[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2006 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          7


          Part 2000 to End

                         Revised as of January 1, 2006


          Agriculture
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2006
          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 OFFICIAL EDITION NOTICE

          Legal Status and Use of Seals and Logos
          
          
          The seal of the National Archives and Records Administration 
              (NARA) authenticates the Code of Federal Regulations (CFR) as 
              the official codification of Federal regulations established 
              under the Federal Register Act. Under the provisions of 44 
              U.S.C. 1507, the contents of the CFR, a special edition of the 
              Federal Register, shall be judicially noticed. The CFR is 
              prima facie evidence of the original documents published in 
              the Federal Register (44 U.S.C. 1510).

          It is prohibited to use NARA's official seal and the stylized Code 
              of Federal Regulations logo on any republication of this 
              material without the express, written permission of the 
              Archivist of the United States or the Archivist's designee. 
              Any person using NARA's official seals and logos in a manner 
              inconsistent with the provisions of 36 CFR part 1200 is 
              subject to the penalties specified in 18 U.S.C. 506, 701, and 
              1017.

          Use of ISBN Prefix

          This is the Official U.S. Government edition of this publication 
              and is herein identified to certify its authenticity. Use of 
              the 0-16 ISBN prefix is for U.S. Government Printing Office 
              Official Editions only. The Superintendent of Documents of the 
              U.S. Government Printing Office requests that any reprinted 
              edition clearly be labeled as a copy of the authentic work 
              with a new ISBN.

              
              
          U . S . G O V E R N M E N T P R I N T I N G O F F I C E

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

          U.S. Superintendent of Documents  Washington, DC 
              20402-0001

          http://bookstore.gpo.gov

          Phone: toll-free (866) 512-1800; DC area (202) 512-1800

[[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 XX--Local Television Loan Guarantee Board         23
          Chapter XXVI--Office of Inspector General, 
          Department of Agriculture                                 59
          Chapter XXVII--Office of Information Resources 
          Management, Department of Agriculture                     67
          Chapter XXVIII--Office of Operations, Department of 
          Agriculture                                               73
          Chapter XXIX--Office of Energy Policy and New Uses, 
          Department of Agriculture                                 81
          Chapter XXX--Office of the Chief Financial Officer, 
          Department of Agriculture                                101
          Chapter XXXI--Office of Environmental Quality, 
          Department of Agriculture                                275
          Chapter XXXII--Office of Procurement and Property 
          Management, Department of Agriculture                    283
          Chapter XXXIII--Office of Transportation, Department 
          of Agriculture                                           289
          Chapter XXXIV--Cooperative State Research, 
          Education, and Extension Service, Department of 
          Agriculture                                              303

[[Page iv]]

          Chapter XXXV--Rural Housing Service, Department of 
          Agriculture                                              423
          Chapter XXXVI--National Agricultural Statistics 
          Service, Department of Agriculture                       655
          Chapter XXXVII--Economic Research Service, 
          Department of Agriculture                                663
          Chapter XXXVIII--World Agricultural Outlook Board, 
          Department of Agriculture                                669
          Chapter XLI [Reserved]
          Chapter XLII--Rural Business-Cooperative Service and 
          Rural Utilities Service, Department of Agriculture       673
  Finding Aids:
      Table of CFR Titles and Chapters........................     871
      Alphabetical List of Agencies Appearing in the CFR......     889
      List of CFR Sections Affected...........................     899

[[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, 2006), 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, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, 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 textual 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 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
fedreg.info@nara.gov.

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call toll-free, 
866-512-1800, or DC area, 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.gpoaccess.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.archives.gov/federal--
register. The NARA site also contains links to GPO Access.

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

January 1, 2006.

[[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, 2006.

    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.

    For this volume, Bonnie Fritts was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of Frances D. 
McDonald, assisted by Alomha S. Morris.

[[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 xx--Local Television Loan Guarantee Board Procedures        2200

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 Policy and New Uses, 
  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

[[Page 2]]


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

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

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 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.



Sec. Sec. 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.



Sec. Sec. 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]



Sec. Sec. 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.



Sec. Sec. 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]



Sec. Sec. 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.



Sec. Sec. 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.



Sec. Sec. 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]]



Sec. Sec. 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.

    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.
    (c) Persons performing authorized gratuitous services will be held 
to the same standard as regular FmHA or its

[[Page 20]]

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.

[43 FR 3694, Jan. 27, 1978, as amended at 68 FR 61333, Oct. 28, 2003]



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 of Part 2045--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.
    (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.

[[Page 21]]

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 ( )

USDA

[[Page 23]]



            CHAPTER XX--LOCAL TELEVISION LOAN GUARANTEE BOARD




  --------------------------------------------------------------------
Part                                                                Page
2200            Access to local television signals 
                    guaranteed loan program; general 
                    policies and procedures.................          25
2201            Local television loan guarantee program--
                    program regulations.....................          36

[[Page 25]]



PART 2200_ACCESS TO LOCAL TELEVISION SIGNALS GUARANTEED LOAN PROGRAM; 
GENERAL POLICIES AND PROCEDURES--Table of Contents




Sec.
2200.1 Definitions.
2200.2 Purpose and scope.
2200.3 Composition of the Board.
2200.4 Authority of the Board.
2200.5 Offices.
2200.6 Meetings and actions of the Board.
2200.7 Officer and staff responsibilities.
2200.8 Ex parte communications.
2200.9 Amendments.
2200.10 Restrictions on lobbying.
2200.11 Government-wide debarment and suspension (nonprocurement).
2200.12 Freedom of Information Act.

    Authority: 47 U.S.C. 1101 et seq.; Pub. L. 106-553; Pub. L.107-171.

    Source: 67 FR 76105, Dec. 11, 2002, unless otherwise noted.



Sec. 2200.1  Definitions.

    (a) Act means the Launching Our Communities' Access to Local 
Television Act of 2000, Title X of Public Law 106-553, 114 Stat. 2762A-
128.
    (b) Administrator means the Administrator of the Rural Utilities 
Service of the United States Department of Agriculture.
    (c) Board means the Launching Our Communities' Access to Local 
(LOCAL) Television Loan Guarantee Board.
    (d) Person means any individual, corporation, cooperative, 
partnership, joint venture, association, joint-stock company, limited 
liability company or partnership, trust, unincorporated organization, 
government entity, agency or instrumentality or any subdivision thereof.

[67 FR 76105, Dec. 11, 2002, as amended at 68 FR 74416, Dec. 23, 2003]



Sec. 2200.2  Purpose and scope.

    This part is issued by the Board pursuant to Section 1004 of the 
Act. This part describes the Board's organizational structure and the 
means and rules by which the Board takes actions.



Sec. 2200.3  Composition of the Board.

    The Board consists of the Secretary of the Treasury, the Chairman of 
the Board of Governors of the Federal Reserve System, the Secretary of 
Agriculture, and the Secretary of Commerce, or their respective 
designees. An individual may be designated a member of the Board only if 
the individual is an officer of the United States pursuant to an 
appointment by the President, by and with the advice and consent of the 
Senate.



Sec. 2200.4  Authority of the Board.

    The Board is authorized to guarantee loans in accordance with the 
provisions of the Act and procedures, rules, and regulations established 
by the Board; to make the determinations authorized by the Act; and to 
take such other actions as are necessary to carry out its functions in 
accordance with the Act.



Sec. 2200.5  Offices.

    The principal offices of the Board are at the U.S. Department of 
Agriculture, Rural Utilities Service, Room 2919-S, Stop 1541; 1400 
Independence Ave., SW.; Washington, DC 20256-1590.



Sec. 2200.6  Meetings and actions of the Board.

    (a) Chair. At its initial meeting, the Board shall select a Chair by 
an affirmative vote of not less than three members of the Board.
    (b) Place and frequency. The Board meets, on the call of the Chair, 
in order to consider matters requiring action by the Board. Time and 
place for any such meeting shall be determined by the members of the 
Board.
    (c) Quorum and voting. Three voting members of the Board constitute 
a quorum for the transaction of business. All decisions and 
determinations of the Board shall be made by an affirmative vote of not 
less than three members of the Board. All votes on determinations of the 
Board required by the Act shall be recorded in the minutes. A Board 
member may request that any vote be recorded according to individual 
Board members.
    (d) Agenda of meetings. To the extent practicable, an agenda for 
each meeting shall be distributed to members of the Board at least two 
days in advance of the date of the meeting, together with copies of 
materials relevant to the agenda items.

[[Page 26]]

    (e) Minutes. The Secretary shall keep minutes of each Board meeting 
and of action taken without a meeting, a draft of which is to be 
distributed to each member of the Board as soon as practicable after 
each meeting or action. To the extent practicable, the minutes of a 
Board meeting shall be corrected and approved at the next meeting of the 
Board.
    (f) Use of conference call communications equipment. Any member may 
participate in a meeting of the Board through the use of conference 
call, telephone or similar communications equipment, by means of which 
all persons participating in the meeting can simultaneously speak to and 
hear each other. Any member so participating in a meeting shall be 
deemed present for all purposes. Actions taken by the Board at meetings 
conducted through the use of such equipment, including the votes of each 
member, shall be recorded in the usual manner in the minutes of the 
meetings of the Board.
    (g) Actions between meetings. When, in the judgment of the Chair, 
circumstances occur making it desirable for the Board to consider action 
when it is not feasible to call a meeting, the relevant information and 
recommendations for action may be transmitted to the members by the 
Secretary and the voting members may communicate their votes to the 
Chair in writing (including an action signed in counterpart by each 
Board member), electronically, or orally (including telephone 
communication). Any action taken under this paragraph has the same 
effect as an action taken at a meeting. Any such action shall be 
recorded in the minutes.
    (h) Officers and staff of the Board. The Board shall appoint a 
Secretary and may appoint such other officers and staff as it deems 
appropriate, including an Executive Director and a Legal Counsel. An 
individual may hold more than one officer or staff position.
    (i) Delegations of authority. The Board may delegate authority, 
subject to such terms and conditions as the Board deems appropriate, to 
officers and staff to take certain actions not required by the Act to be 
taken by the Board. All delegations shall be made pursuant to 
resolutions of the Board and recorded in writing, whether in the minutes 
of a meeting or otherwise. Any action taken pursuant to such delegated 
authority has the effect of an action taken by the Board.



Sec. 2200.7  Officer and staff responsibilities.

    (a) Executive Director. The Executive Director advises and assists 
the Board in carrying out its responsibilities under the Act, provides 
general direction with respect to the administration of the Board's 
actions, directs the activities of the staff, and performs such other 
duties as the Board may require.
    (b) Legal Counsel. The Legal Counsel provides legal advice relating 
to the responsibilities of the Board and performs such other duties as 
the Board may require.
    (c) Secretary. The Secretary sends notice of all meetings, prepares 
minutes of all meetings, maintains a complete record of all votes and 
actions taken by the Board, has custody of all records of the Board, has 
authority to publish documents in the Federal Register upon approval of 
the Board and performs such other duties as the Board may require.
    (d) Other. The responsibilities of any other officer or staff shall 
be defined by the Board at the time of appointment of such position.



Sec. 2200.8  Ex parte communications.

    Communication with the Board shall be conducted through the staff of 
the Board. Oral or written communication, not on the public record, 
between the Board, or any member of the Board, and any party or parties 
interested in any matter pending before the Board concerning the 
substance of that matter is prohibited.



Sec. 2200.9  Amendments.

    The Board's rules may be adopted or amended, or new rules may be 
adopted, only by the affirmative vote of not less than three members of 
the Board. Authority to adopt or amend these rules may not be delegated.



Sec. 2200.10  Restrictions on lobbying.

    (a) No funds received through a Loan guaranteed under this Program 
in this chapter may be expended by the recipient of a Federal contract, 
grant, loan,

[[Page 27]]

loan guarantee, or cooperative agreement 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 or loan 
Guarantee, the entering into of any cooperative agreement, and the 
extension, continuation, renewal, amendment, or modification of any 
Federal contract, grant, loan, loan Guarantee, or cooperative agreement.
    (b) 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 the application form, 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.
    (c) 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 Standard Form-LLL 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.
    (d) Each person shall file a certification, contained in the 
application form, and a disclosure form (Standard Form-LLL), 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.
    (e) 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 (c) of this section.
    (f) 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 (d) or (e) 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.

[68 FR 74416, Dec. 23, 2003]



Sec. 2200.11  Government-wide debarment and suspension (nonprocurement).

    (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. The Board shall 
review the List of Debarred entities prior to making final loan 
Guarantee decisions. Suspension or debarment may be a basis for denying 
a loan Guarantee.

[[Page 28]]

    (b) This section applies 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 this 
section such transactions will be referred to as ``covered 
transactions.''
    (1) Covered transaction. For purposes of this section, 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 (b)(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.
    (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 $100,000) 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 may 
include loan officers or chief executive officers acting as principal 
investigators and 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 accepted);
    (iv) Federal employment;
    (v) Transactions pursuant to national or agency-recognized 
emergencies or disasters;
    (vi) Incidental benefits derived from ordinary governmental 
operations; and
    (vii) Other transactions where the application of this section would 
be prohibited by law.
    (3) Board covered transactions. This section applies to the Board's 
Loan Guarantees, subcontracts and transactions at any tier that are 
charges as direct or indirect costs, regardless of type.
    (c) 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 paragraph (l) of 
this section.
    (d) 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 paragraph (b)(1)(ii) of this section for the 
period of their exclusion).

[[Page 29]]

    (e) 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 accepted);
    (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 this section would 
be prohibited by law.
    (f) Persons who are ineligible are excluded in accordance with the 
applicable statutory, executive order, or regulatory authority.
    (g) Persons who accept voluntary exclusions are excluded in 
accordance with the terms of their settlements. The Board shall, and 
participants may, contact the original action agency to ascertain the 
extent of the exclusion.
    (h) The Board 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. 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 the Executive Order.
    (i) 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.
    (j) 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 paragraph 
(h) of this section.
    (k) Except as permitted under paragraphs (h) or (i) of this section, 
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.
    (l) Violation of the restriction under paragraph (k) 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.
    (m) 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, 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.

[68 FR 74416, Dec. 23, 2003]

[[Page 30]]



Sec. 2200.12  Freedom of Information Act.

    (a) Definitions. All terms used in this section, which are defined 
in 5 U.S.C. 551 or 5 U.S.C. 552 shall have the same meaning in this 
section. In addition the following definitions apply to this section:
    (1) FOIA, as used in this section, means the ``Freedom of 
Information Act,'' as amended, 5 U.S.C. 552.
    (2) Commercial use request means a request from or on behalf of one 
who seeks information for a use or purpose that furthers the commercial, 
trade, or profit interests of the requester or the person on whose 
behalf the request is made.
    (3) Direct costs mean those expenditures that the Board actually 
incurs in searching for, reviewing, and duplicating documents in 
response to a request made under paragraph (c) of this section. Direct 
costs include, for example, the labor costs of the employee performing 
the work (the basic rate of pay for the employee, plus 16 percent of 
that rate to cover benefits). Not included in direct costs are overhead 
expenses such as the costs of space and heating or lighting of the 
facility in which the records are kept.
    (4) Duplication means the process of making a copy of a document in 
response to a request for disclosure of records or for inspection of 
original records that contain exempt material or that otherwise cannot 
be inspected directly. Among others, such copies may take the form of 
paper, microfilm, audiovisual materials, or machine-readable 
documentation (e.g., magnetic tape or disk).
    (5) Educational institution means a preschool, a public or private 
elementary or secondary school, or an institution of undergraduate 
higher education, graduate higher education, professional education, or 
an institution of vocational education that operates a program of 
scholarly research.
    (6) Noncommercial scientific institution refers to an institution 
that is not operated on a ``commercial'' basis (as that term is used in 
this section) and which is operated solely for the purpose of conducting 
scientific research, the results of which are not intended to promote 
any particular product or industry.
    (7) News means information about current events or that would be of 
current interest to the public. Examples of news media entities include, 
but are not limited to, television or radio stations broadcasting to the 
public at large, and publishers of newspapers and other periodicals (but 
only in those instances when they can qualify as disseminators of 
``news'') who make their products available for purchase or subscription 
by the general public. ``Freelance'' journalists may be regarded as 
working for a news organization if they can demonstrate a solid basis 
for expecting publication through that organization, even though not 
actually employed by it.
    (8) Representative of the news media means any person actively 
gathering news for an entity that is organized and operated to publish 
or broadcast news to the general public.
    (9) Review means the process of examining documents, located in 
response to a request for access, to determine whether any portion of a 
document is exempt information. It includes doing all that is necessary 
to excise the documents and otherwise to prepare them for release. 
Review does not include time spent resolving general legal or policy 
issues regarding the application of exemptions.
    (10) Search means the process of looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification within documents. Searches may be done manually or by 
computer.
    (b) Records available for public inspection and copying--(1) Types 
of records made available. The information in this section is furnished 
for the guidance of the public and in compliance with the requirements 
of the FOIA. This section sets forth the procedures the Board follows to 
make publicly available the materials specified in 5 U.S.C. 552(a)(2). 
These materials shall be made available for inspection and copying at 
the Board's offices pursuant to 5 U.S.C. 552(a)(2). Information 
routinely provided to the public as part of a regular Board activity 
(for example, press releases) may be provided to the public without 
following this section.
    (2) Reading room procedures. Information available under this 
section is

[[Page 31]]

available for inspection and copying, from 9 a.m. to 5 p.m. weekdays, at 
1400 Independence Avenue, SW., Washington, DC.
    (3) Electronic records. Information available under this section 
shall also be available on the Board's Web site found at http://
www.usda.gov/rus/localtvboard.
    (c) Records available to the public on request--(1) Types of records 
made available. All records of the Board that are not available under 
paragraph (b) of this section shall be made available upon request, 
pursuant to the procedures in this section and the exceptions set forth 
in the FOIA.
    (2) Procedures for requesting records. A request for records shall 
reasonably describe the records in a way that enables the Board's staff 
to identify and produce the records with reasonable effort and without 
unduly burdening or significantly interfering with any of the Board's 
operations. The request shall be submitted in writing to the Secretary 
of the Board at LOCAL Television Loan Guarantee Board, 1400 Independence 
Avenue, SW., STOP 1575, Room 2919-S, Washington, DC 20250-1575, or sent 
by facsimile to the Secretary of the Board at (202) 720-2734. The 
request shall be clearly marked FREEDOM OF INFORMATION ACT REQUEST.
    (3) Contents of request. The request shall contain the following 
information:
    (i) The name and address of the requester, and the telephone number 
at which the requester can be reached during normal business hours;
    (ii) Whether the requested information is intended for commercial 
use, or whether the requester represents an educational or noncommercial 
scientific institution, or news media;
    (iii) A statement agreeing to pay the applicable fees, or a 
statement identifying any fee limitation desired, or a request for a 
waiver or reduction of fees that satisfies paragraph (f) of this 
section.
    (d) Processing requests--(1) Priority of responses. The date of 
receipt for any request, including one that is addressed incorrectly or 
that is referred to the Board by another agency, is the date the 
Secretary of the Board actually receives the request. The Secretary of 
the Board shall normally process requests in the order they are 
received. However, in the Secretary of the Board's discretion, the Board 
may use two or more processing tracks by distinguishing between simple 
and more complex requests based on the number of pages involved, or some 
other measure of the amount of work and/or time needed to process the 
request, and whether the request qualifies for expedited processing as 
described in paragraph (d)(2) of this section. When using multitrack 
processing, the Secretary of the Board may provide requesters in the 
slower track(s) with an opportunity to limit the scope of their requests 
in order to qualify for faster processing. The Secretary of the Board 
shall contact the requester by telephone or by letter, whichever is most 
efficient in each case.
    (2) Expedited processing. (i) A person may request expedited access 
to records by submitting a statement, certified to be true and correct 
to the best of that person's knowledge and belief, that demonstrates a 
compelling need for the records, as defined in 5 U.S.C. 552(a)(6)(E)(v).
    (ii) The Secretary of the Board shall notify a requester of the 
determination whether to grant or deny a request for expedited 
processing within ten working days of receipt of the request. If the 
Secretary of the Board grants the request for expedited processing, the 
Board shall process the request for access to information as soon as 
practicable. If the Secretary of the Board denies a request for 
expedited processing, the requester may file an appeal pursuant to the 
procedures set forth in paragraph (e) of this section, and the Board 
shall respond to the appeal within twenty days after the appeal was 
received by the Board.
    (3) Time limits. The time for response to requests shall be 20 
working days, except:
    (i) In the case of expedited treatment under paragraph (d)(2) of 
this section;
    (ii) Where the running of such time is suspended for payment of fees 
pursuant to paragraph (f)(2)(ii) of this section;
    (iii) Where the estimated charge is less than $250, and the 
requester does

[[Page 32]]

not guarantee payment pursuant to paragraph (f)(2)(i) of this section; 
or
    (iv) In unusual circumstances, as defined in 5 U.S.C. 
552(a)(6)(B)(iii), the time limit may be extended for a period of time 
not to exceed 10 working days as provided by written notice to the 
requester, setting forth the reasons for the extension and the date on 
which a determination is expected to be dispatched; or such alternative 
time period as mutually agreed to by the Secretary of the Board and the 
requester when the Secretary of the Board notifies the requester that 
the request cannot be processed in the specified time limit.
    (4) Response to request. In response to a request that satisfies 
paragraph (c) of this section, an appropriate search shall be conducted 
of records in the custody and control of the Board on the date of 
receipt of the request, and a review made of any responsive information 
located. The Secretary of the Board shall notify the requester of:
    (i) The Secretary of the Board's determination of the request and 
the reasons therefore;
    (ii) The information withheld, and the basis for withholding; and
    (iii) The right to appeal any denial or partial denial, pursuant to 
paragraph (e) of this section.
    (5) Referral to another agency. To the extent a request covers 
documents that were created by, obtained from, classified by, or is in 
the primary interest of another agency, the Secretary of the Board may 
refer the request to that agency for a direct response by that agency 
and inform the requester promptly of the referral. The Secretary of the 
Board shall consult with another Federal agency before responding to a 
requester if the Board receives a request for a record in which:
    (i) Another Federal agency subject to the FOIA has a significant 
interest, but not the primary interest; or
    (ii) Another Federal agency not subject to the FOIA has the primary 
interest or a significant interest. Ordinarily, the agency that 
originated a record will be presumed to have the primary interest in it.
    (6) Providing responsive records. (i) A copy of records or portions 
of records responsive to the request shall be sent to the requester by 
regular U.S. mail to the address indicated in the request, unless the 
requester elects to take delivery of the documents at the Board's 
Freedom of Information Office or makes other acceptable arrangements, or 
the Secretary of the Board deems it appropriate to send the documents by 
another means. The Secretary of the Board shall provide a copy of the 
record in any form or format requested if the record is readily 
reproducible in that form or format, but the Secretary of the Board need 
not provide more than one copy of any record to a requester.
    (ii) The Secretary of the Board shall provide any reasonably 
segregable portion of a record that is responsive to the request after 
deleting those portions that are exempt under the FOIA or this section.
    (iii) Except where disclosure is expressly prohibited by statute, 
regulation, or order, the Secretary of the Board may authorize the 
release of records that are exempt from mandatory disclosure whenever 
the Board or designated Board members determine that there would be no 
foreseeable harm in such disclosure.
    (iv) The Board is not required in response to the request to create 
records or otherwise to prepare new records.
    (7) Prohibition against disclosure. Except as provided in this part, 
no officer, employee, or agent of the Board shall disclose or permit the 
disclosure of any unpublished information of the Board to any person 
(other than Board officers, employees, or agents properly entitled to 
such information for the performance of official duties), unless 
required by law.
    (e) Appeals. (1) Any person denied access to Board records requested 
under paragraph (c) of this section, denied expedited processing under 
paragraph (d) of this section, or denied a waiver of fees under 
paragraph (f) of this section may file a written appeal within 30 
calendar days after the date of such denial with the Board. The written 
appeal shall prominently display the phrase FREEDOM OF INFORMATION ACT 
APPEAL on the first page, and shall be addressed to Chairman of the 
Board, LOCAL Television Loan Guarantee Board, 1400 Independence Avenue, 
SW.,

