoa, the Commonwealth of the Northern Marianas, 
the Trust Territory of the Pacific Islands, the Virgin Islands of the 
United States, and the District of Columbia.
    Teaching activities means formal classroom instruction, laboratory 
instruction, and practicum experience specific to the food and 
agricultural sciences and matters relating thereto conducted by colleges 
and universities offering baccalaureate or higher degrees.



Sec. 3402.3  Institutional eligibility.

    Proposals may be submitted by land-grant colleges and universities, 
by colleges and universities having significant minority enrollments and 
a demonstrable capacity to carry out the teaching of food and 
agricultural sciences, and by other colleges and universities having a 
demonstrable capacity to carry out the teaching of food and agricultural 
sciences. All applicants should be institutions that confer a graduate 
degree in at least one area of the food and agricultural sciences 
targeted for national needs fellowships, that have a significant ongoing 
commitment to the food and agricultural sciences generally, and that 
have a significant ongoing commitment to the specific subject area for 
which a grant application is made. It is the objective to award grants 
to colleges and universities which have notable teaching and research 
competencies in the food and agricultural sciences. The grants are 
specifically intended to support fellowship programs that encourage 
outstanding students to pursue and complete a graduate degree at such 
institutions in an area of the food and agricultural sciences for which 
there is a national need for the development of scientific and 
professional expertise. Therefore, institutions which currently have 
excellent programs of graduate study and research in the food and 
agricultural sciences dealing with targeted national needs are 
particularly encouraged to apply.



                     Subpart B--Program Description



Sec. 3402.4  Food and agricultural sciences areas targeted for national needs graduate fellowship grants support.

    Areas of the food and agricultural sciences appropriate for 
fellowship grant applications are those in which developing shortages of 
expertise have been determined and targeted by HEP for national needs 
fellowship grant support. When funds are available and HEP determines 
that a new competition is warranted, the specific areas and funds per 
area will be identified in a Federal Register notice announcing the 
program and soliciting program applications.



Sec. 3402.5  Overview of National Needs Graduate Fellowship Grants Program.

    (a) The program will provide funds for a limited number of grants to 
support fixed graduate student stipends and fixed cost-of-education 
institutional allowances. These grants will be awarded competitively to 
eligible institutions. In order to encourage the development of special 
activities that are expected to contribute to Fellows' advanced degree 
objectives, the program will also provide competitive, special 
international study or thesis/dissertation research travel allowances 
for a limited number of USDA Graduate Fellows.
    (b) Based on the amount of funds appropriated in any fiscal year, 
HEP will determine:
    (1) Whether new competitions for graduate fellowships and/or special 
international study or thesis/dissertation research travel allowances 
will be held during that fiscal year;

[[Page 272]]

    (2) The graduate degree level(s) to be supported--Master's and/or 
doctoral;
    (3) The proportion of appropriations to be targeted for the 
fellowship stipends for each respective graduate degree level supported;
    (4) The proportion of appropriations to be targeted for the cost-of-
education institutional allowances for each respective graduate degree 
level supported;
    (5) The proportion of appropriations to be targeted for the special 
international study or thesis/dissertation research travel allowances 
for each respective graduate degree level supported;
    (6) The allowable stipend amount for each respective graduate degree 
level supported, the cost-of-education institutional allowance for each 
respective graduate degree level supported, and the maximum funds 
available for each special international study or thesis/dissertation 
research travel allowance for each respective graduate degree level 
supported; and
    (7) The maximum total funds that may be awarded to an institution 
under the program in a given fiscal year.
    (c) HEP will also determine:
    (1) The maximum number of national needs areas for which funding may 
be requested in a single proposal;
    (2) The degree levels for which funding may be requested in a single 
proposal;
    (3) The minimum and maximum number of fellowships for which an 
institution may apply in a single proposal; and
    (4) The limits on the total number of proposals that can be 
submitted by an institution, college, school, or other administrative 
unit.
    (d) All of these determinations will be published as a part of the 
program announcement in the Federal Register.
    (e) For each USDA Graduate Fellow who desires to be considered for a 
special international study or thesis/dissertation research travel 
allowance, the project director must apply to HEP for a supplemental 
grant in accordance with instructions published in the program 
announcement in the Federal Register. Each application must include an 
``Application for Funding'' (Form CSRS-661) and a ``Budget'' (Form CSRS-
55).
    (1) To provide HEP with sufficient information upon which to 
evaluate the merits of the requests for a special international study or 
thesis/dissertation research travel allowance, each application for a 
supplemental grant must contain a narrative which provides the 
following:
    (i) The specific destination(s) and duration of the travel;
    (ii) The specific study or thesis/dissertation research activities 
in which the Fellow will be engaged;
    (iii) How the international experience will contribute to the 
Fellow's program of study;
    (iv) A budget narrative specifying and justifying the dollar amount 
requested for the travel;
    (v) Summary credentials of the faculty or other professionals with 
whom the Fellow will be working during the international experience 
(summary credentials must not exceed three pages per person; ``Summary 
Vita--Teaching Proposal'' (Form CSRS-708) may be used for this purpose);
    (vi) A letter from the dean of the Fellow's college or equivalent 
administrative unit supporting the Fellow's travel request and 
certifying that the travel experience will not jeopardize the Fellow's 
satisfactory programs toward degree completion; and
    (vii) A letter from the fellowship grant project director certifying 
the Fellow's eligibility, the accuracy of the Fellow's travel request, 
and the relevance of the travel to the Fellow's advanced degree 
objectives.
    (2) The narrative portion of the application must not exceed 10 
pages, excluding the summary vita/vitae.
    (f) All complete requests will be evaluated by professional staff 
from USDA or other Federal agencies, as appropriate. Evaluation criteria 
will be published in the program announcement in the Federal Register. 
Awards will be made to the extent possible based on availability of 
funds.
    (g) Any current fellow with sufficient time to complete the 
international experience before the termination date of