[[Page 33]]

STOP 1575, Room 2919-S, Washington, DC 20250-1575, or sent by facsimile 
to (202) 720-2734. The appeal shall include a copy of the original 
request, the initial denial, if any, and a statement of the reasons why 
the requested records should be made available and why the initial 
denial was in error.
    (2) The Chairman of the Board shall make a determination regarding 
any appeal within 20 working days of actual receipt of the appeal, and 
the determination letter shall notify the appealing party of the right 
to seek judicial review in event of denial.
    (f) Fee schedules and waiver of fees--(1) Fee schedule. The fees 
applicable to a request for records pursuant to paragraph (c) of this 
section are set forth in the uniform fee schedule at the end of this 
paragraph (f).
    (i) Search. (A) Search fees shall be charged for all requests other 
than requests made by educational institutions, noncommercial scientific 
institutions, or representatives of the news media, subject to the 
limitations of paragraph (f)(1)(iv) of this section. The Secretary of 
the Board shall charge for time spent searching even if no responsive 
record is located or if the Secretary of the Board withholds the 
record(s) located as entirely exempt from disclosure. Search fees shall 
be the direct costs of conducting the search by the involved employees.
    (B) For computer searches of records, requesters will be charged the 
direct costs of conducting the search, although certain requesters (as 
provided in paragraph (f)(3) of this section) will be charged no search 
fee and certain other requesters (as provided in paragraph (f)(3)) are 
entitled to the cost equivalent of two hours of manual search time 
without charge. These direct costs include the costs, attributable to 
the search, of operating a central processing unit and operator/
programmer salary.
    (ii) Duplication. Duplication fees will be charged to all 
requesters, subject to the limitations of paragraph (f)(1)(iv) of this 
section. For a paper photocopy of a record (no more than one copy of 
which need be supplied), the fee shall be 15 cents per page. For copies 
produced by computer, such as tapes or printouts, the Secretary of the 
Board shall charge the direct costs, including operator time, of 
producing the copy. For other forms of duplication, the Secretary of the 
Board will charge the direct costs of that duplication.
    (iii) Review. Review fees shall be charged to requesters who make a 
commercial use request. Review fees shall be charged only for the 
initial record review--the review done when the Secretary of the Board 
determines whether an exemption applies to a particular record at the 
initial request level. No charge will be made for review at the 
administrative appeal level for an exemption already applied. However, 
records withheld under an exemption that is subsequently determined not 
to apply may be reviewed again to determine whether any other exemption 
not previously considered applies, and the costs of that review are 
chargeable. Review fees shall be the direct costs of conducting the 
review by the involved employees.
    (iv) Limitations on charging fees. (A) No search fee will be charged 
for requests by educational institutions, noncommercial scientific 
institutions, or representatives of the news media.
    (B) No search fee or review fee will be charged for a quarter-hour 
period unless more than half of that period is required for search or 
review.
    (C) Whenever a total fee calculated under this paragraph is $25 or 
less for any request, no fee will be charged.
    (D) For requesters other than those seeking records for a commercial 
use, no fee will be charged unless the cost of search in excess of two 
hours plus the cost of duplication in excess of 100 pages totals more 
than $25.
    (2) Payment procedures. All persons requesting records pursuant to 
paragraph (c) of this section shall pay the applicable fees before the 
Secretary of the Board sends copies of the requested records, unless a 
fee waiver has been granted pursuant to paragraph (f)(6) of this 
section. Requesters must pay fees by check or money order made payable 
to the Treasury of the United States.
    (i) Advance notification of fees. If the estimated charges are 
likely to exceed $25, the Secretary of the Board shall notify the 
requester of the estimated amount, unless the requester has indicated a 
willingness to pay fees as high

[[Page 34]]

as those anticipated. Upon receipt of such notice, the requester may 
confer with the Secretary of the Board to reformulate the request to 
lower the costs. The processing of the request shall be suspended until 
the requester provides the Secretary of the Board with a written 
guarantee that payment will be made upon completion of the processing.
    (ii) Advance payment. The Secretary of the Board shall require 
advance payment of any fee estimated to exceed $250. The Secretary of 
the Board shall also require full payment in advance where a requester 
has previously failed to pay a fee in a timely fashion. If an advance 
payment of an estimated fee exceeds the actual total fee by $1 or more, 
the difference shall be refunded to the requester. The time period for 
responding to requests under paragraph (d)(4) of this section, and the 
processing of the request shall be suspended until the Secretary of the 
Board receives the required payment.
    (iii) Late charges. The Secretary of the Board may assess interest 
charges when fee payment is not made within 30 days of the date on which 
the billing was sent. Assessment of such interest will commence on the 
31st day following the day on which the billing was sent. Interest is at 
the rate prescribed in 31 U.S.C. 3717.
    (3) Categories of uses. The fees assessed depend upon the fee 
category. In determining which category is appropriate, the Secretary of 
the Board shall look to the identity of the requester and the intended 
use set forth in the request for records. Where a requester's 
description of the use is insufficient to make a determination, the 
Secretary of the Board may seek additional clarification before 
categorizing the request.
    (i) Commercial use requester. The fees for search, duplication, and 
review apply when records are requested for commercial use.
    (ii) Educational, non-commercial scientific institutions, or 
representatives of the news media requesters. The fees for duplication 
apply when records are not sought for commercial use, and the requester 
is a representative of the news media or an educational or noncommercial 
scientific institution, whose purpose is scholarly or scientific 
research. The first 100 pages of duplication, however, will be provided 
free.
    (iii) All other requesters. For all other requests, the fees for 
search and duplication apply. The first two hours of search time and the 
first 100 pages of duplication, however, will be provided free.
    (4) Nonproductive search. Fees for search may be charged even if no 
responsive documents are found. Fees for search and review may be 
charged even if the request is denied.
    (5) Aggregated requests. A requester may not file multiple requests 
at the same time, solely in order to avoid payment of fees. If the 
Secretary of the Board reasonably believes that a requester is 
separating a request into a series of requests for the purpose of 
evading the assessment of fees or that several requesters appear to be 
acting together to submit multiple requests solely in order to avoid 
payment of fees, the Secretary of the Board may aggregate such requests 
and charge accordingly. It is considered reasonable for the Secretary of 
the Board to presume that multiple requests by one requester on the same 
topic made within a 30-day period have been made to avoid fees.
    (6) Waiver or reduction of fees. A request for a waiver or reduction 
of the fees, and the justification for the waiver, shall be included 
with the request for records to which it pertains. If a waiver is 
requested and the requester has not indicated in writing an agreement to 
pay the applicable fees if the waiver request is denied, the time for 
response to the request for documents, as set forth in under paragraph 
(d)(4) of this section, shall not begin until a determination has been 
made on the request for a waiver or reduction of fees.
    (i) Standards for determining waiver or reduction. The Secretary of 
the Board may grant a waiver or reduction of fees where it is determined 
both that disclosure of the information is in the public interest 
because it is likely to contribute significantly to public understanding 
of the operation or activities of the government, and that the 
disclosure of information is not primarily in the commercial interest of

[[Page 35]]

the requester. In making this determination, the following factors shall 
be considered:
    (A) Whether the subject of the records concerns the operations or 
activities of the government;
    (B) Whether disclosure of the information is likely to contribute 
significantly to public understanding of government operations or 
activities;
    (C) Whether the requester has the intention and ability to 
disseminate the information to the public;
    (D) Whether the information is already in the public domain;
    (E) Whether the requester has a commercial interest that would be 
furthered by the disclosure; and, if so,
    (F) Whether the magnitude of the identified commercial interest of 
the requester is sufficiently large, in comparison with the public 
interest in disclosure, that disclosure is primarily in the commercial 
interest of the requester.
    (ii) Contents of request for waiver. A request for a waiver or 
reduction of fees shall include a clear statement of how the request 
satisfies the criteria set forth in paragraph (f)(6)(i) of this section.
    (iii) Burden of proof. The burden shall be on the requester to 
present evidence or information in support of a request for a waiver or 
reduction of fees.
    (iv) Determination by Secretary of the Board. The Secretary of the 
Board shall make a determination on the request for a waiver or 
reduction of fees and shall notify the requester accordingly. A denial 
may be appealed to the Board in accordance with paragraph (e) of this 
section.
    (7) Uniform fee schedule.

------------------------------------------------------------------------
                  Service                               Rate
------------------------------------------------------------------------
(i) Manual search.........................  Actual salary rate of
                                             employee involved, plus 16
                                             percent of salary rate.
(ii) Computerized search..................  Actual direct cost,
                                             including operator time.
(iii) Duplication of records:
    (A) Paper copy reproduction...........  $.15 per page.
    (B) Other reproduction (e.g., computer  Actual direct cost,
     disk or printout, microfilm,            including operator time.
     microfiche, or microform).
(iv) Review of records (includes employee   Actual salary rate of
 preparation for release, i.e. excising).    conducting review, plus 16
                                             percent of salary rate.
------------------------------------------------------------------------

    (g) Request for confidential treatment of business information--(1) 
Submission of request. Any submitter of information to the Board who 
desires confidential treatment of business information pursuant to 5 
U.S.C. 552(b)(4) shall file a request for confidential treatment with 
the Board at the time the information is submitted or a reasonable time 
after submission.
    (2) Form of request. Each request for confidential treatment of 
business information shall state in reasonable detail the facts 
supporting the commercial or financial nature of the business 
information and the legal justification under which the business 
information should be protected. Conclusory statements that release of 
the information would cause competitive harm generally will not be 
considered sufficient to justify confidential treatment.
    (3) Designation and separation of confidential material. All 
information considered confidential by a submitter shall be clearly 
designated ``PROPRIETARY'' or ``BUSINESS CONFIDENTIAL'' in the 
submission and separated from information for which confidential 
treatment is not requested. Failure to segregate confidential commercial 
or financial information from other material may result in release of 
the nonsegregated material to the public without notice to the 
submitter.
    (h) Request for access to confidential commercial or financial 
information--(1) Request for confidential commercial or financial 
information. A request by a submitter for confidential treatment of any 
business information shall be considered in connection with a request 
for access to that information.
    (2) Notice to the submitter. (i) The Secretary of the Board shall 
notify a submitter who requested confidential treatment of information 
pursuant to 5 U.S.C. 552(b)(4), of the request for access.
    (ii) Absent a request for confidential treatment, the Secretary of 
the Board may notify a submitter of a request for

[[Page 36]]

access to submitter's business information if the Secretary of the Board 
reasonably believes that disclosure of the information may cause 
substantial competitive harm to the submitter.
    (iii) The notice given to the submitter by mail, return receipt 
requested, shall be given as soon as practicable after receipt of the 
request for access, and shall describe the request and provide the 
submitter seven working days from the date of notice, to submit written 
objections to disclosure of the information. Such statement shall 
specify all grounds for withholding any of the information and shall 
demonstrate why the information which is considered to be commercial or 
financial information, and that the information is a trade secret, is 
privileged or confidential, or that its disclosure is likely to cause 
substantial competitive harm to the submitter. If the submitter fails to 
respond to the notice within the time specified, the submitter will be 
considered to have no objection to the release of the information. 
Information a submitter provides under this paragraph may itself be 
subject to disclosure under the FOIA.
    (3) Exceptions to notice to submitter. Notice to the submitter need 
not be given if:
    (i) The Secretary of the Board determines that the request for 
access should be denied;
    (ii) The requested information lawfully has been made available to 
the public;
    (iii) Disclosure of the information is required by law (other than 5 
U.S.C. 552); or
    (iv) The submitter's claim of confidentiality under 5 U.S.C. 
552(b)(4) appears obviously frivolous or has already been denied by the 
Secretary of the Board, except that in this last instance the Secretary 
of the Board shall give the submitter written notice of the 
determination to disclose the information at least seven working days 
prior to disclosure.
    (4) Notice to requester. At the same time the Secretary of the Board 
notifies the submitter, the Secretary of the Board also shall notify the 
requester that the request is subject to the provisions of this section.
    (5) Determination by Secretary of the Board. The Secretary of the 
Board's determination whether or not to disclose any information for 
which confidential treatment has been requested pursuant to this section 
shall be communicated to the submitter and the requester immediately. If 
the Secretary of the Board determines to disclose the business 
information over the objection of a submitter, the Secretary of the 
Board shall give the submitter written notice via mail, return receipt 
requested, or similar means, which shall include:
    (i) A statement of reason(s) why the submitter's objections to 
disclosure were not sustained;
    (ii) A description of the business information to be disclosed; and
    (iii) A statement that the component intends to disclose the 
information seven working days from the date the submitter receives the 
notice.
    (6) Notice of lawsuit. The Secretary of the Board shall promptly 
notify any submitter of information covered by this section of the 
filing of any suit against the Board to compel disclosure of such 
information, and shall promptly notify a requester of any suit filed 
against the Board to enjoin the disclosure of requested documents.

[68 FR 74416, Dec. 23, 2003]



PART 2201_LOCAL TELEVISION LOAN GUARANTEE PROGRAM_PROGRAM REGULATIONS
--Table of Contents




                            Subpart A_General

Sec.
2201.1 Definitions.
2201.2-2201.8 [Reserved]
2201.9 Limitation on the applicability of the definition of Local 
          Television Broadcast signals.

                        Subpart B_Loan Guarantees

2201.10 Loan amount and Guarantee percentage.
2201.11 Application requirements.
2201.12 Applicant.
2201.13 Lender.
2201.14 Eligible Loan purposes.
2201.15 Ineligible Loan purposes.
2201.16 Environmental requirements.
2201.17 Submission of applications.
2201.18 Application selection.
2201.19 Loan terms.
2201.20 Collateral.

[[Page 37]]

2201.21 Fees.
2201.22 Issuance of Guarantees.
2201.23 Funding for the Program.
2201.24 Insurance.
2201.25 Performance Agreement.
2201.26 Lender standard of care.
2201.27 Assignment or transfer of Loans.
2201.28 Participation in guaranteed Loans.
2201.29 Supplemental guarantees.
2201.30 Adjustments.
2201.31 Indemnification.
2201.32 Termination of obligations.
2201.33 Defaults.
2201.34 OMB Control Number.

    Authority: 47 U.S.C. 1101 et seq.; Pub. L. 106-553; Pub. L. 107-171.

    Source: 68 FR 74422, Dec. 23, 2003, unless otherwise noted.



                            Subpart A_General



Sec. 2201.1  Definitions.

    Act means Title X of Public Law 106-553, entitled the Launching Our 
Communities' Access to Local Television (LOCAL TV) Act of 2000, as 
amended.
    Administrator means the Administrator of the Rural Utilities 
Service, U.S. Department of Agriculture, acting pursuant to the Act and 
on behalf of the Board.
    Affiliate means any person or entity that controls, or is controlled 
by, or is under common control with, another person or entity; and may 
include any individual who is a director or senior management officer of 
an Affiliate, a shareholder controlling more than 25 percent of the 
voting securities of an Affiliate, or more than 25 percent of the 
ownership interest in an Affiliate not organized in stock form.
    Agent means that Lender authorized to take such actions, exercise 
such powers, and perform such duties on behalf and in representation of 
all Lenders party to a Guarantee of a single Loan, as is required by, or 
necessarily incidental to, the terms and conditions of the Guarantee.
    Applicant means any party that is seeking financing under the Act in 
order to provide access to Local Television Broadcast Signals for 
households in Nonserved Areas and Underserved Areas.
    Asset means anything owned by the Applicant that has commercial or 
exchange value including, but not limited to, cash flows and rights 
thereto.
    Banking Institution means a bank or bank holding company.
    Board means the LOCAL Television Loan Guarantee Board authorized by 
the Act to approve Guarantees to facilitate access, on a technologically 
neutral basis, to Local Television Broadcast Signals for households 
located in Nonserved Areas and Underserved Areas.
    Borrower means the entity liable for the payment of principal and 
interest on any Loan guaranteed under the Act, where such entity shall 
be a corporation, partnership, joint venture trustee or government 
entity, agency or instrumentality. An individual cannot be a Borrower.
    Collateral means all Assets economically pledged by the Applicant, 
any Affiliate of the Applicant, or both that is required under the 
provisions of the Act or the Loan Documents to secure the repayment of 
the indebtedness of the Borrower under the Loan Documents.
    Default means a failure by a Borrower, other than a Payment Default, 
on its obligations under the Loan Documents which has not been cured by 
the Borrower or duly waived by the Lender within any applicable cure 
period.
    Designated Market Area (DMA) means an area designated as such by 
Nielsen Media Research and published in the most recent Nielsen Station 
Index Directory and Nielsen Station Index United States Television 
Household Estimates.
    Generally Accepted Accounting Principles (GAAP) means a common set 
of accounting standards and procedures that are either promulgated by an 
authoritative accounting rulemaking body or accepted as appropriate due 
to wide-spread application in the United States.
    Guarantee means the written agreement, including all terms and 
conditions and all exhibits thereto, guaranteeing repayment of a 
specified percentage of the principal of a Loan pursuant to the Act.
    Guaranteed Portion means the portion of the principal of a loan that 
is subject to the Guarantee.

[[Page 38]]

    High-Speed Internet means a data connection to the Internet 
providing an information rate exceeding 200 kilobits per second (kbps) 
in the consumer's connection to the network in at least one direction, 
either from the provider to the consumer (downstream) or from the 
consumer to the provider (upstream).
    Lender means an entity that has committed to make a Loan to an 
Applicant, where such entity shall be:
    (1) An entity currently engaged in commercial lending in the normal 
course of its business; or
    (2) A nonprofit corporation, including the National Rural Utilities 
Cooperative Finance Corporation, engaged primarily in commercial 
lending, but does not include any governmental entity or any Affiliate 
thereof, the Federal Agricultural Mortgage Corporation, any institution 
supervised by the Office of Federal Housing Enterprise Oversight, the 
Federal Housing Finance Board, or any Affiliate of such entities.
    Loan means a Loan guaranteed pursuant to the Act and includes the 
funds made available to the Borrower by the Lender.
    Loan Agreement means the contract between the Lender and the 
Borrower, approved by the Board, setting forth the terms applicable to 
the Loan.
    Loan Documents means the Loan Agreement, Guarantee and all other 
instruments, and all documentation between or among the Lender, the 
Borrower, and the Board or Administrator, evidencing the making, 
disbursing, securing, collecting, or otherwise administering of the 
Loan.
    Local Television Broadcast means the signals of all Television 
Broadcast Stations located in a DMA. However, when more than one 
commercial Television Broadcast Station within the same DMA is 
affiliated with a particular Television Network, the signal of any one 
of these commercial Television Broadcast Stations will qualify as the 
Local Television Broadcast Signal of the network at that location, 
unless such stations are licensed to communities in different States, in 
which case both stations must be counted. Even if they are not 
affiliated with the same Television Network, when two or more commercial 
Television Broadcast Stations simultaneously broadcast the identical 
programming for more than 50 percent of the broadcast week, the signal 
of any one of these Television Broadcast Stations will qualify as the 
Local Television Broadcast Signal. When two or more noncommercial 
television stations simultaneously broadcast the same programming for 
more than 50 percent of prime time as defined in 47 CFR 76.5(n), and 
more than 50 percent outside of prime time over a 3-month period, the 
signal of any one of these Television Broadcast Stations will qualify as 
the Local Television Broadcast Signal. In areas not included in a DMA, 
but under the jurisdiction of the Federal Communications Commission 
(FCC), an appropriate set of Local Television Broadcast Signals will be 
determined on a case-by-case basis, subject to the approval of the 
Board.
    Low Power Television Station means a station authorized by the FCC 
under subpart G of part 74 of title 47, Code of Federal Regulations, 
that may retransmit the programs and signals of a Television Broadcast 
Station and that may originate programming in any amount greater than 30 
seconds per hour and/or operates a subscription service.
    Net equity means the value of the total Assets of an entity, less 
the total liabilities of that entity, as recorded under Generally 
Accepted Accounting Principles for the fiscal quarter ended immediately 
prior to the date on which the subject Loan is approved.
    Net Worth Ratio means the book value of equity over total Assets.
    Nonserved Area means any area that is outside the grade B contour 
(as determined using standards employed by the Federal Communications 
Commission (FCC)) of the Local Television Broadcast Signals serving a 
particular Designated Market Area and does not have access to such 
signals by any commercial, for profit, multichannel video provider.
    Offer of Guarantee means the Board's decision to approve an 
application for, and extend a Guarantee under, the LOCAL TV Act.
    Payment Default means any failure of a Borrower to pay any amount of 
principal or interest on the Loan when and

[[Page 39]]

as due under the Loan Agreement (including, without limitation, 
following any acceleration thereunder) which has not been cured within 
any applicable cure period.
    Payment Demand means a request, by the Lender or Agent, following a 
Payment Default, in writing to the Board, for payment under the 
Guarantee in respect of the defaulted principal.
    Performance Agreement means the written agreement between the 
Administrator and the Borrower (and Lender, if applicable), pursuant to 
which the Borrower provides stipulated performance schedules with 
respect to Local Television Broadcast Signals provided through the 
Project.
    Program means the LOCAL Television Loan Guarantee Program (LOCAL TV 
Program) established under the Act.
    Project means a proposal for the acquisition, improvement, 
enhancement, construction, deployment, launch, or rehabilitation of the 
means to deliver Local Television Broadcast Signals to a Nonserved Area 
or Underserved Area.
    Regulatory Capital Ratio means tier 1 and total capital ratios as 
shown on a Banking Institution's balance sheet.
    Security means all Collateral required by the provisions of the Act 
or the Loan Documents to secure repayment of any indebtedness of the 
Borrower under the Loan Documents.
    Separate Tier of Local Television Broadcast Signals means a category 
or package of services provided by the applicant, to include the Local 
Television Broadcast Signals and all over-the-air television broadcast 
signals carried pursuant to the must-carry requirement of the 
Communications Act of 1934, as amended, offered as a distinct and 
separate service choice to the applicant's subscribers at a specified 
lower rate when compared to other program service choices.
    Television Broadcast Station means an over-the-air commercial or 
noncommercial Television Broadcast Station licensed by the FCC under 
subpart E of part 73 of title 47, Code of Federal Regulations, except 
that such term does not include a Low Power Television Station or 
Television Broadcast Translator Station.
    Television Broadcast Translator Station means a station in the 
broadcast service operated for the purpose of retransmitting the 
programs and signals of a Television Broadcast Station, without 
significantly altering any characteristic of the original signal other 
than its frequency and amplitude, for the purpose of providing 
television reception to the general public.
    Television Network means an entity which offers an interconnected 
program service on a regular basis for 15 or more hours per week to at 
least 25 affiliated broadcast stations in 10 or more States.
    Term Sheet means an executed agreement between the Applicant and the 
Lender or Agent that sets forth the key business terms and conditions of 
the proposed Loan. Execution of this agreement represents evidence of 
the commitment between the Applicant and Lender or Agent.
    Underserved Area means any area that is outside the grade A contour 
(as determined using standards employed by the Federal Communications 
Commission) of the Local Television Broadcast Signals serving a 
particular Designated Market Area and has access to such signals from 
not more than one commercial, for profit, multichannel video provider.
    Unguaranteed Portion means the portion of the principal of a Loan 
that is not covered by the Guarantee.



Sec. Sec. 2201.2-2201.8  [Reserved]



Sec. 2201.9  Limitation on the applicability of the definition of Local 
Television Broadcast Signals.

    Notwithstanding the definition of Local Television Broadcast Signals 
provided in Sec. 2201.1 of this part, if an area is being served by 
either a satellite carrier which rebroadcasts signals of Television 
Broadcast Stations located in the DMA or a cable television system, and 
that satellite carrier or cable television system is currently in 
compliance with the rules administered by the Federal Communications 
Commission (FCC) as described in part 76 of title 47, Code of Federal 
Regulations, the group of signals of Television Broadcast Stations 
located in the DMA being retransmitted by such satellite carrier or 
cable television system will be considered to meet the definition of 
Local Television Broadcast

[[Page 40]]

Signals for the purposes of the regulation.



                        Subpart B_Loan Guarantees



Sec. 2201.10  Loan amount and Guarantee percentage.

    (a) Aggregate Value of Loans. The aggregate value of all Loans for 
which Guarantees are issued under the Program, including the 
Unguaranteed Portions of such Loans, may not exceed $1,250,000,000.
    (b) Guarantee Percentage. (1) A Guarantee approved by the Board may 
not exceed an amount equal to 80 percent of the principal amount of a 
Loan made to finance the acquisition, improvement, enhancement, 
construction, deployment, launch, or rehabilitation of the means by 
which Local Television Broadcast Signals are delivered to a Nonserved 
Area or Underserved Area;
    (2) If only a portion of a Loan is meant to achieve the purposes 
described in paragraph (b)(1) of this section, the Board shall determine 
that portion of the Loan meant to achieve such purpose and may approve a 
Guarantee in an amount not exceeding 80 percent of that portion of the 
Loan.
    (3) The portion of the Loan meant to achieve the purposes described 
in paragraph (b)(1) of this section will not be lowered simply because 
the means by which Local Television Broadcast Signals are delivered to a 
Nonserved Area or Underserved Area also enable either the provision of 
signals other than Local Television Broadcast Signals or the provision 
of signals to areas other than Nonserved or Underserved Areas. However, 
any amounts of a Loan which the Board determines will be used for 
separable costs not essential to funding the means by which Local 
Television Broadcast Signals are delivered to a Nonserved Area or 
Underserved Area, will be excluded from the portion of the Loan eligible 
for a Guarantee.
    (c) Minimum Loan Amount. The Board will not approve a Guarantee for 
a Loan in an amount less than $1,000,000 (inclusive of both the 
Guaranteed and Unguaranteed Portions of the Loan).



Sec. 2201.11  Application requirements.

    A completed application consists of the following information:
    (a) An executive summary of the Project. The Applicant must provide 
the Board with a general Project overview that addresses each of the 
following six categories:
    (1) A general overview of the system to be developed and description 
of the Project including the types of equipment, technologies, and 
facilities to be used;
    (2) An explanation of how the Applicant will provide Local 
Television Broadcast Signals to Nonserved Areas and Underserved Areas;
    (3) A short description of the Applicant including a written 
narrative describing its demonstrated capability and experience in 
providing access to Local Television Broadcast Signals for households;
    (4) An explanation of the total Project cost including a breakdown 
of the Loan required and the source of funding for the remainder of the 
Project, if a portion of the Project is to be paid with non-Loan funds;
    (5) The name of the Lender or Agent (including a listing of other 
participating Lenders, if applicable) and a description of the financing 
structure of the proposed Loan; and
    (6) A general description of the geographic area to be served.
    (b) Background information. General information concerning the 
Applicant, its Affiliates, and its Lender or Agent, including a 
description of any financial and contractual arrangements among the 
parties. Specific information required of all Applicants is as follows:
    (1) Evidence of legal authority and existence of the applicant. The 
Applicant must provide evidence of its legal existence and authority to 
execute the Loan Documents under the proposed Loan and perform the 
activities proposed under the Project. Such evidence must include 
Articles of Incorporation and bylaws for incorporated Applicants; other 
types of Applicants should submit appropriate documentation for their 
forms of organization. If the Applicant is a special purpose entity 
(SPE) formed for the purpose of the Project, then the Applicant must 
provide a copy of the Deed of Partnership or Articles of Organization 
for the SPE.

[[Page 41]]

    (2) Affiliates descriptions. A listing of all Affiliates of the 
Applicant including a description of the nature of the Applicant's 
relationship to each Affiliate. Any existing or proposed contractual 
arrangements with each Affiliate should be described.
    (3) Legal name. The legal name and form of organization of the 
proposed Lender or Agent.
    (4) Cover Form. A signed copy of Standard Form 424.
    (5) Management Credentials. A description of the experience and 
capabilities of the Applicant's management to carry out the Project.
    (c) A business plan. A plan, satisfactory to the Board, presenting 
in detail the fundamentals of the business and providing sufficient 
financial data to indicate that the business will be economically 
sustainable. The business plan should include, at a minimum:
    (1) Risk Assessments. An assessment of the risks related to 
construction, performance, demand, and financing structure, including a 
narrative statement detailing planned risks mitigation strategies;
    (2) Plans. A comprehensive operations and maintenance plan, as well 
as a marketing strategy;
    (3) Economic and Financial Analysis. A review of economic and 
financial factors affecting the business in general and the Project in 
particular. Applicants should refer to economic and financial conditions 
in the past three years, and also discuss expectations of such 
conditions in the future, including:
    (i) The adequacy and stability of the business' customer base. 
Applicants should provide information on the number of subscribers, 
subscriber churn, subscriber acquisition cost or cost per gross added, 
subscriber penetration, geographic concentration of customers, nature of 
the terms of customer contracts, customer technical support, customer 
satisfaction and retention;
    (ii) The demand for services;
    (iii) The sensitivity of the business to economic cycles;
    (iv) Future capital needs;
    (v) The adequacy, competitiveness and affordability of service fees;
    (vi) An overview of the prevailing economic and demographic trends 
in the target service area; and
    (vii) Information on programming content and costs.
    (4) Project Market Analysis. A breakdown of the key elements of the 
Project, including:
    (i) All proposed services to be offered, including High-speed 
Internet Service, and whether a Separate Tier of Local Television 
Broadcast Signals will be provided;
    (ii) The total number of households, by DMA, and by Nonserved and 
Underserved Area, which will have access to Local Television Broadcast 
Signals under the Project;
    (iii) The total number of households, by DMA, and by Nonserved and 
Underserved Area, which will have access under the Project to any other 
services as described pursuant to paragraph (c)(4)(i) of this section, 
including an explanation if this number is greater than the total 
identified in paragraph (c)(4)(ii);
    (iv) Estimates of the number of households identified in paragraphs 
(c)(4)(ii) and (c)(4)(iii) which will subscribe to each of the services 
identified in paragraph (c)(4)(i) of this section by DMA, including a 
breakdown of Nonserved and Underserved households;
    (v) A breakdown of the Applicant's proposed pricing coupled with an 
evaluation of any competitor's services offerings and pricings; and
    (vi) A service deployment plan and a deployment performance 
schedule, by DMA, for the services to access the Local Television 
Broadcast Signals.
    (d) Financial forecast and information. The Applicant must 
demonstrate its financial ability to complete and maintain the Project 
and repay its obligations. The financial data must include the 
following:
    (1) Audited financial statements. Income statements, balance sheets, 
and cash flow statements for at least the last three years or from the 
date of inception if less than three years. If the Applicant is an SPE, 
then the Applicant must provide at least the last three years of audited 
financial statements of the shareholders or partners of the SPE. If an 
Affiliate has been designated by the Applicant as a source of

[[Page 42]]

credit support, then at least three years audited financial statements 
for the Affiliate must be submitted as well.
    (2) Plan of finance. An identification and explanation of all 
sources and uses of funds throughout the proposed loan period, 
including, but not limited to, any payments to Affiliates or 
shareholders of the Applicant, estimated Project costs, and proposed 
terms.
    (3) A Pro-forma financial forecast covering the life of the proposed 
loan, including balance sheets, income statements and cash flow 
statements, with an explanation of assumptions. These Projections must 
be prepared in accordance with Generally Accepted Accounting Principles 
and should discuss such issues as the effects of inflation, competition, 
ongoing repair and replacement needs, technological obsolescence, 
working capital requirements, and other factors that may affect the 
Applicant's ability to meet its debt service obligations.
    (4) Project budget. A detailed cost breakdown of all facilities to 
be constructed as part of the Project. This breakdown should be on a per 
unit basis. It should also clearly show what will be financed with 
guaranteed loan funds and what will be financed with other funds, 
consistent with the plan of finance in paragraph (d)(2) of this section.
    (5) Commitments. The Applicant must disclose all reasonably 
foreseeable financial obligations, contingent liabilities, or other 
commitments that could affect its financial health over the proposed 
financing term. At the Board's request, the Applicant must take all 
reasonable measures to insulate the Project and the Loan from external 
factors that could affect timely payment of principal and interest. The 
Board may ask for additional detailed information on commitments where 
it is deemed necessary.
    (6) Credit enhancement. In cases where an Affiliate provides credit 
enhancement, the Applicant must provide documentation demonstrating the 
Affiliate is sufficiently capitalized and evidencing the strength, 
extent, limitations, and priority of the credit enhancement relative to 
the other obligations of the Affiliate.
    (e) A certified system plan, technical analysis, and design. 
Prepared by qualified personnel on the Applicant's staff or by a 
licensed consulting engineer, consisting of the following:
    (1) A detailed description of the proposed service area including 
maps of the service area;
    (2) A TV Signals Coverage Diagram and detailed description of all 
existing and proposed facilities. The diagram must include proposed 
route miles of cable plant, if applicable, the estimated area served, 
types of facilities to be deployed (terrestrial microwave or satellite 
microwave, wireless, translator, fiber optic cable or coaxial cable, 
electronic equipment, etc.), the capacity of the facilities (number of 
fibers, size of the cables, and intended number of channels, frequencies 
used, bandwidth capacity, etc.), and the serving area of the proposed 
facilities;
    (3) The intended capabilities of the Project's facilities, including 
bandwidth, proposed television signal topology, standards, and 
television signal transmission protocols. In addition, the Applicant 
must explain the manner in which the transmission facilities will 
deliver the proposed Local Television Broadcast Signals, including any 
equipment necessary to receive the signals which will be located at the 
subscribers' premises, and/or, near or on the subscribers' television 
sets;
    (4) A listing of all regulatory approvals required to operate 
facilities, including licenses, permits, and franchises and the status 
of any required approvals not obtained at the time of the application. 
For any approvals not yet received, the Applicant should provide details 
on the nature of the needed approval, the justification for expecting 
such an approval, the track-record of the Applicant in obtaining such 
approvals, and the contingency plan in the event the approval is 
delayed;
    (5) A description of the television signal sources (including, but 
not limited to local, regional and national television signal 
broadcasters, other television signal providers, content providers, 
cable television operators and providers, enhanced service providers, 
providers of satellite services, and the anticipated role of such 
providers in the proposed Project);

[[Page 43]]

    (6) The results of discussions, if any, with local television 
broadcasters serving the Project area;
    (7) An identification of all Local Television Broadcast Signals that 
will be carried by the Project;
    (8) An identification of the digital signal quality and capacity in 
megabits per second (Mb/s) that will be required to digitally broadcast 
all Local Television Broadcast Signals to be provided by the Project;
    (9) An identification of the net usable bandwidth, in Mb/s, that are 
surplus to the provision of the Local Television Broadcast Signals to be 
provided by the Project and that will be used to provide High Speed 
Internet Service; and
    (10) A description of the extent to which the Project will enable 
the delivery of Local Television Broadcast Signals by a means reasonably 
compatible with existing systems or devices predominantly in use for the 
reception of television signals.
    (f) Lender information--(1) Lender. The Application shall include 
the information described in Sec. 2201.13(b), (c) and (d) of this part 
concerning the Lender or Lenders.
    (2) Term Sheet. The Application shall include a signed Term Sheet.
    (3) Lender's Analysis. The Applicant shall submit the Lender's 
detailed analysis of the creditworthiness of the transaction at the time 
of application and any supporting due diligence documentation, including 
a complete underwriting analysis of the Project (assessing Applicant 
creditworthiness and Project feasibility) exercising the Lender's 
standard of care as set forth at Sec. 2201.26(a).
    (4) Certification. The Lender must certify that the information 
provided pursuant to paragraphs (f)(1), (2) and (3) of this section is 
true and accurate.
    (5) Additional Information. The Board will request any other 
information the Board deems material to its assessment of the Lender.
    (g) Other Financial Information--(1) Collateral. The Applicant shall 
provide a detailed description and valuation of all Collateral to be 
used to secure the Loan. This valuation shall be supported by an 
independent, third party appraisal for existing Assets, and/or adequate 
cost substantiation for Assets to be constructed for purposes of the 
Project, and in all cases shall be acceptable to the Board. Such a 
valuation should address, at a minimum, pledged Assets of the Applicant, 
any designated Affiliate of the Applicant, or both as identified in the 
Loan Documents, including primary Assets to be used in the delivery of 
the service for which the Loan sought would be guaranteed. The Applicant 
also must provide a depreciation schedule (as classified under and in 
accordance with GAAP) for the major Assets in order for the Board to 
determine the economically useful life of the primary Assets to be used 
in delivery of the signals concerned. Appraisals of real property must 
be prepared by State licensed or certified appraisers, and be consistent 
with the ``Uniform Standards of Professional Appraisal Practice,'' 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation.
    (2) Credit Opinion. With respect to applications for a Loan of $15 
million or more, the Applicant is required to obtain and submit to the 
Board a preliminary credit rating opinion letter on the proposed 
transaction at the time of application, prepared by a nationally 
recognized statistical rating organization (rating agency) approved by 
the Board. This preliminary credit rating opinion shall be based on the 
financing structure proposed by the Applicant for the Project absent the 
Federal Guarantee, without regard to recovery expectations. The Board 
will utilize this preliminary credit assessment to assist in evaluating 
the creditworthiness of the proposed transaction and determining whether 
it provides a reasonable assurance of repayment. In addition, applicants 
for loans less than $15 million that have a credit rating shall provide 
that credit rating to the Board. The Board will utilize this preliminary 
credit assessment (for loans over $15 million) or an existing credit 
rating (for loans less than $15 million) to assist in evaluating the 
creditworthiness of the proposed transaction and determining whether it 
provides a reasonable assurance of repayment. The Board may approve a 
Guarantee over $15 million only if it receives a final

[[Page 44]]

credit rating opinion letter from the rating agency on the Loan that is 
in form and substance acceptable to the Board.
    (3) Evidence of Lack of Credit Elsewhere. The Applicant shall 
provide the information required pursuant to Sec. 2201.12(b)(2)(v) of 
this part.
    (h) Compliance with other Federal statutes, regulations and 
Executive Orders. The Applicant must certify compliance with other 
applicable Federal statutes, regulations, and Executive Orders.
    (i) Environmental impact. The Applicant must provide information 
describing the Project's impact on the environment as required pursuant 
to Sec. 2201.16 of this part. The application may be submitted prior to 
final determination of a Project's environmental impacts; however, a 
Guarantee shall not be made and no Loan funds will be advanced prior to 
such determination and demonstrated compliance with all environmental 
statutes, regulations and executive orders.
    (j) Federal debt certification. The Applicant must provide a 
certification that it is not delinquent on any obligation owed to the 
government (7 CFR parts 3016 and 3019). No Guarantee will be made if 
either the Applicant or Lender has an outstanding, delinquent Federal 
debt until:
    (1) The delinquent account has been paid in full;
    (2) A negotiated repayment schedule is established and at least one 
payment has been received; or
    (3) Other arrangements, satisfactory to the agency responsible for 
collecting the debt, are made.
    (k) Supplemental information. The Applicant should provide any 
additional information it considers relevant to the Project and likely 
to be helpful in determining the extent to which the Project would 
further the purposes of the Act.
    (l) Additional information required by the Board. The Applicant must 
provide any additional information the Board determines is necessary to 
adequately evaluate the application.
    (m) Application Fee. For an application to be considered complete, 
the Applicant must submit a check payable to the United States Treasury 
in the amount of the application fee as set forth in Sec. 2201.21(a) of 
this part.
    (n) Incomplete application. An incomplete application, including any 
fee submitted therewith, will be returned to the Applicant without 
action.



Sec. 2201.12  Applicant.

    (a) Eligibility. (1) The Board will make a determination of 
eligibility of an Applicant to be a Borrower under the Program based 
upon the Applicant's ability to directly provide, as a result of 
financing received under the Program, Local Television Broadcast Signals 
to households in Nonserved Areas and/or Underserved Areas and the 
information provided pursuant to paragraph (b) of this section.
    (2) A determination that an Applicant is eligible does not assure 
that the Board will approve a Guarantee sought, or otherwise preclude 
the Board from declining to approve a Guarantee.
    (b) Documentation for Eligibility Determination. (1) An Applicant 
must provide a Term Sheet evidencing a commitment of that Lender or 
Agent, and the Lenders it represents, to make a Loan to the Applicant 
upon an Offer of Guarantee by the Board, subject to the requirements of 
the Act and the regulations set forth in this part.
    (2) An Applicant must provide documentation demonstrating that:
    (i) The Assets, facilities, or equipment covered by the Loan will be 
utilized economically and efficiently;
    (ii) The terms, conditions, security, and schedule and amount of 
repayments of principal and the payment of interest with respect to the 
Loan protect the financial interests of the United States and are 
reasonable;
    (iii) Appropriate and adequate Collateral secures the Loan sought to 
be guaranteed;
    (iv) All necessary and required regulatory and other approvals, 
spectrum licenses, and delivery permissions for the Loan and the Project 
under the Loan have been applied for or obtained (a Guarantee shall not 
be made and no Loan funds will be advanced until all such approvals, 
licenses and permissions have been obtained);
    (v) The Loan would not be available on reasonable terms and 
conditions

[[Page 45]]

without a Guarantee under this Program. To satisfy this requirement, an 
Applicant must provide, with its application, documentation from at 
least one lending institution other than the Lender to which the 
Applicant has applied for financial assistance dated within six months 
of submission of the application, indicating that the Applicant was 
unable to obtain substantially the same Loan it is applying for on 
reasonable terms and conditions; and
    (vi) Repayment of the Loan can reasonably be expected.



Sec. 2201.13  Lender.

    (a) Eligibility. (1) The Board will make a determination of 
eligibility of a Lender to make a Loan to be guaranteed under the 
Program based upon the criteria set forth in paragraphs (b) and (c) of 
this section.
    (2) A determination that a Lender is eligible does not assure that 
the Board will approve a Guarantee sought, or otherwise preclude the 
Board from declining to approve a Guarantee.
    (b) Qualifications. In addition to evaluating an application 
pursuant to Sec. 2201.18, in making a determination to approve a 
Guarantee to a Lender, the Board will assess:
    (1) The Lender's Regulatory Capital Ratios, in the case of Banking 
Institutions, or Net Worth Ratios, in the case of other institutions;
    (2) Whether the Lender possesses the ability to administer the Loan, 
including its experience with loans to telecommunications companies;
    (3) The scope, volume and duration of the Lender's activity in 
administering loans, including federally guaranteed loans;
    (4) The performance of the Lender's loan portfolio, including its 
current delinquency rate;
    (5) The Lender's charge-off rate, expressed as a percentage of 
outstanding loans for its current fiscal year;
    (6) If the Lender intends to sell participation interests in the 
Loan, the plan of syndication; and
    (7) Any other matter the Board deems material to its assessment of 
the Lender.
    (c) A Loan will not be guaranteed unless:
    (1) If the Lender is not a nonprofit corporation and is subject to 
loan-to-one-borrower and Affiliate transaction restrictions under 
applicable law, the Loan is made in accordance with such restrictions;
    (2) If the Lender is not a nonprofit corporation and is not subject 
to the restrictions described in paragraph (c)(1) of this section, the 
Loan is made to a Borrower that is not an Affiliate of the Lender and 
the amount of the Loan, and all outstanding loans by the Lender to the 
Borrower and any of its Affiliates, does not exceed 10 percent of the 
Net Equity of the Lender; and
    (3) If the Lender is a nonprofit corporation, the Board determines 
that:
    (i) Such nonprofit corporation has one or more issues of outstanding 
long-term debt that is rated within the highest 3 rating categories of a 
nationally recognized statistical rating organization, as evidenced by 
written confirmation from the nationally recognized statistical rating 
organization, subject to updating upon request of the Board; and
    (ii) The making of the Loan would not cause a decline in the rating 
of such Lender's long-term debt below the highest 3 rating categories of 
a nationally recognized statistical rating organization, as evidenced by 
written confirmation from the nationally recognized statistical rating 
organization, subject to updating upon request of the Board.
    (d) Agent. (1) An application for a Guarantee of a single Loan that 
includes participation of more than one Lender must identify one of the 
Lenders participating in such Loan to act as Agent for all Lenders. This 
Agent is responsible for administering the Loan and shall have those 
duties and responsibilities required of an Agent, as set forth in the 
Guarantee.
    (2) If more than one Lender is seeking a Guarantee of a single Loan, 
each one of the Lenders on the application must meet the qualifications 
set forth in paragraphs (b) and (c) of this section. However, only the 
Agent must meet the qualifications set forth in paragraph (b)(2) and (3) 
of this section.
    (3) Each Lender, irrespective of any indemnities or other agreements 
between the Lenders and the Agent, shall

[[Page 46]]

be bound by all actions, and/or failures to act, of the Agent. The Board 
and the Administrator shall be entitled to rely upon such actions and/or 
failures to act of the Agent as binding all Lenders.