[[Page 273]]

the grant under which he/she is supported is eligible for a special 
international study or thesis/dissertation research travel allowance. 
Before the international study or thesis/dissertation research travel 
may commence, a Fellow must have completed one academic year of full-
time study, as defined by the institution, under the fellowship 
appointment and arrangements must have been formalized for the Fellow to 
study and/or conduct research in the foreign location(s).



Sec. 3402.6  Fellowship appointments.

    (a)(1) Fellows must be identified and fellowships must be awarded 
within 15 months of the effective date of a grant. Institutions failing 
to meet this deadline will be required to refund monies associated with 
any unawarded fellowship(s). Fellowship appointments may be held only by 
persons who enroll and pursue full-time study in a graduate degree 
program in the national need area and at the degree level supported by 
the grant.
    (2) In addition, fellows:
    (i) must be newly recruited;
    (ii) must not have been enrolled previously in the academic program 
at the same degree level;
    (iii) must be citizens of nationals of the United States as 
determined in accordance with Federal law; and
    (iv) must have strong interest, as judged by the institution, in 
pursuing a degree in a targeted national need area and in preparing for 
a career as a food or agricultural scientist or professional.
    (3) It will be the responsibility of the grantee institution to 
award fellowships to students of superior academic ability.
    (4) A doctoral Fellow who maintains satisfactory progress in his or 
her course of study is eligible for support for a maximum of 36 months 
within a 45-month period. Master's level Fellows, maintaining 
satisfactory progress, are eligible for support for a maximum of 24 
months during a 33-month period. However, it is the intent of this 
program that Fellows pursue full-time uninterrupted study or thesis/
dissertation research, including time spent pursuing USDA-funded special 
international study or thesis/dissertation research activities. For 
Fellows requiring additional time to complete a degree, it is expected 
that the institution will endeavor to continue supporting individuals 
originally appointed to fellowships through such other institutional 
means as teaching assistantships and research assistantships. For 
Fellows who complete the program of study early (less than 24 hours for 
Master's degree or 36 months for doctoral degree), the institution must 
refund any unexpended monies to the granting agency.
    (b) Within the framework of the regulations in this part, all 
decisions with respect to the appointment of Fellows will be made by the 
institution. However, institutions are urged to take maximum advantage 
of opportunities for awarding fellowships to members of underrepresented 
groups at the graduate level in the food and agricultural sciences, 
particularly minorities and women. Throughout a Fellow's tenure, the 
institution should satisfy itself that the Fellow is making satisfactory 
academic progress, and carrying out, or planning to carry out, national 
needs related research. If an institution finds it necessary to 
terminate support of a Fellow for insufficient academic progress or by 
decision on the part of the Fellow, the Fellow becomes ineligible for 
future assistance under the program. If a Fellow finds it necessary to 
interrupt his or her program of study because of health, personal 
reasons, outside employment, or acceptance of an assistantship, the 
institution must reserve the funds for the purpose of allowing the 
Fellow to resume funded study any time within a 9-month period. However, 
a Fellow who finds it necessary to interrupt his or her program of study 
more than one time cannot exceed a total of 9 months' cumulative leave 
status without forfeiting eligibility. For fellowships terminated 
because of insufficient academic progress, a decision on the part of the 
Fellow, or reserved due to an interrupted program of study but not 
resumed within the required time period, unexpended monies must be 
refunded. Institutions may not use unexpended monies associated with a 
terminated fellowship to recruit and support a ``replacement'' Fellow.