Sec. 2201.14  Eligible Loan purposes.

    To be guaranteed under the Program, a Loan must be made for the 
purpose of financing the acquisition, improvement, enhancement, 
construction, deployment, launch, or rehabilitation of the means by 
which Local Television Broadcast Signals will be delivered to a 
Nonserved Area or Underserved Area.



Sec. 2201.15  Ineligible Loan purposes.

    (a) The proceeds of the Loan shall not be used for operating, 
advertising, or promotion expenses, or for the acquisition of licenses 
for the use of spectrum in any competitive bidding.
    (b) The Applicant shall not transfer proceeds of the Loan to any 
Affiliate(s).
    (c) The Board will not fund a Project that is designed primarily to 
serve one or more of the top 40 Designated Market Areas.
    (d) The Board will not fund a Project that would alter or remove 
National Weather Service warnings from Local Television Broadcast 
Signals.
    (e) No Guarantee may be granted or used to provide funds to a 
Project that extends, upgrades, or enhances the services provided over 
any cable system to an area that, as of the enactment of the Act, is 
covered by a cable franchise agreement that expressly obligates a cable 
operator to serve such area.



Sec. 2201.16  Environmental requirements.

    (a) General. (1) Environmental assessments of the Board's actions 
will be conducted in accordance with applicable statutes, regulations, 
and other applicable authorities. Therefore, each application for a 
Guarantee under the Program must be accompanied by information necessary 
for the Board to meet the requirements of applicable law.
    (2) Actions requiring compliance with NEPA. (i) The types of actions 
classified as ``major Federal actions'' subject to NEPA procedures are 
discussed in 40 CFR parts 1500 through 1508.
    (ii) With respect to this Program, these actions typically include:
    (A) Any Project, permanent or temporary, that will involve 
construction and/or installations;
    (B) Any Project, permanent or temporary, that will involve ground 
disturbing activities; and
    (C) Any Project supporting renovation, other than interior 
remodeling.
    (3) Environmental information required from the Applicant. (i) 
Environmental data or documentation concerning the use of the proceeds 
of any Loan guaranteed under this Program must be provided by the 
Applicant to the Board to assist the Board in meeting its legal 
responsibilities.
    (ii) Such information includes:
    (A) Documentation for an environmental threshold review from 
qualified data sources, such as a Federal, State or local agency with 
expertise and experience in environmental protection, or other sources, 
qualified to provide reliable environmental information;
    (B) Any previously prepared environmental reports or data relevant 
to the Loan at issue;
    (C) Any environmental review prepared by Federal, State, or local 
agencies relevant to the Loan at issue; and
    (D) Any other information that can be used by the Board to ensure 
compliance with environmental laws.
    (iii) All information supplied by the Applicant is subject to 
verification by the Board.
    (b) The regulations of the Council on Environmental Quality 
implementing NEPA require the Board to provide public notice of the 
availability of Project specific environmental documents such as 
environmental impact statements, environmental assessments, findings of 
no significant impact, records of decision, etc., to the affected 
public. See 40 CFR 1506.6(b). Environmental information concerning 
specific Projects can be obtained from the Board by contacting: 
Secretary, LOCAL Television Loan Guarantee Board, 1400 Independence 
Ave., SW., Room 2919-S, Stop 1575; Washington, DC 20250-1575.
    (c) National Environmental Policy Act--(1) Purpose. The purpose of 
this paragraph (c) is to adopt procedures for

[[Page 47]]

compliance with the National Environmental Policy Act, 42 U.S.C. 4321 et 
seq., by the Board. This paragraph supplements regulations at 40 CFR 
Chapter V.
    (2) Definitions. For purposes of this section, the following 
definitions apply:
    Categorical exclusion means a category of actions which do not 
individually or cumulatively have a significant effect on the human 
environment and for which neither an environmental assessment nor an 
environmental impact statement is required.
    Environmental assessment means a document that briefly discusses the 
environmental consequences of a proposed action and alternatives 
prepared for the purposes set forth in 40 CFR 1508.9.
    EIS means an environmental impact statement prepared pursuant to 
section 102(2)(C) of NEPA.
    FONSI means a finding of no significant impact on the quality of 
human environment after the completion of an environmental assessment.
    NEPA means the National Environmental Policy Act, 42 U.S.C. 4321, et 
seq.
    Working capital loan means money used by an ongoing business concern 
to fund its existing operations.
    (3) Delegations to the Secretary of the Board. (i) All incoming 
correspondence from Council on Environmental Quality (CEQ) and other 
agencies concerning matters related to NEPA, including draft and final 
EIS, shall be brought to the attention of the Secretary of the Board. 
The Secretary of the Board will prepare or, at his or her discretion, 
coordinated replies to such correspondence.
    (ii) With respect to actions of the Board, the Board will:
    (A) Ensure preparation of all necessary environmental assessments 
and EISs;
    (B) Maintain a list of actions for which environmental assessments 
are being prepared;
    (C) Revise this list at regular intervals, and send the revisions to 
the Environmental Protection Agency;
    (D) Make the list available for public inspection;
    (E) Maintain a list of EISs; and
    (F) Maintain a file of draft and final EISs.
    (4) Categorical exclusions. (i) This paragraph describes various 
classes of Board actions that normally do not have a significant impact 
on the human environment and are categorically excluded. The word 
``normally'' is stressed; there may be individual cases in which 
specific factors require contrary action.
    (ii) Subject to the limitations in paragraph (c)(4)(iii) of this 
section, the actions described in this paragraph have been determined 
not to have a significant impact on the quality of the human 
environment. They are categorically excluded from the need to prepare an 
environmental assessment or an EIS under NEPA.
    (A) Guarantees of working capital loans; and
    (B) Guarantees of loans for the refinancing of outstanding 
indebtedness of the Applicant, regardless of the purpose for which the 
original indebtedness was incurred.
    (iii) Actions listed in paragraph (c)(4)(ii) of this section that 
otherwise are categorically excluded from NEPA review are not 
necessarily excluded from review if they would be located within, or in 
other cases, potentially affect:
    (A) A floodplain;
    (B) A wetland;
    (C) Important farmlands, or prime forestlands or rangelands;
    (D) A listed species or critical habitat for an endangered species;
    (E) A property that is listed on or may be eligible for listing on 
the National Register of Historic Places;
    (F) An area within an approved State Coastal Zone Management 
Program;
    (G) A coastal barrier or a portion of a barrier within the Coastal 
Barrier Resources System;
    (H) A river or portion of a river included in, or designated for, 
potential addition to the Wild and Scenic Rivers System;
    (I) A sole source aquifer recharge area;
    (J) A State water quality standard (including designated and/or 
existing beneficial uses and anti-degradation requirements); or

[[Page 48]]

    (K) The release or disposal of regulated substances above the levels 
set forth in a permit or license issued by an appropriate regulatory 
authority.
    (5) Responsibilities and procedures for preparation of an 
environmental assessment. (i) The Board will request that the Lender and 
Applicant prepare an environmental assessment that provides information 
concerning all potentially significant environmental impacts of the 
Applicant's proposed Project. The Board, consulting at its discretion 
with CEQ, will review the information provided by the Lender and 
Applicant. Though no specific format for an environmental assessment is 
prescribed, it shall be a separate document, suitable for public review 
and should include the following in conformance with 40 CFR 1508.9:
    (A) Description of the environment. The existing environmental 
conditions relevant to the Board's analysis determining the 
environmental impacts of the proposed Project should be described. The 
no action alternative also should be discussed;
    (B) Documentation. Citations to information used to describe the 
existing environment and to assess environmental impacts should be 
clearly referenced and documented. These sources should include, as 
appropriate, but not be limited to, local, tribal, regional, State, and 
Federal agencies, as well as, public and private organizations and 
institutions;
    (C) Evaluating environmental consequences of proposed actions. A 
brief discussion should be included of the need for the proposal, of 
alternatives as required by 42 U.S.C. 4332(2)(E) and their environmental 
impacts. The discussion of the environmental impacts should include 
measures to mitigate adverse impacts and any irreversible or 
irretrievable commitments of resources to the proposed Project.
    (ii) An environmental assessment, may:
    (A) Tier upon the information contained in a previous EIS, as 
described in 40 CFR 1502.20;
    (B) Incorporate by reference reasonably available material, as 
described in 40 CFR 1502.21; and/or
    (C) Adopt a previously completed EIS reasonably related to the 
Project for which the proceeds of the Loan sought to be guaranteed under 
the Program will be used, as described in 40 CFR 1506.3.
    (iii) If, on the basis of the environmental assessment, the Board 
determines that an EIS is not required, a FONSI, as described in 40 CFR 
1508.13 will be prepared. The FONSI will include the environmental 
assessment or a summary of it and be available to the public from the 
Board. The Board shall maintain a record of these decisions, making them 
available to interested parties upon request. Requests should be 
directed to LOCAL Television Loan Guarantee Board, 1400 Independence 
Ave., SW., Room 2919-S, Stop 1575; Washington, DC 20250-1575. Prior to a 
final Guarantee decision, a copy of the NEPA documentation shall be sent 
to the Board for consideration.
    (6) Responsibilities and procedures for preparation of an 
environmental impact statement. (i) If after the environmental 
assessment has been completed, the Board determines that an EIS is 
necessary, it and other related documentation will be prepared by the 
Board in accordance with section 102(2)(c) of NEPA, this section, and 40 
CFR parts 1500 through 1508. The Board may seek additional information 
from the Applicant in preparing the EIS. Once the document is prepared, 
the Board will transmit the document to the Environmental Protection 
Agency.
    (ii) EIS. (A) The following procedures, as discussed in 40 CFR parts 
1500 through 1508, will be followed in preparing an EIS:
    (1) The format and contents of the draft and final EIS shall be as 
discussed in 40 CFR part 1502.
    (2) The requirements of 40 CFR 1506.9 for filing of documents with 
the Environmental Protection Agency shall be followed.
    (3) The Board, consulting at its discretion with CEQ, shall examine 
carefully the basis on which supportive studies have been conducted to 
assure that such studies are objective and comprehensive in scope and in 
depth.
    (4) NEPA requires that the decision making ``utilize a systematic, 
interdisciplinary approach that will ensure the integrated use of the 
natural and social sciences and the environmental

[[Page 49]]

design arts.'' 42 U.S.C. 4332(A). If such disciplines are not present on 
the Board staff, appropriate use should be made of personnel of Federal, 
State, and local agencies, universities, non-profit organizations, or 
private industry.
    (B) Until the Board issues a record of decision as provided in 40 
CFR 1502.2 no action concerning the proposal shall be taken which would:
    (1) Have an adverse environmental impact; or
    (2) Limit the choice of reasonable alternatives.
    (3) 40 CFR 1506.10 places certain limitations on the timing of Board 
decisions on taking ``major Federal actions.'' A Guarantee shall not be 
made before the times set forth in 40 CFR 1506.10.
    (iii) A public record of decision stating what the decision was; 
identifying alternatives that were considered, including the 
environmentally preferable one(s); discussing any national 
considerations that entered into the decision; and summarizing a 
monitoring and enforcement program if applicable for mitigating the 
environmental effects of a proposal will be prepared. This record of 
decision will be prepared at the time the decision is made.



Sec. 2201.17  Submission of applications.

    (a) Applications should be submitted as follows:
    (1) Applications for Guarantees shall be submitted to the LOCAL 
Television Loan Guarantee Board, 1400 Independence Avenue, SW., Stop 
1575, Room 2919-S, Washington, DC 20250-1575. Applications should be 
marked Attention: Secretary, LOCAL Television Loan Guarantee Board.
    (2) Applications must be submitted postmarked not later than the 
application filing deadline established by the Board if the applications 
are to be considered during the period for which the application was 
submitted.
    (3) All Applicants must submit an original and two copies of a 
completed application.
    (b) Application deadline. One or more application windows will be 
announced. The duration of each application window for submission of 
applications will be approximately 120 days. Notice of an application 
window will be published in the Federal Register.



Sec. 2201.18  Application selection.

    (a) Application Priority. When evaluating applications to determine 
which Project or combinations of Projects will best facilitate access to 
Local Television Broadcast Signals, the Board shall give priority in the 
approval of Guarantees to the following categories:
    (1) First, to applications for Projects that will serve households 
in Nonserved Areas.
    (2) Second, to applications for Projects that will serve households 
in Underserved Areas.
    (3) Within each category, the Board shall balance applications for 
Projects that will serve the largest number of households with 
applications for Projects that will serve remote, isolated communities 
(including noncontiguous States) in areas that are unlikely to be served 
through market mechanisms. The Board shall consider the Project's 
estimated cost per household and shall give priority to those 
applications for Projects that provide the highest quality service at 
the lowest cost per household.
    (b) Additional Considerations. (1) The Board shall give additional 
consideration to applications for Projects that, in addition to 
providing Local Television Broadcast Signals, also provide High-speed 
Internet service.
    (2) The Board shall consider other factors, which shall include 
applications for Projects that:
    (i) Offer a separate tier of Local Television Broadcast Signals at a 
lower cost to consumers, except where prohibited by applicable Federal, 
State, or local laws or regulations; and
    (ii) Enable the delivery of Local Television Broadcast Signals 
consistent with the purpose of the Act by means reasonably compatible 
with existing systems or devices predominantly in use.
    (c) Other Considerations. All other evaluation factors and priority 
considerations being equal, the Board will give a preference in 
approving Guarantees to those applications for Projects that provide 
greater amounts and higher quality Collateral.

[[Page 50]]

    (d) Protection of United States Financial Interests. The Board may 
not approve the Guarantee of a Loan unless:
    (1) The Board has been given documentation, assurances, and access 
to information, persons, and entities necessary, as determined by the 
Board, to address issues relevant to review of the Loan by the Board for 
purposes of the Act; and
    (2) The Board makes a determination in writing that:
    (i) To the best of its knowledge upon due inquiry, the Assets, 
facilities, or equipment covered by the Loan will be utilized 
economically and efficiently;
    (ii) The terms, conditions, security, and schedule and amount of 
repayments of principal and the payment of interest with respect to the 
Loan protect the financial interests of the United States and are 
reasonable;
    (iii) The value of Collateral provided by an Applicant is at least 
equal to the unpaid balance of the Loan amount; and if the value of 
Collateral provided by an Applicant is less than the Loan amount, 
additional required Collateral is provided by the Applicant or an 
Affiliate designated by the Applicant and acceptable to the Board;
    (iv) All necessary and required regulatory and other approvals, 
spectrum licenses, and delivery permissions have been received for the 
Loan and the Project under the Loan;
    (v) The Loan would not be available on reasonable terms and 
conditions without a Guarantee under the Act; and
    (vi) Repayment of the Loan can be reasonably expected.
    (e) Non approvals. A Guarantee will not be approved if it is 
determined that:
    (1) The Applicant's proposal does not indicate financial 
feasibility, or the Collateral is determined to not adequately secure 
the Loan;
    (2) The Applicant's proposal indicates technical flaws, which, in 
the opinion of the Board, would prevent successful implementation, or 
operation of the Project;
    (3) Any other aspect of the Applicant's proposal fails to adequately 
address any requirements of the Act or the regulations in this part or 
contains inadequacies which would, in the opinion of the Board, 
undermine the ability of the Project to meet the general purpose of the 
Act or comply with requirements in this part; or
    (4) Proceeds for the Loan will be used for any of the ineligible 
purposes set forth in Sec. 2201.15.
    (f ) Impact on Competition. A Loan shall not be guaranteed unless 
the proposed Project, as determined by the Board in consultation with 
the National Telecommunications and Information Administration, is not 
likely to have a substantial adverse impact on competition that 
outweighs the benefits of improving access to Local Television Broadcast 
Signals in a Nonserved Area or Underserved Area and is commercially 
viable.



Sec. 2201.19  Loan terms.

    (a) All Loans guaranteed under the Program shall be due and payable 
in full no later than the earlier of 25 years from date of the closing 
of the Loan or the economically useful life of the primary Assets to be 
used in delivery of the signals concerned, as determined by the Board.
    (b) Loans guaranteed under the Program must:
    (1) Bear a rate of interest determined by the Board to protect the 
financial interests of the United States and to be reasonable. This 
determination will be based on the Board's comparison of the:
    (i) Difference, or interest rate spread, between the interest rate 
on the Loan sought to be guaranteed and the current average yield on 
outstanding marketable obligations of the United States of comparable 
maturity; and
    (ii) The interest rate spread between the rates on recently issued 
and similarly rated and structured obligations and the current yields on 
outstanding marketable obligations of the United States of comparable 
maturity.
    (2) Have terms that, in the judgment of the Board, are consistent in 
material respects with the terms of similar obligations in the private 
capital market.
    (c) So long as any principal and interest is due and payable on a 
Loan guaranteed under the Act, a Borrower shall:

[[Page 51]]

    (1) Maintain Assets, equipment, facilities, and operations on a 
continuing basis;
    (2) Not make any discretionary dividend payments that impair its 
ability to repay obligations guaranteed under the Act;
    (3) Remain sufficiently capitalized; and
    (4) Submit to and cooperate fully with any audit or Collateral 
review required by the Board.



Sec. 2201.20  Collateral.

    (a) Existence of adequate Collateral. An Applicant shall provide the 
Board such documentation as is necessary, in the judgment of the Board, 
to provide satisfactory evidence that appropriate and adequate 
Collateral secures a Loan guaranteed under the Program. Prior to 
approving a Guarantee, the Board shall require that the value of the 
Collateral pledged be at least equal to the unpaid balance of the Loan 
Amount.
    (b) Form of Collateral. Collateral required by paragraph (a) of this 
section shall consist solely of Assets of the Applicant, any Affiliate 
of the Applicant, or both, as identified in the Loan Documents, 
including primary Assets to be used in the delivery of the service for 
which the Loan is guaranteed. Such Assets may include, but are not 
limited to, the following:
    (1) Tangible Assets, including current Assets (such as cash, 
accounts receivable, and inventory), reserve funds, land, buildings, 
machinery, fixtures, and equipment;
    (2) Assignments of all relevant contractual agreements, including 
contractual rights to certain cash flows, marketing arrangements, third-
party guarantees, insurance policies, contractors' bonds, and other 
agreements or rights that may be of value;
    (3) All permits, governmental approvals, franchises and licenses, 
necessary to carry out and operate the required equipment or service; 
and
    (4) Other Assets, which, in the judgment of the Board, possess 
Collateral value suitable for securing the Loan, including a pledge of 
all or part of the Applicant's ownership interest in the Project or 
company, and any after-acquired property.
    (c) Applicant's compliance findings. An Applicant's compliance with 
paragraphs (a) and (b) of this section does not assure a finding of 
reasonable assurance of repayment, or assure the Board's Guarantee of 
the Loan.
    (d) Collateral for entire loan. The same Collateral shall secure the 
entire Loan, including both the Guaranteed Portion and the Unguaranteed 
Portion.
    (e) Review of valuation. The value of Collateral securing a Loan is 
subject to review and approval by the Board, and may be adjusted 
downward by the Board if the Board reasonably believes such adjustment 
is appropriate. The Board's evaluation of the proposed Collateral for 
the Loan will be based on several factors, including but not limited to:
    (1) The expected value of the pledged Collateral in the event of 
defaults with specific consideration given to the residual value of 
Project Assets to third-parties and the liquidity of such Assets;
    (2) The cash flow characteristics of the Project;
    (3) The contractual characteristics of the Project to the extent 
Project-related agreements underpin the Project's estimated cash flows;
    (4) The competitiveness of the Project's economics and the 
associated certainty of cash flows in the future; and
    (5) The creditworthiness of any designated Affiliates(s) that 
provides services to the Applicant or provides any credit support.
    (f) Ongoing Collateral Assessment. The Board shall require that the 
value of the Collateral shall be at all times at least equal to the 
unpaid balance of the Loan Amount. To ensure that the ongoing value of 
the Collateral is properly maintained, the Board may require the 
borrower to have an ongoing third-party inspection and valuation of the 
Collateral that is acceptable to the Board. If the Collateral value at 
the measurement date is less than the unpaid balance of the Loan Amount, 
the Borrower or its designated Affiliates(s) will be required to pledge 
additional acceptable Collateral to cover any deficit.
    (g) Lien on Collateral. (1) Upon the Board's approval of a 
Guarantee, the

[[Page 52]]

Administrator shall have liens on Collateral securing the Loan, which 
shall be superior to all other liens on such Collateral. The value of 
the Collateral (based on a determination satisfactory to the Board) 
shall be at least equal to the unpaid balance of the Loan amount, giving 
significant consideration to the expected value of the Collateral in the 
event of defaults with specific consideration given to the residual 
value of the Project Assets to third-parties and the liquidity of such 
Assets.
    (2) Both the Administrator and the Lender or Agent shall have a 
perfected security interest in the Collateral fully sufficient to 
protect the financial interests of the United States and the Lenders. 
However, the security interest perfected by the Administrator shall 
ensure that the Administrator has first priority in such Collateral.



Sec. 2201.21  Fees.

    (a) Application Fee. The Board shall charge each Applicant for a 
Guarantee under the Program a non-refundable fee, payable to the United 
States Treasury, to cover the costs of making necessary determinations 
and findings with respect to an application for a Guarantee under the 
Program. The amount of the fee is $10,000 for Loans of $1 million up to 
$50 million, $15,000 for Loans of $50 million up to $100 million, 
$30,000 for Loans of $100 million up to $500 million, and $40,000 for 
Loans of $500 million or greater.
    (b) Guarantee Origination Fee. The Board shall charge and collect 
from a Borrower a Guarantee Origination Fee. The amount of such fee will 
be sufficient to cover the administrative costs of the Board associated 
with the Loan. Upon extending an offer of Guarantee, the Board and the 
Borrower shall enter into an agreement providing for the payment of the 
Guarantee Origination Fee; the agreement shall include terms relating to 
the schedule of payments and deposit of such payments into an escrow 
account. The Guarantee Origination Fee must be paid in full no later 
than and as a condition of the closing of any Loan. A Borrower will be 
responsible for paying the administrative costs of the Board regardless 
of whether the Loan actually closes.
    (c) Lender Fees. A Lender or Agent may assess and collect from the 
Borrower such fees and costs associated with the application and 
origination of the Loan as are reasonable and customary, taking into 
consideration the amount and complexity of the credit. The Board may 
take such fees and costs into consideration when determining whether to 
offer a Guarantee.



Sec. 2201.22  Issuance of Guarantees.