[[Page 274]]

    (c) Only Fellows enrolled in Master's programs of study may be 
supported under a Master's fellowship grant. Only Fellows enrolled in 
doctoral programs of study may be supported under a doctoral fellowship 
grant.



Sec. 3402.7  Fellowship activities.

    A Fellow must be enrolled as a full-time graduate student, as 
defined by the institution, at all times during the tenure of the 
fellowship in the national need area and at the degree level supported 
by the grant. This includes the time used for special international 
study or thesis/dissertation research if the international travel is 
funded through a special international study or thesis/dissertation 
research travel allowance under this grant program. However, the normal 
requirement of formal registration during part of this tenure may be 
waived if permitted by the policy of the fellowship institution, 
provided that the fellow is making satisfactory progress toward degree 
completion and remains engaged in appropriate full-time fellowship 
activities such as thesis/dissertation research. Fellows in academic 
institutions are not entitled to vacations as such. They are entitled to 
the short normal student holidays observed by the institution. The time 
between academic semesters or quarters is to be utilized as an active 
part of the grant period. During the period of support, a Fellow may not 
accept employment by the institution or any other agency. However, a 
grant supporting research costs of the Fellow is acceptable, exclusive 
of salary or wages and fringe benefits for the Fellow.



Sec. 3402.8  Financial provisions.

    The basis fellowship stipend, cost-of-education institutional 
allowance, and special international study or thesis/dissertation 
research travel allowance that may be paid from grant funds will be 
determined by HEP contingent upon appropriations. The amount of the 
stipend, cost-of-education institution allowance, and special 
international study or thesis/dissertation research travel allowance 
will be cited in the program announcement in the Federal Register. An 
institution may elect to apply the cost-of-education institutional 
allowance to a Fellow's tuition and fees; however, such is not required. 
The allowance also may be used by an institution to defray other program 
expenses (e.g., recruitment, travel, publications, or salaries of 
project personnel). Tuition and fees are the responsibility of the 
Fellow unless an institution elects to use its cost-of-education 
institutional allowance for this purpose or elects to pay such costs out 
of other non-USDA monies. No dependency allowances are provided for 
Fellows. Stipend payments and special international study or thesis/
dissertation research travel allowances will be made to Fellows by the 
institution, according to standard institutional procedures for 
fellowships and assistantships.



                  Subpart C--Preparation of a Proposal



Sec. 3402.9  Application package.

    An application package will be made available to any potential grant 
applicant upon request. This package will include all necessary forms 
and instructions to apply for a grant under this program. The package 
also includes the regulatory provisions applicable to the program.



Sec. 3402.10  Proposal cover page.

    The Proposal Cover Page, Form CSRS 701, must be completed in its 
entirety including all authorizing signatures. One copy of each grant 
application must contain the original pen-and-ink signature of:
    (a) The Project Director(s);
    (b) The Authorized Certifying Representative for the college or 
equivalent administrative unit; and
    (c) The Authorized Certifying Representative for the institution.



Sec. 3402.11  National need summary.

    Using the National Need Summary, Form CSRS-702, applicants must 
summarize the proposed graduate program of study and the academic and 
research strengths of the institution in the national need area for 
which funding is requested. To the extent possible, applicants should 
emphasize the uniqueness of the proposed graduate program

[[Page 275]]

of study. The summary should not include any reference to the specific 
number of fellowships requested. The information on the summary page 
will be used in assigning the most appropriate panelists to review a 
proposal. If a proposal is supported, this page may be used in program 
publications.



Sec. 3402.12  National need narrative.

    A narrative for the national need area should be written in five 
sections limited to no more than 20 pages, and preceded by a table of 
contents. The table of contents is not considered part of the 20-page 
limitation. The narrative should be typed on one side of the page only, 
using a font no smaller than 12 point, and double-spaced. The five 
sections to be included in the narrative are as follows:

    Sec. 1. In this section, applicants should establish clearly that 
the proposed program of study and research will result in the 
development of outstanding expertise in the national need area for which 
funding is requested and will do so in a reasonable period of time. 
Applicants should present a detailed description of the proposed 
graduate program of study and research. This section of the narrative 
should contain, but need not be limited to, the following components:
    (a) The plan should specifically address the course work which 
Fellows will be required to take rather than the overall spectrum of 
departmental offerings. Identify courses, summarize content, and discuss 
sequencing. Explain how course work will relate to Fellows' research.
    (b) Identify and describe areas of research that Fellows will be 
encouraged to engage in via a thesis or dissertation.
    (c) Discuss graduate program examination requirements, such as a 
proficiency or qualifying examination, a comprehensive examination, and 
an oral examination.
    (d) Include a projected timetable for completing the proposed 
graduate program of study and research.
    (e) If admission to a proposed doctoral program does not require a 
Master's degree, discuss how institutional procedures allow for the 
bypass of a Master's degree.
    Sec. 2. In this section, applicants should highlight thoroughly any 
special features of the graduate program such as the extent to which it 
will involve an inter-disciplinary, multi-disciplinary, or cross-
disciplinary approach resulting in the development of expertise 
transcending a single discipline. Applicants should also discuss any 
other special features such as development of an unusual collateral 
specialization in a related discipline, experiential learning 
opportunities such as practicums or internships, unique mentoring 
programs, seminars, or a multi-university collaborative approach.
    Sec. 3. In this section, applicants should substantiate clearly the 
institution's position that it presently provides a major, productive, 
and recognized program of graduate study and research at the level(s) of 
study in the area of national need in which selected Fellows would be 
engaged. Applicants should include evidence of the quality of existing 
academic attributes and resources of the institution such as teaching 
and research faculty, instructional and research instrumentation and 
facilities, library resources, computing resources, and other such 
indicators of academic quality. Also, applicants should discuss the 
extent to which graduate students have access to such institutional 
resources.
    Sec. 4. In this section, applicants should document thoroughly the 
institution's plans and procedures for managing fellowship appointments. 
Applicants should explain in-depth the plan for recruiting academically 
outstanding Fellows and procedures for selecting Fellows of superior 
quality who appear to be highly motivated to prepare for and pursue a 
career as a food or agricultural scientist or professional. In addition, 
applicants should cite specific plans for advising and guiding Fellows 
through a program of study, as well as any special programs or 
activities that will be offered to enrich the Fellows' graduate study. 
Particular attention should be given to the plans and procedures for 
recruiting and retaining members of underrepresented groups.
    Sec. 5. In this section, applicants should include important 
supplementary summary data for the institution relevant to the national 
need area for which funding is requested. Examples of appropriate data 
are indices of student quality, enrollments and degrees awarded for 
recent years, placement of graduates, facilities, faculty research 
support, and publications of previous graduate students. To the extent 
possible, applicants should present the supplementary summary data in 
tabular form.



Sec. 3402.13  Budget.

    Applicants must prepare the Proposal Budget, Form CSRS-703, 
identifying all costs associated with the proposal. Instructions for 
completing the ``Proposal Budget'' are provided on the form. Pagination 
for the budget page should be continuous following the national need 
narrative and so indicated in the table of contents.

[[Page 276]]



Sec. 3402.14  Faculty vitae.

    This section should include a Summary Vita, Form CSRS-708, for each 
faculty member contributing significantly to institutional competence at 
the level of graduate study for the national area addressed in the 
proposal. Applicants should arrange the faculty vitae with the project 
director(s) first, followed by the remaining faculty, in alphabetical 
order. Pagination for the faculty vitae should be continuous following 
the budget page and so indicated in the table of contents.



Sec. 3402.15  Appendix.

    Any additional supporting information deemed essential for 
clarifying and/or strengthening the proposal should be included in an 
Appendix and referenced in the national need narrative. To the extent 
possible, applicants should present supporting information included in 
the Appendix in tabular form. Pagination for the Appendix should be 
continuous following the faculty vitae and so indicated in the table of 
contents.



                   Subpart D--Submission of a Proposal



Sec. 3402.16  Intent to submit a proposal.

    To assist HEP in preparing for review of fellowship proposals, 
institutions planning to submit proposals for fellowships may be 
requested to complete and return an Intent to Submit a Proposal form 
(Form CSRS-706). When required, applicants should complete and return 
one form for each proposal they anticipate submitting. Sending this form 
does not commit an institution to any course of action. The program 
announcement published in the Federal Register will delineate if, when, 
and where the Intent to Submit a Proposal Forms should be sent.