    (a) The Board's decision to approve an application and extend an 
Offer of Guarantee under the Program is conditioned upon:
    (1) The Lender or Agent and Applicant obtaining any required 
regulatory or judicial approvals;
    (2) The Lender or Agent and Applicant being legally authorized to 
enter into the Loan under the terms and conditions submitted to the 
Board in the application;
    (3) The Board's receipt of the Loan Documents and any related 
instruments, in form and substance satisfactory to the Board all 
properly executed by the Lender or Agent, Applicant, and any other 
required party other than the Board;
    (4) No material adverse change in the Applicant's ability to repay 
the Loan between the date of the Board's approval and the date the 
Guarantee is to be issued;
    (5) Entering into the Guarantee violates no Loan covenants or 
existing contractual obligations of the Borrower; and
    (6) Such other conditions as determined by the Board.
    (b) The Board may withdraw its approval of an application and 
rescind its Offer of Guarantee if the Board determines that the Lender 
or Agent or the Applicant cannot, or is unwilling to, provide adequate 
documentation and proof of compliance with paragraph (a) of this section 
within the time provided for in the Offer of Guarantee.
    (c) Only after receipt of all the documentation required by this 
section will the Administrator sign and deliver the Guarantee.



Sec. 2201.23  Funding for the Program.

    (a) Costs incurred by the Government. The Act provides funding for 
the costs

[[Page 53]]

incurred by the Government as a result of granting Guarantees under the 
Program. While pursuing the goals of the Act, it is the intent of the 
Board to minimize the cost of the Program to the Government. The Board 
will estimate the risk posed by the guaranteed Loans to the funds 
appropriated for the costs of the Guarantees under the Program and 
operate the Program accordingly.
    (b) Credit Risk Premium--(1) Establishment and approval. The Board 
may establish and approve the acceptance of credit risk premiums with 
respect to a Guarantee under this Act in order to offset the cost, as 
defined in section 502(5) of the Federal Credit Reform Act of 1990, of 
the Guarantee. To the extent that appropriations of budget authority are 
insufficient to cover the cost, as so determined, of a Guarantee, and 
the Board approves such a Guarantee, credit risk premiums shall be 
accepted from a non-Federal source on behalf of a Borrower.
    (2) Credit risk premium amount--(i) General. The Board shall 
determine the amount of any credit risk premium to be accepted with 
respect to a Guarantee on the basis of:
    (A) The financial and economic circumstances of the Borrower, 
including the amount of Collateral offered;
    (B) The proposed schedule of Loan disbursements;
    (C) The business plans of the Borrower;
    (D) Any financial commitment from a broadcast signal provider; and
    (E) The concurrence of the Director of the Office of Management and 
Budget as to the amount of the credit risk premium.
    (ii) Proportionality. To the extent that appropriations of budget 
authority are sufficient to cover the cost, as determined under section 
502(5) of the Federal Credit Reform Act of 1990, of Guarantees, the 
credit risk premium with respect to each Guarantee shall be reduced 
proportionately.
    (iii) Payment of premiums. Credit risk premiums under this paragraph 
shall be paid to an escrow account established in the Treasury, which 
shall accrue interest. Such interest shall be retained by the escrow 
account, subject to paragraph (b)(2)(iv) of this section.
    (iv) Deductions from escrow account. If a liquidation of the 
Collateral occurs pursuant to Sec. 2201.33(h), any shortfall between 
the proceeds of the liquidation net of costs and expenses relating to 
the liquidation, and the guarantee amount paid shall be deducted from 
funds in the escrow account and credited to the Administrator for 
payment of such shortfall. At such time as all Loans guaranteed under 
this Program have been repaid or otherwise satisfied in accordance with 
the Act and the regulations in this part, remaining funds in the escrow 
account, if any, shall be refunded, on a pro rata basis, to Borrowers 
whose Loans guaranteed under the Program were not in Payment Default or 
Default, or where any Payment Default or Default was cured in accordance 
with the terms of the Loan Documents.



Sec. 2201.24  Insurance.

    The Borrower of a Loan guaranteed under the Program shall obtain, at 
its expense, insurance sufficient to protect the financial interests of 
the United States, as determined by the Board.



Sec. 2201.25  Performance Agreement.

    (a) The Borrower of a Loan guaranteed under the Program shall enter 
into a Performance Agreement with the Administrator with respect to the 
Local Television Broadcast Signals to be provided through the Project.
    (b) The Administrator may assess against and collect from a Borrower 
a penalty not to exceed 3 times the interest accrued on the Loan during 
the period of noncompliance if the Borrower fails to meet its stipulated 
Performance Agreement entered into under paragraph (a) of this section.



Sec. 2201.26  Lender standard of care.

    (a) The Lender or Agent shall exercise due care and diligence in 
analyzing and administering the Loan as would be exercised by a 
responsible and prudent Banking Institution when analyzing and 
administering a secured loan of such Banking Institution's own funds 
without a Guarantee. Such standards shall also apply to any and all 
underwriting analysis, approvals,

[[Page 54]]

determinations, permissions, acceptances, requirements, or opinion made, 
given, imposed or reached by Lender.
    (b) The Lender or Agent shall have such other obligations and duties 
to the Board and the Administrator as are set forth in the Act or Loan 
Documents.



Sec. 2201.27  Assignment or transfer of Loans.

    (a) Modifications. The Loan Documents may not be modified, in whole 
or in part, without the prior written approval of the Board.
    (b) Requirements. (1) Subject to the provisions of paragraphs (c) 
and (d) of this section and other provisions of this part, a Lender or 
Agent may assign or transfer the Loan including the Loan Documents to 
another Lender that meets the eligibility requirements of Sec. 2201.13 
of this part.
    (2) Any assignment or transfer of a Loan, or any pledge or other use 
of a Loan as security, including but not limited to any derivatives 
transaction, will require the prior written approval of the Board.
    (c) The provisions of paragraph (b) of this section shall not apply 
to transfers which occur by operation of law.
    (d) The Agent must hold an interest in a Loan guaranteed under the 
Program equal to at least the lesser of $25 million or fifteen percent 
of the aggregate amount of the Loan. Of this amount, the Agent must hold 
an interest in the Unguaranteed Portion of the Loan equal to at least 
the minimum amount of the Loan required to be held by the Agent under 
the preceding sentence multiplied by the percentage of the entire Loan 
that is not guaranteed. A non-Agent Lender must hold an interest in the 
Unguaranteed Portion of the Loan representing no less than five percent 
of such Lender's total interest in the Loan; provided, that a non-Agent 
Lender may transfer its interest in the Unguaranteed Portion after 
payment of the Guaranteed Portion has been made under the Guarantee.
    (e) The Guarantee shall have no force or effect if any part of the 
Guaranteed Portion of the Loan is transferred separate and apart from 
the Unguaranteed Portion of the Loan. At least five percent of any 
assignment or transfer interest in a Loan must be unguaranteed to ensure 
that no part of the Guaranteed Portion of the Loan is transferred 
separate and apart from the Unguaranteed Portion of the Loan.



Sec. 2201.28  Participation in guaranteed Loans.

    (a) Subject to paragraphs (b), (c) and (d) of this section, a Lender 
may distribute the risk of a portion of a Loan guaranteed under the 
Program by sale of participations therein if:
    (1) Neither the Loan note nor the Guarantee is assigned, conveyed, 
sold, or transferred in whole or in part as a result of the sale of such 
participations;
    (2) The Lender remains solely responsible for the administration of 
the Loan as an Agent; and
    (3) The Board's ability to assert any and all defenses available to 
it under the law and under the Loan Documents is not adversely affected.
    (b) The following categories of entities may purchase participation 
interests in Loans guaranteed under the Program:
    (1) Lenders that meet the eligibility requirements of Sec. 2201.13 
of this part;
    (2) Qualified institutional buyers as defined in 17 CFR 230.144A 
(a), known as Rule 144A (a) of the Securities and Exchange Commission 
and issued under the Securities Act of 1933 (15 U.S.C. 77a et seq.); or
    (3) Any other entity approved by the Board on a case-by-case basis.
    (c) An Agent may not grant participations in that portion of its 
interest in a Loan that may not be assigned or transferred under Sec. 
2201.27(d) of this part. A Lender, other than the Agent, may not grant 
participations in that portion of its interest in a Loan that may not be 
assigned or transferred under Sec. 2201.27(d) of this part.
    (d) At least five percent of any participation interest in a Loan 
must be unguaranteed.



Sec. 2201.29  Supplemental guarantees.

    The Board will allow the structure of a guaranteed Loan to include 
one or more supplemental guarantees only from a State or local 
governmental or tribal entity that cover the

[[Page 55]]

Unguaranteed Portion of the Loan, provided that:
    (a) There shall be no supplemental guarantee with respect to the 
Unguaranteed Portion required to be held by the Agent or sole Lender 
pursuant to Sec. 2201.27(d) of this part;
    (b) The Loan Documents relating to any supplemental guarantee shall 
be acceptable in form and substance to the Board; and
    (c) In approving the issuance of a Guarantee, the Board may impose 
any conditions with respect to supplemental guarantee(s) relating to the 
Loan that it considers appropriate.



Sec. 2201.30  Adjustments.

    (a) The Board must approve the adjustment of any term or condition 
of the Loan Documents under this Program, including the rate of 
interest, time of payment of principal or interest, or Collateral 
requirements. Adjustments may be approved by the Board only if:
    (1) The adjustment is consistent with the financial interests of the 
United States;
    (2) Consent has been obtained from the parties to the Loan 
Agreement;
    (3) The adjustment is consistent with the underwriting criteria 
developed for the Program;
    (4) The adjustment does not adversely affect the interest of the 
Federal Government in the Assets or Collateral of the Borrower;
    (5) The adjustment does not adversely affect the ability of the 
Borrower to repay the Loan; and
    (6) The National Telecommunications and Information Administration 
of the Department of Commerce has been consulted by the Board regarding 
the adjustment.
    (b) A Lender's decision to forego remedial action in the event of a 
breach of financial covenants required under the Loan Agreement will not 
constitute an adjustment under this section.



Sec. 2201.31  Indemnification.

    (a) The United States may be indemnified by any Affiliate of a 
Borrower designated in the Loan Documents for any losses that the United 
States incurs as a result of:
    (1) A judgment against the Borrower or any of its Affiliates;
    (2) Any breach by the Borrower or any of its Affiliates of their 
obligations under the Loan Documents;
    (3) Any violation of the provisions of the Act, or the regulations 
in this part, by the Borrower or any of its Affiliates;
    (4) Any penalties incurred by the Borrower or any of its Affiliates 
for any reason, including violation of a performance schedule stipulated 
in a Performance Agreement; and
    (5) Any other circumstances that the Board considers appropriate.
    (b) The Board may require more than one Affiliate of a Borrower to 
make the indemnifications referred to in paragraph (a) of this section.
    (c) The indemnifications referred to in paragraph (a) of this 
section shall be included in the Loan Documents.



Sec. 2201.32  Termination of obligations.

    The Board shall have such rights to terminate the Guarantee as are 
set forth in the Act and Loan Documents.



Sec. 2201.33  Defaults.

    (a) In determining, following any Payment Default or Default, 
whether to accelerate the maturity of any amounts outstanding under the 
Loan Documents or otherwise to declare such amounts to be immediately 
due and payable, or pursue other remedial actions available under the 
Loan Documents, the Agent or Lender, as the case may be, shall act at 
all times in accordance with the standard of care and diligence required 
under Sec. 2201.26(a) of this part.
    (b) Following any Payment Default, the Agent or Lender shall 
promptly notify the Board and be entitled to make a Payment Demand. Any 
Payment Demand shall:
    (1) Identify the amount and due date of the defaulted payment of 
principal and the outstanding amounts of principal and interest under 
the Loan;
    (2) Describe briefly the circumstances leading to the Payment 
Default, including, without limitation,

[[Page 56]]

the nature of any precipitating Default, whether an acceleration has 
occurred, and whether a bankruptcy proceeding has been instituted or 
threatened; and
    (3) Be accompanied by a copy of each of the Loan Documents and all 
notices and other correspondence with the Borrower or other Lender 
relating to the Payment Default and any precipitating Default.
    (c) Following any Payment Demand being made, the Agent or Lender 
shall furnish to the Board promptly upon request from the Board and, in 
any event, not later than ninety (90) days from the date of such 
request, each of the following:
    (1) A written, detailed and reasonable plan for the partial or 
complete foreclosure on and liquidation of the Collateral, including, 
without limitation, detailed estimates by the Agent or Lender of the 
time and reasonable costs of collection anticipated to be necessary in 
order to carry out such plan; and
    (2) A written, detailed and reasonable work-out plan, if such a plan 
is feasible, for the continued operation of the Borrower calculated, in 
the Agent's or Lender's judgment, to assure the best prospect for 
repayment of principal and interest under the Loan without partial or 
complete foreclosure and liquidation of the Collateral, including, 
without limitation, detailed estimates of the time and expense required 
for such work-out and an assessment of the risks to the Agent or Lender 
and the Board associated therewith relative to such risks associated 
with complete foreclosure and liquidation; and, if any partial 
foreclosure and liquidation is a part of such proposed work-out plan, a 
detailed estimate of the time and reasonable costs of collection 
anticipated by the Agent or Lender to be required to effect such partial 
liquidation.
    (d) By making a Payment Demand, the Agent or Lender shall be 
conclusively deemed to have certified, with full knowledge of the 
provisions of 18 U.S.C. 1001 and 31 U.S.C. 3729 including, without 
limitation, the provisions thereof for penalties and damages, to the 
Board that it has fully and timely complied with all material provisions 
and obligations under the Guarantee and the Loan Documents, that the 
amount demanded is past due and owed by the Borrower under the Loan 
Agreement, and that the demand is properly made and required to be 
satisfied by the Board under the terms of the Guarantee.
    (e) Following receipt of any Payment Demand, the Board or, on its 
behalf, any duly authorized representative or designee, may conduct an 
audit and investigation of compliance with all material provisions and 
obligations under the Guarantee. The Agent and/or Lender shall cooperate 
fully and diligently with any such audit and investigation.
    (f) Within a reasonable period of time from receipt by the Board of 
a Payment Demand, the Board shall approve payment of the amount to be 
paid in respect of the unpaid principal amount under the Loan to which 
the Payment Demand relates. The Board may withhold such payment if any 
audit or investigation is pending or if information remains to be 
furnished by the Agent or Lender. Further, payment shall not be made to 
the extent it is determined by the Board, whether as the result of an 
audit, investigation or otherwise, that the Board's payment obligation 
has terminated. Payment shall be made by wire transfer in immediately 
available funds to the bank and account designated by the Agent or 
Lender for such purpose.
    (g) The Board may take, or direct to be taken any action in 
liquidating the Collateral that the Board determines to be necessary or 
proper, consistent with Federal law and regulations.
    (h) Pursuant to the Guarantee, upon Payment Demand by the Agent or 
Lender, and whether the Board has approved any payment under the 
Guarantee or any payment has been made under the Guarantee, the Board, 
through the Administrator, shall have the right to liquidate, or cause 
to be liquidated, the Collateral. The Board, at its sole discretion, 
shall have the right to require that the Agent or Lender, solely or with 
the Administrator, conduct to completion any liquidation of any of the 
Collateral. Such liquidation shall be conducted by the Agent or Lender 
in accordance with the standards of care specified in Sec. 2201.26(a) 
of this part.

[[Page 57]]



Sec. 2201.34  OMB Control Number.

    The information collection requirements in this part are approved by 
the Office of Management and Budget and assigned OMB control number 
0572-0135.

[[Page 59]]



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




  --------------------------------------------------------------------
Part                                                                Page
2610            Organization, functions, and delegations of 
                    authority...............................          61
2620            Availability of information to the public...          64

[[Page 61]]



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 62]]

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 63]]

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 64]]

          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 65]]

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 67]]



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




  --------------------------------------------------------------------
Part                                                                Page
2700            Organization and functions..................          69
2710            Availability of information to the public...          69

[[Page 69]]



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 70]]



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 71]]

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 73]]



                  CHAPTER XXVIII--OFFICE OF OPERATIONS,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
2810            Organization and functions--Office of 
                    Operations..............................          75
2811            Availability of information to the public...          75
2812            Department of Agriculture guidelines for the 
                    donation of excess research equipment 
                    under 15 U.S.C. 3710(i).................          77

[[Page 75]]



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 76]]

    (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 77]]



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 78]]



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 79]]

    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 81]]



           CHAPTER XXIX--OFFICE OF ENERGY POLICY AND NEW USES,
                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
2900            Essential agricultural uses and volumetric 
                    requirements--Natural Gas Policy Act....          83
2901            Administrative procedures for adjustments of 
                    natural gas curtailment priority........          84
2902            Guidelines for designating biobased products 
                    for Federal procurement.................          88
2903            Biodiesel fuel education program............          93

[[Page 83]]



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 84]]

    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 85]]


    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 86]]

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 87]]

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 88]]

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.



PART 2902_GUIDELINES FOR DESIGNATING BIOBASED PRODUCTS FOR FEDERAL 
PROCUREMENT--Table of Contents




                            Subpart A_General

Sec.
2902.1 Purpose and scope.
2902.2 Definitions.
2902.3 Applicability to Federal procurements.
2902.4 Procurement programs.
2902.5 Item designation.
2902.6 Providing product information to Federal agencies.
2902.7 Determining biobased content.
2902.8 Determining life cycle costs, environmental and health benefits, 
          and performance.
2902.9 Funding for testing.

Subpart B--Designated Items [Reserved]

    Source: 70 FR 1809, Jan. 11, 2005, unless otherwise noted.

    Authority: 7 U.S.C. 8102.



                            Subpart A_General



Sec. 2902.1  Purpose and scope.

    (a) Purpose. The purpose of the guidelines in this part is to assist 
Federal agencies in complying with the requirements of section 9002 of 
the Farm Security and Rural Investment Act of 2002 (FSRIA), Public Law 
107-171, 116 Stat. 476 (7 U.S.C. 8102), as they apply to the procurement 
of the items designated in subpart B of this part.
    (b) Scope. The guidelines in this part designate items that are or 
can be produced with biobased products and whose procurement by Federal 
agencies will carry out the objectives of section 9002 of FSRIA.



Sec. 2902.2  Definitions.

    These definitions apply to this part:
    Agricultural materials. Agricultural-based, including plant, animal, 
and marine materials, raw materials or residues used in the manufacture 
of commercial or industrial, nonfood/nonfeed products.
    ASTM International. ASTM International, a nonprofit organization 
organized in 1898, is one of the largest voluntary standards development 
organizations in the world with about 30,000 members in over 100 
different countries. ASTM provides a forum for the development and 
publication of voluntary consensus standards for materials, products, 
systems, and services.
    BEES. An acronym for ``Building for Environmental and Economic 
Sustainability,'' an analytic tool used to determine the environmental 
and health benefits and life cycle costs of items, developed by the U.S. 
Department of Commerce National Institute of Standards and Technology, 
with support from the U.S. Environmental Protection Agency, Office of 
Pollution Prevention and Toxics (BEES 3.0, Building for Environmental 
and Economic Sustainability Technical Manual and User Guide, NISTIR 
6916, National Institute of Standards and Technology, U.S. Department of 
Commerce, October 2002). Also, see http://www.bfrl.nist.gov/oae/
software/bees--USDA.html for a discussion of how biobased feedstocks are 
addressed in the BEES Analysis.
    Biobased components. Any intermediary biobased materials or parts

[[Page 89]]

that, in combination with other components, are functional parts of the 
biobased product.
    Biobased content. Biobased content shall be determined based on the 
amount of biobased carbon in the material or product as a percent of 
weight (mass) of the total organic carbon in the material or product.
    Biobased product. A product determined by USDA to be a commercial or 
industrial product (other than food or feed) that is composed, in whole 
or in significant part, of biological products or renewable domestic 
agricultural materials (including plant, animal, and marine materials) 
or forestry materials.
    Biological products. Products derived from living materials other 
than agricultural or forestry materials.
    Designated item. A generic grouping of biobased products identified 
in subpart B that is eligible for the procurement preference established 
under section 9002 of FSRIA.
    Diluent. A substance used to diminish the strength, scent, or other 
basic property of a substance.
    Engineered wood products. Products produced with a combination of 
wood, food fibers and adhesives.
    Federal agency. Any executive agency or independent establishment in 
the legislative or judicial branch of the Government (except the Senate, 
the House of Representatives, the Architect of the Capitol, and any 
activities under the Architect's direction).
    Filler. A substance added to a product to increase the bulk, weight, 
viscosity, strength, or other property.
    Forest thinnings. Refers to woody materials removed from a dense 
forest, primarily to improve growth, enhance forest health, or recover 
potential mortality. (To recover potential mortality means to remove 
trees that are going to die in the near future.)
    Forestry materials. Materials derived from the practice of planting 
and caring for forests and the management of growing timber. Such 
materials must come from short rotation woody crops (less than 10 years 
old), sustainably managed forests, wood residues, or forest thinnings.
    Formulated product. A product that is prepared or mixed with other 
ingredients, according to a specified formula and includes more than one 
ingredient.
    FSRIA. The Farm Security and Rural Investment Act of 2002, Public 
Law 107-171, 116 Stat. 134 (7 U.S.C. 8102).
    Ingredient. A component; part of a compound or mixture; may be 
active or inactive.
    ISO. The International Organization for Standardization, a network 
of national standards institutes from 145 countries working in 
partnership with international organizations, governments, industries, 
business, and consumer representatives.
    Neat product. A product that is made of only one ingredient and is 
not diluted or mixed with other substances.
    Relative price. The price of a product as compared to the price of 
other products on the market that have similar performance 
characteristics.
    Residues. That which remains after a part is taken, separated, 
removed, or designated; a remnant; a remainder; and, for this purpose, 
is from agricultural materials, biological products, or forestry 
materials.
    Secretary. The Secretary of the United States Department of 
Agriculture.
    Small and emerging private business enterprise. Any private business 
which will employ 50 or fewer new employees and has less than $1 million 
in projected annual gross revenues.
    Sustainably managed forests. Refers to the practice of a land 
stewardship ethic that integrates the reforestation, management, 
growing, nurturing, and harvesting of trees for useful products while 
conserving soil and improving air and water quality, wildlife, fish 
habitat, and aesthetics.



Sec. 2902.3  Applicability to Federal procurements.

    (a) Applicability to procurement actions. The guidelines in this 
part apply to all procurement actions by Federal agencies involving 
items designated by USDA in this part, where the Federal agency 
purchases $10,000 or more worth of one of these items during the course 
of a fiscal year, or where the quantity of such items or of functionally 
equivalent items purchased during the preceding fiscal year was $10,000 
or more. The $10,000 threshold applies to Federal

[[Page 90]]

agencies as a whole rather than to agency subgroups such as regional 
offices or subagencies of a larger Federal department or agency.
    (b) Exception for procurements subject to EPA regulations under the 
Solid Waste Disposal Act. For any procurement by any Federal agency that 
is subject to regulations of the Administrator of the Environmental 
Protection Agency under section 6002 of the Solid Waste Disposal Act as 
amended by the Resource Conservation and Recovery Act of 1976 (40 CFR 
part 247), these guidelines do not apply to the extent that the 
requirements of this part are inconsistent with such regulations.
    (c) Procuring items composed of highest percentage of biobased 
products. FSRIA section 9002(c)(1) requires Federal agencies to procure 
designated items composed of the highest percentage of biobased products 
practicable, consistent with maintaining a satisfactory level of 
competition, considering these guidelines. Federal agencies may decide 
not to procure such items if they are not reasonably priced or readily 
available or do not meet specified or reasonable performance standards.



Sec. 2902.4  Procurement programs.

    (a) Integration into the Federal procurement framework. The Office 
of Federal Procurement Policy, in cooperation with USDA, has the 
responsibility to coordinate this policy's implementation in the Federal 
procurement regulations. These guidelines are not intended to address 
full implementation of these requirements into the Federal procurement 
framework. This will be accomplished through revisions to the Federal 
Acquisition Regulation.
    (b) Federal agency preferred procurement programs. (1) On or before 
January 11, 2006, each Federal agency shall develop a procurement 
program which will assure that items composed of biobased products will 
be purchased to the maximum extent practicable and which is consistent 
with applicable provisions of Federal procurement laws. Each procurement 
program shall contain:
    (i) A preference program for purchasing designated items,
    (ii) A promotion program to promote the preference program; and
    (iii) Provisions for the annual review and monitoring of the 
effectiveness of the procurement program.
    (2) In developing the preference program, Federal agencies shall 
adopt one of the following options, or a substantially equivalent 
alternative, as part of the procurement program:
    (i) A policy of awarding contracts to the vendor offering a 
designated item composed of the highest percentage of biobased product 
practicable except when such items:
    (A) Are not available within a reasonable time;
    (B) Fail to meet performance standards set forth in the applicable 
specifications, or the reasonable performance standards of the Federal 
agency; or
    (C) Are available only at an unreasonable price.
    (ii) A policy of setting minimum biobased products content 
specifications in such a way as to assure that the biobased products 
content required is consistent with section 9002 of FSRIA and the 
requirements of the guidelines in this part except when such items:
    (A) Are not available within a reasonable time;
    (B) Fail to meet performance standards for the use to which they 
will be put, or the reasonable performance standards of the Federal 
agency; or
    (C) Are available only at an unreasonable price.
    (c) Procurement specifications. After the publication date of each 
designated item, Federal agencies that have the responsibility for 
drafting or reviewing specifications for items procured by Federal 
agencies shall ensure within a specified time frame that their 
specifications require the use of designated items composed of biobased 
products, consistent with the guidelines in this part. USDA will specify 
the allowable time frame in each designation rule. The biobased content 
of a designated item may vary considerably from product to product based 
on the mix of ingredients used in its manufacture. In procuring 
designated items, the percentage of biobased product content should be 
maximized, consistent with achieving the desired performance for the 
product.

[[Page 91]]



Sec. 2902.5  Item designation.

    (a) Procedure. Designated items are listed in subpart B. In 
designating items, USDA will designate items composed of generic 
groupings of specific products and will identify the minimum biobased 
content for each listed item. As items are designated for procurement 
preference, they will be added to subpart B. Items are generic groupings 
of specific products. Products are specific products offered for sale by 
a manufacturer or vendor. Although manufacturers and vendors may submit 
recommendations to USDA for future item designations at any time, USDA 
does not have a formal process for such submissions or for responding to 
such submissions.
    (b) Considerations. In designating items, USDA will consider the 
availability of such items and the economic and technological 
feasibility of using such items, including life cycle costs. USDA will 
gather information on individual products within an item and extrapolate 
that product information to the item level for consideration in 
designating items. In considering these factors, USDA will use life 
cycle cost information only from tests using the BEES analytical method.
    (c) Exclusions. (1) Motor vehicle fuels and electricity are excluded 
by statute from this program.
    (2) USDA additionally will not designate items for preferred 
procurement that are determined to have mature markets. USDA will 
determine mature market status by whether the item had significant 
national market penetration in 1972.



Sec. 2902.6  Providing product information to Federal agencies.

    (a) Informational Web site. An informational USDA Web site 
implementing section 9002 can be found at: http://
www.biobased.oce.usda.gov. USDA will maintain a voluntary Web-based 
information site for manufacturers and vendors of designated items 
produced with biobased products and Federal agencies to exchange product 
information. This Web site will provide information as to the 
availability, relative price, biobased content, performance and 
environmental and public health benefits of the designated items. USDA 
encourages manufacturers and vendors to provide product, business 
contacts, and product information for designated items. Instructions for 
posting information are found on the Web site itself. USDA also 
encourages Federal agencies to utilize this Web site to obtain current 
information on designated items, contact information on manufacturers 
and vendors, and access to information on product characteristics 
relevant to procurement decisions. In addition to any information 
provided on the Web site, manufacturers and vendors are expected to 
provide relevant information to Federal agencies, upon request, with 
respect to product characteristics, including verification of such 
characteristics if requested.
    (b) Advertising, labeling and marketing claims. Manufacturers and 
vendors are reminded that their advertising, labeling, and other 
marketing claims, including claims regarding health and environmental 
benefits of the product, must conform to the Federal Trade Commission 
Guides for the Use of Environmental Marketing Claims, 16 CFR part 260.



Sec. 2902.7  Determining biobased content.

    (a) Certification requirements. For any product offered for 
preferred procurement, manufacturers and vendors must certify that the 
product meets the biobased content requirements for the designated item 
within which the product falls. Paragraph (c) of this section addresses 
how to determine biobased content. Upon request, manufacturers and 
vendors must provide USDA and Federal agencies information to verify 
biobased content for products certified to qualify for preferred 
procurement.
    (b) Minimum biobased content. Unless specified otherwise in the 
designation of a particular item, the minimum biobased content 
requirements in a specific item designation refer to the biobased 
portion of the product, and not the entire product.
    (c) Determining biobased content. Verification of biobased content 
must be based on third party ASTM/ISO compliant test facility testing 
using the ASTM International Radioisotope Standard Method D 6866. ASTM 
International Radioisotope Standard Method D 6866 determines biobased 
content

[[Page 92]]

based on the amount of biobased carbon in the material or product as 
percent of the weight (mass) of the total organic carbon in the material 
or product.
    (d) Products with the same formulation. In the case of products that 
are essentially the same formulation, but marketed under a variety of 
brand names, biobased content test data need not be brand-name specific.



Sec. 2902.8  Determining life cycle costs, environmental and health 
benefits, and performance.

    (a) Providing information on life cycle costs and environmental and 
health benefits. When requested by Federal agencies, manufacturers and 
vendors must provide information on life cycle costs and environmental 
and health benefits based on tests using either of two analytical 
approaches: The BEES analytical tool along with the qualifications of 
the independent testing entity that performed the tests; or either a 
third-party or an in-house conducted analysis using the ASTM standard 
for evaluating and reporting on environmental performance of biobased 
products D7075. Both BEES and the ASTM standard are in accordance with 
ISO standards, are focused on testing of biobased products, and will 
provide the life cycle assessment and life cycle cost information 
Federal agencies might require. As with biobased content, test data 
using the above analytical methods need not be brand-name specific.
    (b) Performance test information. In assessing performance of 
qualifying biobased products, USDA requires that Federal agencies rely 
on results of performance tests using applicable ASTM, ISO, Federal or 
military specifications, or other similarly authoritative industry test 
standards. Such testing must be conducted by an ASTM/ISO compliant 
laboratory. The procuring official will decide whether performance data 
must be brand-name specific in the case of products that are essentially 
of the same formulation.



Sec. 2902.9  Funding for testing.

    (a) USDA use of funds for biobased content and BEES testing. USDA 
will use funds to support testing for biobased content and conduct of 
BEES testing for products within items USDA has selected to designate 
for preferred procurement through early regulatory action. USDA 
initially will focus on gathering the necessary test information on a 
sufficient number of products within an item (generic grouping of 
products) to support regulations to be promulgated to designate an item 
or items for preferred procurement under this program. USDA may accept 
cost sharing for such testing to the extent consistent with USDA product 
testing decisions. During this period USDA will not consider cost 
sharing in deciding what products to test. When USDA has concluded that 
a critical mass of items have been designated, USDA will exercise its 
discretion, in accordance with the competitive procedures outlined in 
paragraph (b) of this section, to allocate a portion of the available 
USDA testing funds to give priority to testing of products for which 
private sector firms provide cost sharing for the testing.
    (b) Competitive program for cost sharing for determining life cycle 
costs, environmental and health benefits, and performance. (1) Subject 
to the availability of funds and paragraph (a) of this section, USDA 
will announce annually the solicitation of proposals for cost sharing 
for life cycle costs, environmental and health benefits, and performance 
testing of biobased products in accordance with the standards set forth 
in Sec. 2902.8 to carry out this program. Information regarding the 
submission of proposals for cost sharing also will be posted on the USDA 
informational Web site, http://www.biobased.oce.usda.gov.
    (2) Proposals will be evaluated and assigned a priority rating. 
Priority ratings will be based on the following criteria:
    (i) A maximum of 25 points will be awarded a proposal based on the 
market readiness;
    (ii) A maximum of 20 points will be awarded a proposal based on the 
potential size of the market for that product in Federal agencies;
    (iii) A maximum of 25 points will be awarded based on the financial 
need for assistance of the manufacturer or vendor;

[[Page 93]]

    (iv) A maximum of 20 points will be awarded a proposal based on the 
product's prospective competitiveness in the market place;
    (v) A maximum of 10 points will be awarded a proposal based on its 
likely benefit to the environment.
    (3) Cost-sharing proposals will be considered first for high 
priority products of small and emerging private business enterprises. If 
funds remain to support further testing, USDA will consider cost sharing 
proposals for products of all other producers of biobased items as well 
as the remaining proposals for products of small and emerging private 
business enterprises. Proposals will be selected based on priority 
rating until available funds for the fiscal year are committed.
    (4)(i) For products selected for life cycle costs and environmental 
and health benefits testing under this paragraph, USDA could provide up 
to 50 percent of the cost of determining the life cycle costs and 
environmental and health effects, up to a maximum of $5,000 of 
assistance per product.
    (ii) For products selected for performance testing under this 
paragraph, USDA could provide up to 50 percent of the cost for 
performance testing, up to $100,000 of assistance per product for up to 
two performance tests (measures of performance) per product.
    (5) For selected proposals, USDA will enter into agreements with and 
provide the funds directly to the testing entities.
    (6) Proposals submitted in one fiscal year, but not selected for 
cost sharing of testing in that year, may be resubmitted to be 
considered for cost sharing in the following year.

Subpart B--Designated Items [Reserved]



PART 2903_BIODIESEL FUEL EDUCATION PROGRAM--Table of Contents




                      Subpart A_General Information

Sec.
2903.1 Applicability of regulations.
2903.2 Purpose of the program.
2903.3 Eligibility.
2903.4 Indirect costs.
2903.5 Matching requirements.

                      Subpart B_Program Description

2903.6 Project types.
2903.7 Project objectives.

                 Subpart C_Preparation of an Application

2903.8 Program application materials.
2903.9 Content of an application.
2903.10 Submission of an application.
2903.11 Acknowledgment of applications.

               Subpart D_Application Review and Evaluation

2903.12 Application review.
2903.13 Evaluation criteria.
2903.14 Conflicts of interest and confidentiality.

                     Subpart E_Award Administration

2903.15 General.
2903.16 Organizational management information.
2903.17 Award document and notice of award.

                   Subpart F_Supplementary Information

2903.18 Access to review information.
2903.19 Use of funds; changes.
2903.20 Reporting requirements.
2903.21 Applicable Federal statutes and regulations.
2903.22 Confidential aspects of applications and awards.
2903.23 Definitions.

    Authority: 7 U.S.C. 8104; 5 U.S.C. 301.

    Source: 68 FR 56139, Sept. 30, 2003, unless otherwise noted.



                      Subpart A_General Information



Sec. 2903.1  Applicability of regulations.

    (a) The regulations of this part only apply to Biodiesel Fuel 
Education Program grants awarded under the provisions of section 9004 of 
the Farm Security and Rural Investment Act of 2002 (FSRIA) (7 U.S.C. 
8104) which authorizes the Secretary to award competitive grants to 
eligible entities to educate governmental and private entities that 
operate vehicle fleets, other interested entities (as determined by the 
Secretary), and the public about the benefits of biodiesel fuel use. 
Eligibility is limited to nonprofit organizations and institutions of 
higher education (as defined in sec. 101 of the Higher Education Act of 
1965 (20 U.S.C. 1001)) that have demonstrated both knowledge of 
biodiesel fuel production,

[[Page 94]]

use, or distribution and the ability to conduct educational and 
technical support programs. The Secretary delegated this authority to 
the Chief Economist, who in turn delegated this authority to the 
Director of OEPNU.
    (b) The regulations of this part do not apply to grants awarded by 
the Department of Agriculture under any other authority.



Sec. 2903.2  Purpose of the program.

    The Biodiesel Fuel Education Program seeks to familiarize public and 
private vehicle fleet operators, other interested entities, and the 
public, with the benefits of biodiesel, a relatively new fuel option in 
the United States. It will also address concerns previously identified 
by fleet operators and other potential users of this alternative fuel, 
including the need to balance the positive environmental, social and 
human health impacts of biodiesel utilization with the increased per 
gallon cost to the user. It is the Program's goal to stimulate biodiesel 
demand and encourage the further development of a biodiesel industry in 
the United States.



Sec. 2903.3  Eligibility.

    (a) Eligibility is limited to nonprofit organizations and 
institutions of higher education that have demonstrated both knowledge 
of biodiesel fuel production, use, or distribution and the ability to 
conduct educational and technical support programs.
    (b) Award recipients may subcontract to organizations not eligible 
to apply provided such organizations are necessary for the conduct of 
the project.



Sec. 2903.4  Indirect costs.

    (a) For the Biodiesel Fuel Education Program, applicants should use 
the current indirect cost rate negotiated with the cognizant Federal 
negotiating agency. Indirect costs may not exceed the negotiated rate. 
If no indirect cost rate has been negotiated, a reasonable dollar amount 
for indirect costs may be requested, which will be subject to approval 
by USDA. In the latter case, if a proposal is recommended for funding, 
an indirect cost rate proposal must be submitted prior to award to 
support the amount of indirect costs requested.
    (b) A proposer may elect not to charge indirect costs and, instead, 
charge only direct costs to grant funds. Grantees electing this 
alternative will not be allowed to charge, as direct costs, indirect 
costs that otherwise would be in the grantee's indirect cost pool under 
the applicable Office of Management and Budget cost principles. Grantees 
who request no indirect costs will not be permitted to revise their 
budgets at a later date to charge indirect costs to grant funds.



Sec. 2903.5  Matching requirements.

    There are no matching funds requirements for the Biodiesel Fuel 
Education Program and matching resources will not be factored into the 
review process as evaluation criteria.



                      Subpart B_Program Description



Sec. 2903.6  Project types.

    OEPNU intends to award continuation grants to successful Biodiesel 
Fuel Education Program applicants. A continuation grant is a grant 
instrument by which the Department agrees to support a specified level 
of effort for a predetermined project period 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 government support would be in the best interest 
of the Federal government and the public. If these three elements are 
met, OEPNU plans to provide additional support to the funded project(s).



Sec. 2903.7  Project objectives.

    (a) Successful projects will develop practical indicators or 
milestones to measure their progress towards achieving the following 
objectives:
    (1) Enhance current efforts to collect and disseminate biodiesel 
information;
    (2) Coordinate with other biodiesel educational or promotional 
programs, and with Federal, State and local programs aimed at 
encouraging biodiesel use, including the EPAct program;
    (3) Create a nationwide networking system that delivers biodiesel 
information to targeted audiences, including users, distributors and 
other infrastructure-related personnel;

[[Page 95]]

    (4) Identify and document the benefits of biodiesel (e.g., lifecycle 
costing); and
    (5) Gather data pertaining to information gaps and develop 
strategies to address the gaps.
    (b) [Reserved]



                 Subpart C_Preparation of an Application



Sec. 2903.8  Program application materials.

    OEPNU will publish periodic program announcements to notify 
potential applicants of the availability of funds for competitive 
continuation grants. The program announcement will provide information 
about obtaining program application materials.



Sec. 2903.9  Content of an application.

    (a) Applications should be prepared following the guidelines and the 
instructions in the program announcement. At a minimum, applications 
shall include: a proposal cover page, project summary, project 
description, information about key personnel, documentation of 
collaborative arrangements, information about potential conflicts-of-
interest, budget forms and a budget narrative, information about current 
and pending support, and assurance statements.
    (b) Proper preparation of applications will assist reviewers in 
evaluating the merits of each application in a systematic, consistent 
fashion. Specific instructions regarding additional application content 
requirements and the ordering of application contents will be included 
in the program announcement. These will include instructions about paper 
size, margins, font type and size, line spacing, page numbering, the 
inclusion of illustrations, and electronic submission.



Sec. 2903.10  Submission of an application.

    The program announcement will provide the deadline date for 
submitting an application, the number of copies of each application that 
must be submitted, and the address to which proposals must be submitted.



Sec. 2903.11  Acknowledgment of applications.

    The receipt of all applications will be acknowledged. Applicants who 
do not receive an acknowledgment within 60 days of the submission 
deadline should contact the program contact indicated on the program 
announcement. Once the application has been assigned a proposal number, 
that number should be cited on all future correspondence.



               Subpart D_Application Review and Evaluation



Sec. 2903.12  Application review.

    (a) Reviewers will include government and non-government 
individuals. All reviewers will be selected based upon training and 
experience in relevant scientific, extension, or education fields, 
taking into account the following factors:
    (1) The level of relevant formal scientific, technical education, or 
extension experience of the individual, as well as the extent to which 
an individual is engaged in relevant research, education, or extension 
activities; and
    (2) The need to include as reviewers experts from various areas of 
specialization within relevant scientific, education, or extension 
fields.
    (b) In addition, when selecting non-government reviewers, the 
following factors will be considered:
    (1) The need to include as reviewers other experts (e.g., producers, 
range or forest managers/operators, and consumers) who can assess 
relevance of the applications to targeted audiences and to program 
needs;
    (2) The need to include as reviewers experts from a variety of 
organizational types (e.g., colleges, universities, industry, state and 
Federal agencies, private profit and non-profit organizations) and 
geographic locations;
    (3) The need to maintain a balanced composition of reviewers with 
regard to minority and female representation and an equitable age 
distribution; and
    (4) The need to include reviewers who can judge the effective 
usefulness to producers and the general public of each application.
    (c) Authorized departmental officers will compile application 
reviews and

[[Page 96]]

recommend awards to OEPNU. OEPNU will make final award decisions.



Sec. 2903.13  Evaluation criteria.

    (a) The following evaluation criteria will be used in reviewing 
applications submitted for the Biodiesel Fuel Education Program:
    (1) Relevance of proposed project to current and future issues 
related to the production, use, distribution, fuel quality, and fuel 
properties of biodiesel, including:
    (i) Demonstrated knowledge about markets, state initiatives, impacts 
on local economies, regulatory issues, standards, and technical issues;
    (ii) Demonstrated knowledge about issues associated with developing 
a biodiesel infrastructure; and
    (iii) Quality and extent of stakeholder involvement in planning and 
accomplishment of program objectives.
    (2) Reasonableness of project proposal, including:
    (i) Sufficiency of scope and strategies to provide a consistent 
message in keeping with existing standards and regulations;
    (ii) Adequacy of Project Description, suitability and feasibility of 
methodology to develop and implement program;
    (iii) Clarity of objectives, milestones, and indicators of progress;
    (iv) Adequacy of plans for reporting, assessing and monitoring 
results over project's duration; and
    (v) Demonstration of feasibility, and probability of success.
    (3) Technical quality of proposed project, including:
    (i) Suitability and qualifications of key project personnel;
    (ii) Institutional experience and competence in providing 
alternative fuel education, including:
    (A) Demonstrated knowledge about programs involved in alternative 
fuel research and education;
    (B) Demonstrated knowledge about other fuels, fuel additives, engine 
performance, fuel quality and fuel emissions;
    (C) Demonstrated knowledge about Federal, State and local programs 
aimed at encouraging alternative fuel use;
    (D) Demonstrated ability in providing educational programs and 
developing technical programs; and
    (E) Demonstrated ability to analyze technical information relevant 
to the biodiesel industry.
    (iii) Adequacy of available or obtainable resources; and
    (iv) Quality of plans to administer and maintain the project, 
including collaborative efforts, evaluation and monitoring efforts.
    (b) [Reserved]



Sec. 2903.14  Conflicts of interest and confidentiality.

    (a) During the peer evaluation process, extreme care will be taken 
to prevent any actual or perceived conflicts of interest that may impact 
review or evaluation. Determinations of conflicts of interest will be 
based on the academic and administrative autonomy of an institution. The 
program announcement will specify the methodology for determining such 
autonomy.
    (b) Names of submitting institutions and individuals, as well as 
application content and peer evaluations, will be kept confidential, 
except to those involved in the review process, to the extent permitted 
by law. In addition, the identities of peer reviewers will remain 
confidential throughout the entire review process. Therefore, the names 
of the reviewers will not be released to applicants. At the end of the 
fiscal year, names of reviewers will be made available in such a way 
that the reviewers cannot be identified with the review of any 
particular application.



                     Subpart E_Award Administration



Sec. 2903.15  General.

    Within the limit of funds available for such purpose, the Authorized 
Departmental Officer (ADO) shall make grants to those responsible, 
eligible applicants whose applications are judged most meritorious under 
the procedures set forth in this part. The date specified by the ADO as 
the effective date of the grant 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. It should be noted that

[[Page 97]]

the project need not be initiated on the grant effective date, but as 
soon thereafter as practical so that project goals may be attained 
within the funded project period. All funds granted by OEPNU under this 
program 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 applicable Department 
assistance regulations (including part 3019 of this title).



Sec. 2903.16  Organizational management information.

    Specific management information relating to an applicant shall be 
submitted on a one-time basis as part of the responsibility 
determination prior to the award of a grant identified under this 
program, if such information has not been provided previously. Copies of 
forms recommended for use in fulfilling these requirements will be 
provided as part of the preaward process.



Sec. 2903.17  Award document and notice of award.

    (a) The award document will provide pertinent instructions and 
information including, at a minimum, the following:
    (1) Legal name and address of performing organization or institution 
to whom OEPNU has issued an award under this program;
    (2) Title of project;
    (3) Name(s) and institution(s) of PDs chosen to direct and control 
approved activities;
    (4) Identifying award number assigned by the Department;
    (5) Project period;
    (6) Total amount of Departmental financial assistance approved by 
OEPNU during the project period;
    (7) Legal authority(ies) under which the award is issued;
    (8) Appropriate Catalog of Federal Domestic Assistance (CFDA) 
number;
    (9) Approved budget plan for categorizing allocable project funds to 
accomplish the stated purpose of the award; and
    (10) Other information or provisions deemed necessary by OEPNU and 
the Authorized Departmental Officer to carry out the awarding activities 
or to accomplish the purpose of a particular award.
    (b) [Reserved]



                   Subpart F_Supplementary Information



Sec. 2903.18  Access to review information.