Sec. 3402.17  Where to submit a proposal.

    The program announcement published in the Federal Register will 
delineate the date for submission of proposals and the number of 
proposal copies required to apply for a grant. In addition, the program 
announcement will provide the address to which the proposal, its 
accompanying duplicate copies, and the institution's latest graduate 
catalog should be mailed.



                Subpart E--Proposal Review and Evaluation



Sec. 3402.18  Proposal review.

    The proposal evaluation process includes both USDA internal staff 
review and merit evaluation by panels of scientists, educators, 
industrialists, and Government officials who are highly qualified to 
render expert advice in the targeted areas. The goal of the process of 
selection and structuring of evaluation panels is to provide optimum 
expertise and objective judgment in the evaluation of proposals specific 
to a particular area of national need.



Sec. 3402.19  Evaluation criteria.

    Proposals addressing a particular national need area at a particular 
degree level will be evaluated in competition with other proposals 
addressing the same national need area at the same degree level. Both 
USDA internal staff and the panelists will evaluate proposals primarily 
on the basis of the following criteria:

------------------------------------------------------------------------
              Evaluation criterion                        Weight
------------------------------------------------------------------------
a. The degree to which the proposal establishes  30 points.
 clearly that the proposed program of graduate
 study will result in the development of
 outstanding scientific/professional expertise
 related to the national need area and will do
 so in a reasonable period of time.
b. The degree to which the proposal highlights   10 points.
 thoroughly any special features such as an
 inter-disciplinary, multi-disciplinary, or
 cross-disciplinary approach, an unusual
 collateral specialization in a related
 discipline, experiential learning
 opportunities, unique mentoring programs,
 seminars, or a multi-university collaborative
 approach.
c. The degree to which the proposal              20 points.
 substantiates clearly that the institution's
 faculty, facilities and equipment,
 instructional support resources, and other
 academic attributes are excellent for
 providing outstanding graduate study and
 research at the forefront of science and
 technology related to the chosen area of
 national need.
d. The degree to which the institution's plans   20 points.
 and procedures for recruiting and selecting
 academically outstanding Fellows and for
 advising and guiding Fellows through a program
 of study reflect excellence as documented in
 the proposal.

[[Page 277]]

 
e. The degree to which supplementary summary     10 points.
 data substantiate program quality in the
 targeted national need area.
f. The quality of the proposal as reflected by   10 points.
 its substantive content, organization,
 clarity, and accuracy.
------------------------------------------------------------------------

    Additional or amended evaluation criteria and new point weightings 
may be cited in the program announcement published in the Federal 
Register.



                  Subpart F--Supplementary Information



Sec. 3402.20  Terms and conditions of grant awards.

    Within the limit of funds available for such purpose, the awarding 
official shall make project grants to those responsible, eligible 
applicants whose proposals are judged most meritorious in the announced 
program areas under the evaluation criteria and procedures set forth in 
this part. The beginning of the project period shall be no later than 
September 30 of the Federal fiscal year in which the project is approved 
for support. All funds granted under this part shall be expended solely 
for the purpose for which the funds are granted in accordance with the 
approved application and budget, the regulations of this part, the terms 
and conditions of the award, the applicable Federal cost principles, and 
the Department's Uniform Federal Assistance Regulations (7 CFR Part 
3015).



Sec. 3402.21  Grant awards.

    (a) The grant award document shall include, at a minimum, the 
following:
    (1) Legal name and address of performing organization.
    (2) Title of project.
    (3) Name(s) and address(es) of Project Director(s).
    (4) Identifying grant number assigned by the Department.
    (5) Project period, which specifies how long the Department intends 
to support the effort without requiring reapplication for funds.
    (6) Total amount of Federal financial assistance approved during the 
project period.
    (7) Legal authority under which the grant is awarded.
    (8) Approved budget plan for categorizing allocable project funds to 
accomplish the stated purpose of the grant award.
    (9) Other information or provisions deemed necessary by the 
Department to carry out its granting activities or to accomplish the 
purpose of this particular project grant.
    (b) The notice of grant award, in the form of a letter, will provide 
pertinent instructions and information to the grantee that are not 
included in the grant award document described above.
    (c) The major types of grant instruments shall be as follows:
    (1) New grant. This is a grant instrument by which HEP agrees to 
support a specified number of graduate Fellows at a specific institution 
via funds for fixed graduate student stipends and fixed cost-of-
education institutional allowances. This type of grant is approved on 
the basis of peer review recommendation.
    (2) Supplemental grant. This is an instrument by which HEP agrees to 
provide additional funding under a new grant as specified in paragraph 
(c)(1) of this section to provide special international study or thesis/
dissertation research travel allowances for graduate Fellows. This type 
of grant will not require additional peer review.