    Copies of reviews, not including the identity of reviewers, and a 
summary of the comments will be sent to the applicant PD after the 
review process has been completed.



Sec. 2903.19  Use of funds; changes.

    (a) Delegation of fiscal responsibility. Unless the terms and 
conditions of the award state otherwise, the awardee may not in whole or 
in part delegate or transfer to another person, institution, or 
organization the responsibility for use or expenditure of award funds.
    (b) Changes in project plans. (1) The permissible changes by the 
awardee, PD(s), or other key project personnel in the approved project 
shall be limited to changes in methodology, techniques, or other similar 
aspects of the project to expedite achievement of the project's approved 
goals. If the awardee or the PD(s) is uncertain as to whether a change 
complies with this provision, the question must be referred to the 
Authorized Departmental Officer (ADO) for a final determination. The ADO 
is the signatory of the award document, not the program contact.
    (2) Changes in approved goals or objectives shall be requested by 
the awardee and approved in writing by the ADO 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 
awardee and approved in writing by the ADO 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 awardee and 
approved in writing

[[Page 98]]

by the ADO prior to effecting such transfers, unless prescribed 
otherwise in the terms and conditions of the award.
    (5) Changes in project period. The project period may be extended by 
OEPNU without additional financial support, for such additional 
period(s) as the ADO determines may be necessary to complete or fulfill 
the purposes of an approved project, but in no case shall the total 
project period exceed five years. Any extension of time shall be 
conditioned upon prior request by the awardee and approval in writing by 
the ADO, unless prescribed otherwise in the terms and conditions of 
award.
    (6) Changes in approved budget. Changes in an approved budget must 
be requested by the awardee and approved in writing by the ADO prior to 
instituting such changes if the revision will involve transfers or 
expenditures of amounts requiring prior approval as set forth in the 
applicable Federal cost principles, Departmental regulations, or award.



Sec. 2903.20  Reporting requirements.

    The award document will give instructions regarding the submission 
of progress reports, including the frequency and required contents of 
the reports.



Sec. 2903.21  Applicable Federal statutes and regulations.

    Several Federal statutes and regulations apply to grant applications 
considered for review and to project grants awarded under this program. 
These include, but are not limited to:
    7 CFR Part 1, subpart A--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 VI of the 
Civil Rights Act of 1964, as amended.
    7 CFR Part 3017--USDA implementation of Governmentwide Debarment and 
Suspension (Nonprocurement) and Governmentwide Requirements for Drug-
Free Workplace (Grants).
    7 CFR Part 3018--USDA implementation of Restrictions on Lobbying. 
Imposes 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 implementation of OMB Circular A-110, Uniform 
Administrative Requirements for Grants and Other Agreements With 
Institutions of Higher Education, Hospitals, and Other Nonprofit 
Organizations.
    7 CFR Part 3052--USDA implementation of OMB Circular No. A-133, 
Audits of States, Local Governments, and Non-profit Organizations. 29 
U.S.C. 794 (sec. 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. 2903.22  Confidential aspects of applications and awards.

    When an application results in an award, it becomes a part of the 
record of USDA transactions, available to the public upon specific 
request. Information that the Secretary determines to be of a 
confidential, privileged, or proprietary nature will be held in 
confidence to the extent permitted by law. Therefore, any information 
that the applicant wishes to have considered as confidential, 
privileged, or proprietary should be clearly marked within the 
application. The original copy of an application that does not result in 
an award will be retained by the Agency for a period of one year. Other 
copies will be destroyed. Such an application will be released only with 
the consent of the applicant or to the extent required by law. An 
application may be withdrawn at any time prior to the final action 
thereon.



Sec. 2903.23  Definitions.

    For the purpose of this program, the following definitions are 
applicable:

[[Page 99]]

    Authorized departmental officer or ADO means the Secretary or any 
employee of the Department who has the authority to issue or modify 
grant instruments on behalf of the Secretary.
    Authorized organizational representative or AOR means the president 
or chief executive officer of the applicant organization or the 
official, designated by the president or chief executive officer of the 
applicant organization, who has the authority to commit the resources of 
the organization.
    Biodiesel means a monoalkyl ester that meets the requirements of an 
appropriate American Society for Testing and Materials Standard.
    Budget period means the interval of time (usually 12 months) into 
which the project period is divided for budgetary and reporting 
purposes.
    Department or USDA means the United States Department of 
Agriculture.
    Education activity means an act or process that imparts knowledge or 
skills through formal or informal training and outreach.
    Grant means the award by the Secretary of funds to an eligible 
recipient for the purpose of conducting the identified project.
    Grantee means the organization designated in the award document as 
the responsible legal entity to which a grant is awarded.
    Institution of higher education, as defined in sec. 101 of the 
Higher Education Act of 1965 (20 U.S.C. 1001), means an educational 
institution in any State that:
    (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 the institution awards 
a bachelor's degree or provides not less than a two-year program that is 
acceptable for full credit toward such a degree;
    (4) Is a public or other nonprofit institution; and
    (5) Is accredited by a nationally recognized accrediting agency or 
association, or if not so accredited, is an institution that has been 
granted preaccreditation status by such an agency or association that 
has been recognized by the Secretary of Education for the granting of 
preaccreditation status, and the Secretary of Education has determined 
that there is satisfactory assurance that the institution will meet the 
accreditation standards of such an agency or association within a 
reasonable time.
    OEPNU means the Office of Energy Policy and New Uses.
    Peer review is an evaluation of a proposed project performed by 
experts with the scientific knowledge and technical skills to conduct 
the proposed work whereby the technical quality and relevance to the 
program are assessed.
    Prior approval means written approval evidencing prior consent by an 
authorized departmental officer (as defined in this section).
    Program means the Biodiesel Fuel Education Program.
    Project means the particular activity within the scope of the 
program supported by a grant award.
    Project director or PD means the single individual designated by the 
grantee in the grant application and approved by the Secretary who is 
responsible for the direction and management of the project, also known 
as a principal investigator for research activities.
    Project period means the period, as stated in the award document and 
modifications thereto, if any, during which Federal sponsorship begins 
and ends.
    Secretary means the Secretary of Agriculture and any other officer 
or employee of the Department to whom the authority involved may be 
delegated.

[[Page 101]]



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




  --------------------------------------------------------------------
Part                                                                Page
3010            [Reserved]
3011            Availability of information to the public...         103
3015            Uniform Federal assistance regulations......         104
3016            Uniform administrative requirements for 
                    grants and cooperative agreements to 
                    State and local governments.............         154
3017            Governmentwide debarment and suspension 
                    (nonprocurement)........................         182
3018            New restrictions on lobbying................         207
3019            Uniform administrative requirements for 
                    grants and agreements with institutions 
                    of higher education, hospitals, and 
                    other non-profit organizations..........         219
3021            Governmentwide requirements for drug-free 
                    workplace (financial assistance)........         246
3052            Audits of States, local governments, and 
                    non-profit organizations................         252

[[Page 103]]



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 104]]



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 105]]

              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 106]]

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 107]]

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 108]]



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 Sec. Sec. 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 109]]

    (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 110]]



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 111]]

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 112]]

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 113]]

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 114]]

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 115]]

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 116]]

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 sub recipients. Recipients are encouraged not to impose on sub 
recipients 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 Sec. Sec. 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 
Sec. Sec. 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 Sec. Sec. 
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 117]]

    (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 118]]

    (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 
subrecip ients.
    (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 119]]



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 120]]

    (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 subrecip ients, 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 121]]

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 Sec. Sec. 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, recipi ents 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 122]]

    (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 proj ect budgets. For research and 
non-research projects which involve cost-sharing or matching, approved 
budg ets 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 budg eted 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 123]]



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 124]]

    (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 Sec. Sec. 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 125]]

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 126]]



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 nongov ernmental 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 127]]

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 128]]

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 129]]

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 130]]

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 131]]

part contains retention and access requirements for these records.) The 
rec ords 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 132]]

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 subrecip ient'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 133]]

    (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 sub recipient 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 134]]

    (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 135]]



                        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 subrecip ient, 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 136]]

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 137]]

    (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 audio visual 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 138]]

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 139]]

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 140]]

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 141]]

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 142]]

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 Re view 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 143]]

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 144]]



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 145]]



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 146]]

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 147]]

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 Sec. Sec. 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 148]]

    (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 149]]

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 150]]

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 151]]

    (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 152]]

    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 153]]

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 154]]

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 155]]

              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 156]]

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 157]]

    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 158]]

    (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 159]]

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 160]]

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 161]]

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 162]]

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 163]]

    (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 164]]

    (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 165]]

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 Sec. Sec. 
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 166]]

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 167]]

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 168]]

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 169]]

    (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 170]]

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 171]]

    (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 172]]

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 173]]

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 174]]

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 175]]

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 176]]

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 177]]

    (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 178]]

    (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 179]]

    (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 180]]

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 181]]



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 Sec. Sec. 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 182]]

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 Sec. Sec. 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 
Sec. Sec. 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)
--Table of Contents




Sec.
3017.25 How is this part organized?
3017.50 How is this part written?
3017.75 Do terms in this part have special meanings?

                            Subpart A_General

3017.100 What does this part do?
3017.105 Does this part apply to me?
3017.110 What is the purpose of the nonprocurement debarment and 
          suspension system?
3017.115 How does an exclusion restrict a person's involvement in 
          covered transactions?

[[Page 183]]

3017.120 May we grant an exception to let an excluded person participate 
          in a covered transaction?
3017.125 Does an exclusion under the nonprocurement system affect a 
          person's eligibility for Federal procurement contracts?
3017.130 Does exclusion under the Federal procurement system affect a 
          person's eligibility to participate in nonprocurement 
          transactions?
3017.135 May the Department of Agriculture exclude a person who is not 
          currently participating in a nonprocurement transaction?
3017.140 How do I know if a person is excluded?
3017.145 Does this part address persons who are disqualified, as well as 
          those who are excluded from nonprocurement transactions?

                     Subpart B_Covered Transactions

3017.200 What is a covered transaction?
3017.205 Why is it important to know if a particular transaction is a 
          covered transaction?
3017.210 Which nonprocurement transactions are covered transactions?
3017.215 Which nonprocurement transactions are not covered transactions?
3017.220 Are any procurement contracts included as covered transactions?
3017.225 How do I know if a transaction in which I may participate is a 
          covered transaction?

Subpart C_Responsibilities of Participants Regarding Transactions Doing 
                       Business With Other Persons

3017.300 What must I do before I enter into a covered transaction with 
          another person at the next lower tier?
3017.305 May I enter into a covered transaction with an excluded or 
          disqualified person?
3017.310 What must I do if a Federal agency excludes a person with whom 
          I am already doing business in a covered transaction?
3017.315 May I use the services of an excluded person as a principal 
          under a covered transaction?
3017.320 Must I verify that principals of my covered transactions are 
          eligible to participate?
3017.325 What happens if I do business with an excluded person in a 
          covered transaction?
3017.330 What requirements must I pass down to persons at lower tiers 
          with whom I intend to do business?

            Disclosing Information_Primary Tier Participants

3017.335 What information must I provide before entering into a covered 
          transaction with the Department of Agriculture?
3017.340 If I disclose unfavorable information required under Sec. 
          3017.335, will I be prevented from participating in the 
          transaction?
3017.345 What happens if I fail to disclose the information required 
          under Sec. 3017.335?
3017.350 What must I do if I learn of the information required under 
          Sec. 3017.335 after entering into a covered transaction with 
          the Department of Agriculture?

             Disclosing Information_Lower Tier Participants

3017.355 What information must I provide to a higher tier participant 
          before entering into a covered transaction with that 
          participant?
3017.360 What happens if I fail to disclose the information required 
          under Sec. 3017.355?
3017.365 What must I do if I learn of information required under Sec. 
          3017.355 after entering into a covered transaction with a 
          higher tier participant?

   Subpart D_Responsibilities of Department of Agriculture Officials 
                         Regarding Transactions

3017.400 May I enter into a transaction with an excluded or disqualified 
          person?
3017.405 May I enter into a covered transaction with a participant if a 
          principal of the transaction is excluded?
3017.410 May I approve a participant's use of the services of an 
          excluded person?
3017.415 What must I do if a Federal agency excludes the participant or 
          a principal after I enter into a covered transaction?
3017.420 May I approve a transaction with an excluded or disqualified 
          person at a lower tier?
3017.425 When do I check to see if a person is excluded or disqualified?
3017.430 How do I check to see if a person is excluded or disqualified?
3017.435 What must I require of a primary tier participant?
3017.440 What method do I use to communicate those requirements to 
          participants?
3017.445 What action may I take if a primary tier participant knowingly 
          does business with an excluded or disqualified person?
3017.450 What action may I take if a primary tier participant fails to 
          disclose the information required under Sec. 3017.335?
3017.455 What may I do if a lower tier participant fails to disclose the 
          information

[[Page 184]]

          required under Sec. 3017.355 to the next higher tier?

                 Subpart E_Excluded Parties List System

3017.500 What is the purpose of the Excluded Parties List System (EPLS)?
3017.505 Who uses the EPLS?
3017.510 Who maintains the EPLS?
3017.515 What specific information is in the EPLS?
3017.520 Who places the information into the EPLS?
3017.525 Whom do I ask if I have questions about a person in the EPLS?
3017.530 Where can I find the EPLS?

   Subpart F_General Principles Relating to Suspension and Debarment 
                                 Actions

3017.600 How do suspension and debarment actions start?
3017.605 How does suspension differ from debarment?
3017.610 What procedures does the Department of Agriculture use in 
          suspension or debarment actions?
3017.615 How does the Department of Agriculture notify a person of a 
          suspension and debarment action?
3017.620 Do Federal agencies coordinate suspension and debarment 
          actions?
3017.625 What is the scope of a suspension or debarment action?
3017.630 May the Department of Agriculture impute the conduct of one 
          person to another?
3017.635 May the Department of Agriculture settle a debarment or 
          suspension action?
3017.640 May a settlement include a voluntary exclusion?
3017.645 Do other Federal agencies know if the Department of Agriculture 
          agrees to a voluntary exclusion?

                          Subpart G_Suspension

3017.700 When may the suspending official issue a suspension?
3017.705 What does the suspending official consider in issuing a 
          suspension?
3017.710 When does a suspension take effect?
3017.715 What notice does the suspending official give me if I am 
          suspended?
3017.720 How may I contest a suspension?
3017.725 How much time do I have to contest a suspension?
3017.730 What information must I provide to the suspending official if I 
          contest a suspension?
3017.735 Under what conditions do I get an additional opportunity to 
          challenge the facts on which the suspension is based?
3017.740 Are suspension proceedings formal?
3017.745 How is fact-finding conducted?
3017.750 What does the suspending official consider in deciding whether 
          to continue or terminate my suspension?
3017.755 When will I know whether the suspension is continued or 
          terminated?
3017.760 How long may my suspension last?
3017.765 How may I appeal my suspension?

                           Subpart H_Debarment

3017.800 What are the causes for debarment?
3017.805 What notice does the debarring official give me if I am 
          proposed for debarment?
3017.810 When does a debarment take effect?
3017.815 How may I contest a proposed debarment?
3017.820 How much time do I have to contest a proposed debarment?
3017.825 What information must I provide to the debarring official if I 
          contest a proposed debarment?
3017.830 Under what conditions do I get an additional opportunity to 
          challenge the facts on which the proposed debarment is based?
3017.835 Are debarment proceedings formal?
3017.840 How is fact-finding conducted?
3017.845 What does the debarring official consider in deciding whether 
          to debar me?
3017.850 What is the standard of proof in a debarment action?
3017.855 Who has the burden of proof in a debarment action?
3017.860 What factors may influence the debarring official's decision?
3017.865 How long may my debarment last?
3017.870 When do I know if the debarring official debars me?
3017.875 May I ask the debarring official to reconsider a decision to 
          debar me?
3017.880 What factors may influence the debarring official during 
          reconsideration?
3017.885 May the debarring official extend a debarment?
3017.890 How may I appeal my debarment?

                          Subpart I_Definitions

3017.900 Adequate evidence.
3017.905 Affiliate.
3017.910 Agency.
3017.915 Agent or representative.
3017.920 Civil judgment.
3017.925 Conviction.
3017.930 Debarment.
3017.935 Debarring official.
3017.940 Disqualified.
3017.945 Excluded or exclusion.
3017.950 Excluded Parties List System.
3017.955 Indictment.
3017.960 Ineligible or ineligibility.
3017.965 Legal proceedings.
3017.970 Nonprocurement transaction.
3017.975 Notice.
3017.980 Participant.
3017.985 Person.
3017.990 Preponderance of the evidence.
3017.995 Principal.

[[Page 185]]

3017.1000 Respondent.
3017.1005 State.
3017.1010 Suspending official.
3017.1015 Suspension.
3017.1020 Voluntary exclusion or voluntarily excluded.

Subpart J [Reserved]

Appendix to Part 3017--Covered Transactions

    Authority: 5 U.S.C. 301; Pub. L. 101-576, 104 Stat. 2838; Sec. 2455, 
Pub. L. 103-355, 108 Stat. 3327 (31 U.S.C. 6101 note); E.O. 12549 (3 
CFR, 1986 Comp., p. 189); E.O. 12698 (3 CFR, 1989 Comp., p. 235); 7 CFR 
2.28.

    Source: 68 FR 66544, 66563, Nov. 26, 2003, unless otherwise noted.



Sec. 3017.25  How is this part organized?

    (a) This part is subdivided into ten subparts. Each subpart contains 
information related to a broad topic or specific audience with special 
responsibilities, as shown in the following table:

------------------------------------------------------------------------
                                             You will find provisions
            In subpart . . .                     related to . . .
------------------------------------------------------------------------
A......................................  general information about this
                                          rule.
B......................................  the types of Department of
                                          Agriculture transactions that
                                          are covered by the
                                          Governmentwide nonprocurement
                                          suspension and debarment
                                          system.
C......................................  the responsibilities of persons
                                          who participate in covered
                                          transactions.
D......................................  the responsibilities of
                                          Department of Agriculture
                                          officials who are authorized
                                          to enter into covered
                                          transactions.
E......................................  the responsibilities of Federal
                                          agencies for the Excluded
                                          Parties List System
                                          (Disseminated by the General
                                          Services Administration).
F......................................  the general principles
                                          governing suspension,
                                          debarment, voluntary exclusion
                                          and settlement.
G......................................  suspension actions.
H......................................  debarment actions.
I......................................  definitions of terms used in
                                          this part.
J......................................  [Reserved]
------------------------------------------------------------------------

    (b) The following table shows which subparts may be of special 
interest to you, depending on who you are:

------------------------------------------------------------------------
             If you are . . .                   See subpart(s) . . .
------------------------------------------------------------------------
(1) a participant or principal in a         A, B, C, and I.
 nonprocurement transaction.
(2) a respondent in a suspension action...  A, B, F, G and I.
(3) a respondent in a debarment action....  A, B, F, H and I.
(4) a suspending official.................  A, B, D, E, F, G and I.
(5) a debarring official..................  A, B, D, E, F, H and I.
(6) a (n) Department of Agriculture         A, B, D, E and I.
 official authorized to enter into a
 covered transaction.
(7) Reserved..............................  J.
------------------------------------------------------------------------



Sec. 3017.50  How is this part written?

    (a) This part uses a ``plain language'' format to make it easier for 
the general public and business community to use. The section headings 
and text, often in the form of questions and answers, must be read 
together.
    (b) Pronouns used within this part, such as ``I'' and ``you,'' 
change from subpart to subpart depending on the audience being 
addressed. The pronoun ``we'' always is the Department of Agriculture.
    (c) The ``Covered Transactions'' diagram in the appendix to this 
part shows the levels or ``tiers'' at which the Department of 
Agriculture enforces an exclusion under this part. However, this diagram 
shows only the general model for the levels or ``tiers'' at which the 
Department of Agriculture enforces an exclusion under this part, and the 
model will vary for certain categories of transactions in accordance 
with the exclusions from covered transactions in Sec. 3017.215 and 
Sec. 3017.220.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66564, Nov. 26, 
2003]



Sec. 3017.75  Do terms in this part have special meanings?

    This part uses terms throughout the text that have special meaning. 
Those terms are defined in Subpart I of this part. For example, three 
important terms are--
    (a) Exclusion or excluded, which refers only to discretionary 
actions taken by a suspending or debarring official under this part or 
the Federal Acquisition Regulation (48 CFR part 9, subpart 9.4);
    (b) Disqualification or disqualified, which refers to prohibitions 
under specific statutes, executive orders (other than Executive Order 
12549 and Executive Order 12689), or other authorities. 
Disqualifications frequently are not subject to the discretion of an 
agency official, may have a different scope than exclusions, or have 
special conditions that apply to the disqualification; and
    (c) Ineligibility or ineligible, which generally refers to a person 
who is either excluded or disqualified.

[[Page 186]]



                            Subpart A_General



Sec. 3017.100  What does this part do?

    This part adopts a governmentwide system of debarment and suspension 
for Department of Agriculture nonprocurement activities. It also 
provides for reciprocal exclusion of persons who have been excluded 
under the Federal Acquisition Regulation, and provides for the 
consolidated listing of all persons who are excluded, or disqualified by 
statute, executive order, or other legal authority. This part satisfies 
the requirements in section 3 of Executive Order 12549, ``Debarment and 
Suspension'' (3 CFR 1986 Comp., p. 189), Executive Order 12689, 
``Debarment and Suspension'' (3 CFR 1989 Comp., p. 235) and 31 U.S.C. 
6101 note (Section 2455, Public Law 103-355, 108 Stat. 3327).



Sec. 3017.105  Does this part apply to me?

    Portions of this part (see table at Sec. 3017.25(b)) apply to you 
if you are a(n)--
    (a) Person who has been, is, or may reasonably be expected to be, a 
participant or principal in a covered transaction;
    (b) Respondent (a person against whom the Department of Agriculture 
has initiated a debarment or suspension action);
    (c) Department of Agriculture debarring or suspending official; or
    (d) Department of Agriculture official who is authorized to enter 
into covered transactions with non-Federal parties.



Sec. 3017.110  What is the purpose of the nonprocurement debarment and 
suspension system?

    (a) To protect the public interest, the Federal Government ensures 
the integrity of Federal programs by conducting business only with 
responsible persons.
    (b) A Federal agency uses the nonprocurement debarment and 
suspension system to exclude from Federal programs persons who are not 
presently responsible.
    (c) An exclusion is a serious action that a Federal agency may take 
only to protect the public interest. A Federal agency may not exclude a 
person or commodity for the purposes of punishment.



Sec. 3017.115  How does an exclusion restrict a person's involvement 
in covered transactions?

    With the exceptions stated in Sec. Sec. 3017.120, 3017.315, and 
3017.420, a person who is excluded by the Department of Agriculture or 
any other Federal agency may not:
    (a) Be a participant in a(n) Department of Agriculture transaction 
that is a covered transaction under subpart B of this part;
    (b) Be a participant in a transaction of any other Federal agency 
that is a covered transaction under that agency's regulation for 
debarment and suspension; or
    (c) Act as a principal of a person participating in one of those 
covered transactions.