Sec. 3402.22  Other Federal statutes and regulations that apply.

    Several other Federal regulations or statutes apply to project 
grants awarded under this part. These include but are not limited to:

7 CFR Part 1.1--USDA implementation of the Freedom of Information Act.
7 CFR Part 3--USDA implementation of OMB Circular No. A-129 regarding 
debt collection.
7 CFR Part 15, Subpart A--USDA implementation of Title IV of the Civil 
Rights Act of 1964.
7 CFR Part 3015--USDA Uniform Federal Assistance Regulations, as 
amended, implementing OMB directives (i.e., Circular Nos. A-110 and A-
21), as well as general policy

[[Page 278]]

requirements applicable to recipients of Departmental financial 
assistance.
7 CFR Part 3017, as amended--USDA implementation of Governmentwide 
Debarment and Suspension (Nonprocurement) and Governmentwide 
Requirements for Drug-Free Workplace (Grants), as amended.
7 CFR Part 3018--USDA implementation of New Restrictions on Lobbying. 
Imposes new prohibitions and requirements for disclosure and 
certification related to lobbying on recipients of Federal contracts, 
grants, cooperative agreements, and loans.
7 CFR Part 3051--USDA implementation of OMB Circular No. A-133 regarding 
audits of institutions of higher education and other nonprofit 
institutions.
7 CFR Part 3407--CSREES implementation of the National Environmental 
Policy Act.
29 U.S.C. 794, Section 504--Rehabilitation Act of 1973, and 7 CFR Part 
15b (USDA implementation of statute), prohibiting discrimination based 
upon physical or mental handicap in Federally assisted programs.
35 U.S.C. 200 et seq.--Bayh-Dole Act, controlling allocation of rights 
to inventions made by employees of small business firms and domestic 
nonprofit organizations, including universities, in Federally assisted 
programs (implementing regulations are contained in 37 CFR Part 401).



Sec. 3402.23  Confidential aspects of proposals and awards.

    When a proposal results in a grant, it becomes a part of the record 
of the Agency's transactions, available to the public upon specific 
request. Information that the Agency and the grantee mutually agree to 
be of a privileged nature will be held in confidence to the extent 
permitted by law. Therefore, any information that the applicant wishes 
to have considered as privileged should be clearly marked as such and 
sent in a separate statement, two copies of which should accompany the 
proposal. The original copy of a proposal that does not result in a 
grant will be retained by the Agency for a period of one year. Other 
copies will be destroyed. Such a proposal will be released only with the 
consent of the applicant or to the extent required by law. A proposal 
may be withdrawn at any time prior to the final action thereon.



Sec. 3402.24  Access to peer review information.

    After final decisions have been announced, HEP will, upon request, 
inform the project director of the reasons for its decision on a 
proposal. Verbatim copies of summary reviews, not including the identity 
of the reviewers, will be made available to respective project directors 
upon specific request.



Sec. 3402.25  Documentation of progress on funded projects.

    (a) A Fellowship Appointment Documentation form (Form CSRS-707) is 
included in the application package. Upon request by HEP, project 
directors awarded grants under the program will be required to complete 
and submit this form. Follow-up progress reports will focus on assessing 
continuing progress of Fellows through their graduate programs of study 
(including activities supported by any special international study or 
thesis/dissertation research allowance) and on institution adherence to 
program guidelines.
    (b) A Graduate Fellow Exit Report (Form CSRS-709) is included in the 
application package. This form should be completed and submitted to HEP 
by the project director for each Fellow supported by a grant as soon as 
a Fellow either: graduates; is officially terminated from the fellowship 
or the academic program due to unsatisfactory academic progress; or 
voluntarily withdraws from the fellowship or the academic program. If a 
Fellow has not completed all degree requirements at the end of the five-
year grant duration, HEP may request a preliminary exit report. In such 
a case, a final exit report will be required at a later date. When a 
final exit report for each Fellow supported by a grant has been accepted 
by USDA, the grantee institution will have satisfied the requirement of 
a final performance report for the grant. Additional follow-up reports 
to track the Fellows' career patterns may be requested.
    (c) A Final Report must be completed and returned within 90 days 
after the expiration date of the project. The Final Report must be 
submitted to the program contact person and must contain proper data and 
information as specified in the ``Special Terms and Conditions'' of the 
award. Generally, the Final Report should include a summary of: 
recruitment strategies that were effective; successful mentoring 
procedures or activities; enrichment

[[Page 279]]

activities the fellows were afforded; barriers faced in recruiting and 
graduating fellows; and the impact of the fellowship grant on the 
overall quality of the educational programs of the institution.



Sec. 3402.26  Evaluation of program.

    Grantees should be aware that HEP may, as a part of its own program 
evaluation activities, carry out in-depth evaluations of assisted 
activities through independent third parties. Thus, grantees should be 
prepared to cooperate with evaluators retained by HEP to analyze both 
the institutional context and the impact of any supported project.



PART 3403--SMALL BUSINESS INNOVATION RESEARCH GRANTS PROGRAM--Table of Contents




                     Subpart A--General Information

Sec.
3403.1  Applicability of regulations.
3403.2  Definitions.
3403.3  Eligibility requirements.

                     Subpart B--Program Description

3403.4  Three-phase program.

           Subpart C--Preparation and Submission of Proposals

3403.5  Requests for proposals.
3403.6  General content of proposals.
3403.7  Proposal format for phase I applications.
3403.8  Proposal format for phase II applications.
3403.9  Submission of proposals.

                Subpart D--Proposal Review and Evaluation

3403.10  Proposal review
3403.11  Availability of information.

                  Subpart E--Supplementary Information

3403.12  Terms and conditions of grant awards.
3403.13  Notice of grant awards.
3403.14  Use of funds; changes.
3403.15  Other Federal statutes and regulations that apply.
3403.16  Other conditions.

    Authority: 15 U.S.C. 638.

    Source: 62 FR 26168, May 12, 1997, unless otherwise noted.



                     Subpart A--General Information



Sec. 3403.1  Applicability of regulations.

    (a) The regulations of this part apply to small business innovation 
research grants awarded under the general authority of section 630 of 
the Act making appropriations for Agriculture, Rural Development, and 
Related Agencies' programs for fiscal year ending September 30, 1987, 
and for other purposes, as made applicable by section 101(a) of Public 
Law 99-591, 100 Stat. 3341, and the provisions of the Small Business 
Innovation Development Act of 1982, as amended (15 U.S.C. 638). The 
Small Business Innovation Development Act of 1982, as amended, mandates 
that each Federal agency with an annual extramural budget for research 
or research and development in excess of $100 million participate in a 
Small Business Innovation Research (SBIR) program by reserving a 
statutory percentage of its annual extramural budget for award to small 
business concerns for research or research and development in order to 
stimulate technological innovation, use small business to meet Federal 
research and development needs, increase private sector 
commercialization of innovations derived from Federal research and 
development, and foster and encourage the participation of socially and 
economically disadvantaged small business concerns and women-owned small 
business concerns in technological innovation. The U.S. Department of 
Agriculture (USDA) will participate in this program through the issuance 
of competitive research grants which will be administered by the Office 
of Competitive Research Grants and Awards Management, Cooperative State 
Research, Education, and Extension Service (CSREES).
    (b) The regulations of this part do not apply to research grants 
awarded by the Department of Agriculture under any other authority.



Sec. 3403.2  Definitions.

    As used in this part:
    Ad hoc reviewers means experts or consultants, qualified by training 
and experience in particular scientific or technical fields to render 
expert advice on the scientific or technical merit of

[[Page 280]]

grant applications in those fields, who review on an individual basis 
one or several of the eligible proposals submitted to this program in 
their area of expertise and who submit to the Department written 
evaluations of such proposals.
    Awarding official means any officer or employee of the Department 
who has the authority to issue or modify research project grant 
instruments on behalf of the Department.
    Budget period means the interval of time into which the project 
period is divided for budgetary and reporting purposes.
    Commercialization means the process of developing markets and 
producing and delivering products or services for sale (whether by the 
originating party or by others); as used here, commercialization 
includes both government and commercial markets.
    Department means the Department of Agriculture.
    Funding agreement is any contract, grant, or cooperative agreement 
entered into between any Federal agency and any small business concern 
for the performance of experimental, developmental, or research work 
funded in whole or in part by the Federal Government.
    Grantee means the small business concern designated in the grant 
award document as the responsible legal entity to whom a grant is 
awarded under this part.
    Peer review group means experts or consultants, qualified by 
training and experience in particular scientific or technical fields to 
give expert advice on the scientific and technical merit of grant 
applications in those fields, who assemble as a group to discuss and 
evaluate all of the eligible proposals submitted to this program in 
their area of expertise.
    Principal investigator means a single individual designated by the 
grantee in the grant application and approved by the Department who is 
responsible for the scientific or technical direction of the project. 
Therefore, the individual should have a scientific and technical 
background.
    Program solicitation is a formal request for proposals whereby an 
agency notifies the small business community of its research or research 
and development needs and interests in selected areas and invites 
proposals from small business concerns in response to those needs.
    Project means the particular activity within the scope of one of the 
research topic areas identified in the annual solicitation of 
applications, which is supported by a grant award under this part.
    Project period means the total length of time that is approved by 
the Department for conducting the research project as outlined in an 
approved grant application.
    Research or research and development (R&D) means any activity which 
is:
    (1) A systematic, intensive study directed toward greater knowledge 
or understanding of the subject studied;
    (2) A systematic study directed specifically toward applying new 
knowledge to meet a recognized need; or
    (3) A systematic application of knowledge toward the production of 
useful materials, devices, and systems or methods, including design, 
development, and improvement of prototypes and new processes to meet 
specific requirements.
    Research project grant means the award by the Department of funds to 
a grantee to assist in meeting the costs of conducting for the benefit 
of the public an identified project which is intended and designed to 
establish, discover, elucidate, or confirm information or the underlying 
mechanisms relating to a research topic area identified in the annual 
solicitation of applications.
    Small business concern means a concern which at the time of award of 
phase I and phase II funding agreements meets the following criteria:
    (1) Is organized for profit, independently owned or operated, is not 
dominant in the field in which it is proposing, has its principal place 
of business located in the United States, has a number of employees not 
exceeding 500 (full-time, part-time, temporary, or other) in all 
affiliated concerns owned or controlled by a single parent concern, and 
meets the other regulatory requirements outlined in 13 CFR Part 121. 
Business concerns, other than licensed investment companies, or State

[[Page 281]]

development companies qualifying under the Small Business Investment Act 
of 1958, 15 U.S.C. 661, et seq., are affiliates of one another when 
directly or indirectly one concern controls or has the power to control 
the other or third parties (or party) control or have the power to 
control both. Control can be exercised through common ownership, common 
management, and contractual relationships. The term ``affiliates'' is 
defined in greater detail in 13 CFR 121.401(a) through (m). The term 
``number of employees'' is defined in 13 CFR 121.407. Business concerns 
include, but are not limited to, any individual, partnership, 
corporation, joint venture, association, or cooperative.
    (2) Is at least 51 percent owned, or in the case of a publicly owned 
business at least 51 percent of its voting stock is owned, by United 
States citizens or lawfully admitted permanent resident aliens.
    Socially and economically disadvantaged individual is a member of 
any of the following groups: Black Americans, Hispanic Americans, Native 
Americans, Asian-Pacific Americans, Subcontinent Asian Americans, other 
groups designated from time to time by the Small Business Administration 
(SBA) to be socially disadvantaged, or any other individual found to be 
socially and economically disadvantaged by the SBA pursuant to section 
8(a) of the Small Business Act, 15 U.S.C. 637(a).
    Socially and economically disadvantaged small business concern is 
one that is:
    (1) At least 51 percent owned by
    (i) An Indian tribe or a native Hawaiian organization, or
    (ii) One or more socially and economically disadvantaged 
individuals; and
    (2) Whose management and daily business operations are controlled by 
one or more socially and economically disadvantaged individuals.
    Subcontract is any agreement, other than one involving an employer-
employee relationship, entered into by a Federal Government funding 
agreement awardee requesting supplies or services required solely for 
the performance of the funding agreement.
    United States means the fifty States, the territories and 
possessions of the United States, the Commonwealth of Puerto Rico, the 
Trust Territory of the Pacific Islands, and the District of Columbia.
    Women-owned small business concern means a small business concern 
that is at least 51 percent owned by a woman or women who also control 
and operate it. ``Control'' as used in this context means exercising the 
power to make policy decisions. ``Operate'' as used in this context 
means being actively involved in the day-to-day management of the 
concern.



Sec. 3403.3  Eligibility requirements.

    (a) Eligibility of organization. (1) Each organization submitting