Sec. 3017.120  May we grant an exception to let an excluded person 
participate in a covered transaction?

    (a) The Secretary of Agriculture or designee may grant an exception 
permitting an excluded person to participate in a particular covered 
transaction. If the Secretary of Agriculture or designee grants an 
exception, the exception must be in writing and state the reason(s) for 
deviating from the governmentwide policy in Executive Order 12549.
    (b) An exception granted by one agency for an excluded person does 
not extend to the covered transactions of another agency.



Sec. 3017.125  Does an exclusion under the nonprocurement system affect 
a person's eligibility for Federal procurement contracts?

    If any Federal agency excludes a person under its nonprocurement 
common rule on or after August 25, 1995, the excluded person is also 
ineligible to participate in Federal procurement transactions under the 
FAR. Therefore, an exclusion under this part has reciprocal effect in 
Federal procurement transactions.



Sec. 3017.130  Does exclusion under the Federal procurement system 
affect a person's eligibility to participate in nonprocurement 
transactions?

    If any Federal agency excludes a person under the FAR on or after 
August

[[Page 187]]

25, 1995, the excluded person is also ineligible to participate in 
nonprocurement covered transactions under this part. Therefore, an 
exclusion under the FAR has reciprocal effect in Federal nonprocurement 
transactions.



Sec. 3017.135  May the Department of Agriculture exclude a person who 
is not currently participating in a nonprocurement transaction?

    Given a cause that justifies an exclusion under this part, we may 
exclude any person who has been involved, is currently involved, or may 
reasonably be expected to be involved in a covered transaction.



Sec. 3017.140  How do I know if a person is excluded?

    Check the Excluded Parties List System (EPLS) to determine whether a 
person is excluded. The General Services Administration (GSA) maintains 
the EPLS and makes it available, as detailed in subpart E of this part. 
When a Federal agency takes an action to exclude a person under the 
nonprocurement or procurement debarment and suspension system, the 
agency enters the information about the excluded person into the EPLS.



Sec. 3017.145  Does this part address persons who are disqualified, as 
well as those who are excluded from nonprocurement transactions?

    Except if provided for in Subpart J of this part, this part--
    (a) Addresses disqualified persons only to--
    (1) Provide for their inclusion in the EPLS; and
    (2) State responsibilities of Federal agencies and participants to 
check for disqualified persons before entering into covered 
transactions.
    (b) Does not specify the--
    (1) Department of Agriculture transactions for which a disqualified 
person is ineligible. Those transactions vary on a case-by-case basis, 
because they depend on the language of the specific statute, Executive 
order, or regulation that caused the disqualification;
    (2) Entities to which the disqualification applies; or
    (3) Process that the agency uses to disqualify a person. Unlike 
exclusion, disqualification is frequently not a discretionary action 
that a Federal agency takes.



                     Subpart B_Covered Transactions



Sec. 3017.200  What is a covered transaction?

    A covered transaction is a nonprocurement or procurement transaction 
that is subject to the prohibitions of this part. It may be a 
transaction at--
    (a) The primary tier, between a Federal agency and a person (see 
appendix to this part); or
    (b) A lower tier, between a participant in a covered transaction and 
another person.



Sec. 3017.205  Why is it important if a particular transaction is a 
covered transaction?

    The importance of a covered transaction depends upon who you are.
    (a) As a participant in the transaction, you have the 
responsibilities laid out in Subpart C of this part. Those include 
responsibilities to the person or Federal agency at the next higher tier 
from whom you received the transaction, if any. They also include 
responsibilities if you subsequently enter into other covered 
transactions with persons at the next lower tier.
    (b) As a Federal official who enters into a primary tier 
transaction, you have the responsibilities laid out in subpart D of this 
part.
    (c) As an excluded person, you may not be a participant or principal 
in the transaction unless--
    (1) The person who entered into the transaction with you allows you 
to continue your involvement in a transaction that predates your 
exclusion, as permitted under Sec. 3017.310 or Sec. 3017.415; or
    (2) A(n) Department of Agriculture official obtains an exception 
from the Secretary of Agriculture or designee to allow you to be 
involved in the transaction, as permitted under Sec. 3017.120.

[[Page 188]]



Sec. 3017.210  Which nonprocurement transactions are covered transactions?

    All nonprocurement transactions, as defined in Sec. 3017.970, are 
covered transactions unless listed in Sec. 3017.215. (See appendix to 
this part.)



Sec. 3017.215  Which nonprocurement transactions are not covered 
transactions?

    The following types of nonprocurement transactions are not covered 
transactions:
    (a) A direct award to--
    (1) A foreign government or foreign governmental entity;
    (2) A public international organization;
    (3) An entity owned (in whole or in part) or controlled by a foreign 
government; or
    (4) Any other entity consisting wholly or partially of one or more 
foreign governments or foreign governmental entities.
    (b) A benefit 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). For example, if 
a person receives social security benefits under the Supplemental 
Security Income provisions of the Social Security Act, 42 U.S.C. 1301 et 
seq., those benefits are not covered transactions and, therefore, are 
not affected if the person is excluded.
    (c) Federal employment.
    (d) A transaction that the Department of Agriculture needs to 
respond to a national or agency-recognized emergency or disaster.
    (e) A permit, license, certificate, or similar instrument issued as 
a means to regulate public health, safety, or the environment, unless 
the Department of Agriculture specifically designates it to be a covered 
transaction.
    (f) An incidental benefit that results from ordinary governmental 
operations.
    (g) Any other transaction if the application of an exclusion to the 
transaction is prohibited by law.
    (h) An entitlement or mandatory award required by a statute, 
including a lower tier entitlement or mandatory award that is required 
by a statute.
    (i) With respect to the Department of Agriculture's export and 
foreign assistance programs, any transaction below the primary tier 
covered transaction other than a nonprocurement transaction under the 
Market Access Program between a nonprofit trade association or state 
regional group and a U.S. entity, as defined in part 1485 of this title.
    (j) Any transaction under the Department of Agriculture's 
conservation programs, warehouse licensing programs, or programs that 
provide statutory entitlements and make available loans to individuals 
and entities in their capacity as producers of agricultural commodities.
    (k) 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''), which provides separate statutory 
authority to debar.
    (l) 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.
    (m) 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.
    (n) If the person is a State or local government, the provision of 
official grading and inspection services, animal damage control 
services, animal and plant health and safety inspection services.
    (o) The receipt of licenses, permit, or certificates under 
regulatory programs conducted in the interest of ensuring fair trade 
practices.
    (p) Permits, licenses, exchanges and other acquisitions of real 
property, rights of way, and easements under natural resource management 
programs.

[68 FR 66544,66563, Nov. 26, 2003, as amended at 68 FR 66564, Nov. 26, 
2003]



Sec. 3017.220  Are any procurement contracts included as covered 
transactions?

    (a) Covered transactions under this part--

[[Page 189]]

    (1) Do not include any procurement contracts awarded directly by a 
Federal agency; but
    (2) Do include some procurement contracts awarded by non-Federal 
participants in nonprocurement covered transactions (see appendix to 
this part).
    (b) Specifically, a contract for goods or services is a covered 
transaction if any of the following applies:
    (1) The contract is awarded by a participant in a nonprocurement 
transaction that is covered under Sec. 3017.210, and the amount of the 
contract is expected to equal or exceed $25,000.
    (2) The contract requires the consent of a(n) Department of 
Agriculture official. In that case, the contract, regardless of the 
amount, always is a covered transaction, and it does not matter who 
awarded it. For example, it could be a subcontract awarded by a 
contractor at a tier below a nonprocurement transaction, as shown in the 
appendix to this part.
    (3) The contract is for federally-required audit services.
    (c) A contract for the procurement of ocean transportation in 
connection with the Department of Agriculture's foreign assistance 
programs is a covered transaction. With respect to the Department of 
Agriculture's export and foreign assistance programs, such contracts are 
the only procurement contracts included as covered transactions, 
notwithstanding the provisions in paragraphs (a) and (b) of this 
section.

[68 FR 66544,66563, Nov. 26, 2003, as amended at 68 FR 66564, Nov. 26, 
2003]



Sec. 3017.225  How do I know if a transaction in which I may participate 
is a covered transaction?

    As a participant in a transaction, you will know that it is a 
covered transaction because the agency regulations governing the 
transaction, the appropriate agency official, or participant at the next 
higher tier who enters into the transaction with you, will tell you that 
you must comply with applicable portions of this part.



    Subpart C_Responsibilities of Participants Regarding Transactions

                    Doing Business With Other Persons



Sec. 3017.300  What must I do before I enter into a covered transaction 
with another person at the next lower tier?

    When you enter into a covered transaction with another person at the 
next lower tier, you must verify that the person with whom you intend to 
do business is not excluded or disqualified. You do this by:
    (a) Checking the EPLS; or
    (b) Collecting a certification from that person if allowed by this 
rule; or
    (c) Adding a clause or condition to the covered transaction with 
that person.



Sec. 3017.305  May I enter into a covered transaction with an excluded 
or disqualified person?

    (a) You as a participant may not enter into a covered transaction 
with an excluded person, unless the Department of Agriculture grants an 
exception under Sec. 3017.120.
    (b) You may not enter into any transaction with a person who is 
disqualified from that transaction, unless you have obtained an 
exception under the disqualifying statute, Executive order, or 
regulation.



Sec. 3017.310  What must I do if a Federal agency excludes a person 
with whom I am already doing business in a covered transaction?

    (a) You as a participant may continue covered transactions with an 
excluded person if the transactions were in existence when the agency 
excluded the person. However, you are not required to continue the 
transactions, and you may consider termination. You should make a 
decision about whether to terminate and the type of termination action, 
if any, only after a thorough review to ensure that the action is proper 
and appropriate.
    (b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, unless the Department of 
Agriculture grants an exception under Sec. 3017.120.

[[Page 190]]



Sec. 3017.315  May I use the services of an excluded person as a 
principal under a covered transaction?

    (a) You as a participant may continue to use the services of an 
excluded person as a principal under a covered transaction if you were 
using the services of that person in the transaction before the person 
was excluded. However, you are not required to continue using that 
person's services as a principal. You should make a decision about 
whether to discontinue that person's services only after a thorough 
review to ensure that the action is proper and appropriate.
    (b) You may not begin to use the services of an excluded person as a 
principal under a covered transaction unless the Department of 
Agriculture grants an exception under Sec. 3017.120.



Sec. 3017.320  Must I verify that principals of my covered transactions 
are eligible to participate?

    Yes, you as a participant are responsible for determining whether 
any of your principals of your covered transactions is excluded or 
disqualified from participating in the transaction. You may decide the 
method and frequency by which you do so. You may, but you are not 
required to, check the EPLS.



Sec. 3017.325  What happens if I do business with an excluded person 
in a covered transaction?

    If as a participant you knowingly do business with an excluded 
person, we may disallow costs, annul or terminate the transaction, issue 
a stop work order, debar or suspend you, or take other remedies as 
appropriate.



Sec. 3017.330  What requirements must I pass down to persons at lower 
tiers with whom I intend to do business?

    Before entering into a covered transaction with a participant at the 
next lower tier, you must require that participant to--
    (a) Comply with this subpart as a condition of participation in the 
transaction. You may do so using any method(s), unless Sec. 3017.440 
requires you to use specific methods.
    (b) Pass the requirement to comply with this subpart to each person 
with whom the participant enters into a covered transaction at the next 
lower tier.

            Disclosing Information--Primary Tier Participants



Sec. 3017.335  What information must I provide before entering into a 
covered transaction with the Department of Agriculture?

    Before you enter into a covered transaction at the primary tier, you 
as the participant must notify the Department of Agriculture office that 
is entering into the transaction with you, if you know that you or any 
of the principals for that covered transaction:
    (a) Are presently excluded or disqualified;
    (b) Have been convicted within the preceding three years of any of 
the offenses listed in Sec. 3017.800(a) or had a civil judgment 
rendered against you for one of those offenses within that time period;
    (c) Are presently indicted for or otherwise criminally or civilly 
charged by a governmental entity (Federal, State or local) with 
commission of any of the offenses listed in Sec. 3017.800(a); or
    (d) Have had one or more public transactions (Federal, State, or 
local) terminated within the preceding three years for cause or default.



Sec. 3017.340  If I disclose unfavorable information required under 
Sec. 3017.335, will I be prevented from participating in the transaction?

    As a primary tier participant, your disclosure of unfavorable 
information about yourself or a principal under Sec. 3017.335 will not 
necessarily cause us to deny your participation in the covered 
transaction. We will consider the information when we determine whether 
to enter into the covered transaction. We also will consider any 
additional information or explanation that you elect to submit with the 
disclosed information.



Sec. 3017.345  What happens if I fail to disclose information required 
under Sec. 3017.335?

    If we later determine that you failed to disclose information under 
Sec. 3017.335 that you knew at the time you entered into the covered 
transaction, we may--

[[Page 191]]

    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.



Sec. 3017.350  What must I do if I learn of information required under 
Sec. 3017.335 after entering into a covered transaction with the 
Department of Agriculture?

    At any time after you enter into a covered transaction, you must 
give immediate written notice to the Department of Agriculture office 
with which you entered into the transaction if you learn either that--
    (a) You failed to disclose information earlier, as required by Sec. 
3017.335; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec. 3017.335.

             Disclosing Information--Lower Tier Participants



Sec. 3017.355  What information must I provide to a higher tier 
participant before entering into a covered transaction with that 
participant?

    Before you enter into a covered transaction with a person at the 
next higher tier, you as a lower tier participant must notify that 
person if you know that you or any of the principals are presently 
excluded or disqualified.



Sec. 3017.360  What happens if I fail to disclose the information 
required under Sec. 3017.355?

    If we later determine that you failed to tell the person at the 
higher tier that you were excluded or disqualified at the time you 
entered into the covered transaction with that person, we may pursue any 
available remedies, including suspension and debarment.



Sec. 3017.365  What must I do if I learn of information required under 
Sec. 3017.355 after entering into a covered transaction with a higher 
tier participant?

    At any time after you enter into a lower tier covered transaction 
with a person at a higher tier, you must provide immediate written 
notice to that person if you learn either that--
    (a) You failed to disclose information earlier, as required by Sec. 
3017.355; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec. 3017.355.



   Subpart D_Responsibilities of Department of Agriculture Officials 
                         Regarding Transactions



Sec. 3017.400  May I enter into a transaction with an excluded or 
disqualified person?

    (a) You as an agency official may not enter into a covered 
transaction with an excluded person unless you obtain an exception under 
Sec. 3017.120.
    (b) You may not enter into any transaction with a person who is 
disqualified from that transaction, unless you obtain a waiver or 
exception under the statute, Executive order, or regulation that is the 
basis for the person's disqualification.



Sec. 3017.405  May I enter into a covered transaction with a participant 
if a principal of the transaction is excluded?

    As an agency official, you may not enter into a covered transaction 
with a participant if you know that a principal of the transaction is 
excluded, unless you obtain an exception under Sec. 3017.120.



Sec. 3017.410  May I approve a participant's use of the services of an 
excluded person?

    After entering into a covered transaction with a participant, you as 
an agency official may not approve a participant's use of an excluded 
person as a principal under that transaction, unless you obtain an 
exception under Sec. 3017.120.



Sec. 3017.415  What must I do if a Federal agency excludes the 
participant or a principal after I enter into a covered transaction?

    (a) You as an agency official may continue covered transactions with 
an excluded person, or under which an excluded person is a principal, if 
the transactions were in existence when

[[Page 192]]

the person was excluded. You are not required to continue the 
transactions, however, and you may consider termination. You should make 
a decision about whether to terminate and the type of termination 
action, if any, only after a thorough review to ensure that the action 
is proper.
    (b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, or under which an 
excluded person is a principal, unless you obtain an exception under 
Sec. 3017.120.



Sec. 3017.420  May I approve a transaction with an excluded or 
disqualified person at a lower tier?

    If a transaction at a lower tier is subject to your approval, you as 
an agency official may not approve--
    (a) A covered transaction with a person who is currently excluded, 
unless you obtain an exception under Sec. 3017.120; or
    (b) A transaction with a person who is disqualified from that 
transaction, unless you obtain a waiver or exception under the statute, 
Executive order, or regulation that is the basis for the person's 
disqualification.



Sec. 3017.425  When do I check to see if a person is excluded or 
disqualified?

    As an agency official, you must check to see if a person is excluded 
or disqualified before you--
    (a) Enter into a primary tier covered transaction;
    (b) Approve a principal in a primary tier covered transaction;
    (c) Approve a lower tier participant if agency approval of the lower 
tier participant is required; or
    (d) Approve a principal in connection with a lower tier transaction 
if agency approval of the principal is required.



Sec. 3017.430  How do I check to see if a person is excluded or 
disqualified?

    You check to see if a person is excluded or disqualified in two 
ways:
    (a) You as an agency official must check the EPLS when you take any 
action listed in Sec. 3017.425.
    (b) You must review information that a participant gives you, as 
required by Sec. 3017.335, about its status or the status of the 
principals of a transaction.



Sec. 3017.435  What must I require of a primary tier participant?

    You as an agency official must require each participant in a primary 
tier covered transaction to--
    (a) Comply with subpart C of this part as a condition of 
participation in the transaction; and
    (b) Communicate the requirement to comply with Subpart C of this 
part to persons at the next lower tier with whom the primary tier 
participant enters into covered transactions.



Sec. 3017.440  What method do I use to communicate those requirements 
to participants?

    To communicate the requirement, you must include a term or condition 
in the transaction requiring the participants' compliance with subpart C 
of this part and requiring them to include a similar term or condition 
in their lower-tier covered transactions.

[68 FR 66565, Nov. 26, 2003]



Sec. 3017.445  What action may I take if a primary tier participant 
knowingly does business with an excluded or disqualified person?

    If a participant knowingly does business with an excluded or 
disqualified person, you as an agency official may refer the matter for 
suspension and debarment consideration. You may also disallow costs, 
annul or terminate the transaction, issue a stop work order, or take any 
other appropriate remedy.



Sec. 3017.450  What action may I take if a primary tier participant 
fails to disclose the information required under Sec. 3017.335?

    If you as an agency official determine that a participant failed to 
disclose information, as required by Sec. 3017.335, at the time it 
entered into a covered transaction with you, you may--
    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.

[[Page 193]]



Sec. 3017.455  What may I do if a lower tier participant fails to 
disclose the information required under Sec. 3017.355 to the next 
higher tier?

    If you as an agency official determine that a lower tier participant 
failed to disclose information, as required by Sec. 3017.355, at the 
time it entered into a covered transaction with a participant at the 
next higher tier, you may pursue any remedies available to you, 
including the initiation of a suspension or debarment action.



                 Subpart E_Excluded Parties List System



Sec. 3017.500  What is the purpose of the Excluded Parties List System 
(EPLS)?

    The EPLS is a widely available source of the most current 
information about persons who are excluded or disqualified from covered 
transactions.



Sec. 3017.505  Who uses the EPLS?

    (a) Federal agency officials use the EPLS to determine whether to 
enter into a transaction with a person, as required under Sec. 
3017.430.
    (b) Participants also may, but are not required to, use the EPLS to 
determine if--
    (1) Principals of their transactions are excluded or disqualified, 
as required under Sec. 3017.320; or
    (2) Persons with whom they are entering into covered transactions at 
the next lower tier are excluded or disqualified.
    (c) The EPLS is available to the general public.



Sec. 3017.510  Who maintains the EPLS?

    In accordance with the OMB guidelines, the General Services 
Administration (GSA) maintains the EPLS. When a Federal agency takes an 
action to exclude a person under the nonprocurement or procurement 
debarment and suspension system, the agency enters the information about 
the excluded person into the EPLS.



Sec. 3017.515  What specific information is in the EPLS?

    (a) At a minimum, the EPLS indicates--
    (1) The full name (where available) and address of each excluded or 
disqualified person, in alphabetical order, with cross references if 
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 the action;
    (6) The agency and name and telephone number of the agency point of 
contact for the action; and
    (7) The Dun and Bradstreet Number (DUNS), or other similar code 
approved by the GSA, of the excluded or disqualified person, if 
available.
    (b)(1) The database for the EPLS includes a field for the Taxpayer 
Identification Number (TIN) (the social security number (SSN) for an 
individual) of an excluded or disqualified person.
    (2) Agencies disclose the SSN of an individual to verify the 
identity of an individual, only if permitted under the Privacy Act of 
1974 and, if appropriate, the Computer Matching and Privacy Protection 
Act of 1988, as codified in 5 U.S.C. 552(a).



Sec. 3017.520  Who places the information into the EPLS?

    Federal officials who take actions to exclude persons under this 
part or officials who are responsible for identifying disqualified 
persons must enter the following information about those persons into 
the EPLS:
    (a) Information required by Sec. 3017.515(a);
    (b) The Taxpayer Identification Number (TIN) of the excluded or 
disqualified person, including the social security number (SSN) for an 
individual, if the number is available and may be disclosed under law;
    (c) Information about an excluded or disqualified person, generally 
within five working days, after--
    (1) Taking an exclusion action;
    (2) Modifying or rescinding an exclusion action;
    (3) Finding that a person is disqualified; or
    (4) Finding that there has been a change in the status of a person 
who is listed as disqualified.

[[Page 194]]



Sec. 3017.525  Whom do I ask if I have questions about a person in the 
EPLS?

    If you have questions about a person in the EPLS, ask the point of 
contact for the Federal agency that placed the person's name into the 
EPLS. You may find the agency point of contact from the EPLS.



Sec. 3017.530  Where can I find the EPLS?

    (a) You may access the EPLS through the Internet, currently at 
http://epls.arnet.gov.
    (b) As of November 26, 2003, you may also subscribe to a printed 
version. However, we anticipate discontinuing the printed version. Until 
it is discontinued, you may obtain the printed version by purchasing a 
yearly subscription from the Superintendent of Documents, U.S. 
Government Printing Office, Washington, DC 20402, or by calling the 
Government Printing Office Inquiry and Order Desk at (202) 783-3238.



   Subpart F_General Principles Relating to Suspension and Debarment 
                                 Actions



Sec. 3017.600  How do suspension and debarment actions start?

    When we receive information from any source concerning a cause for 
suspension or debarment, we will promptly report and investigate it. We 
refer the question of whether to suspend or debar you to our suspending 
or debarring official for consideration, if appropriate.



Sec. 3017.605  How does suspension differ from debarment?

    Suspension differs from debarment in that--

------------------------------------------------------------------------
        A suspending official . . .          A debarring official . . .
------------------------------------------------------------------------
(a) Imposes suspension as a temporary       Imposes debarment for a
 status of ineligibility for procurement     specified period as a final
 and nonprocurement transactions, pending    determination that a person
 completion of an investigation or legal     is not presently
 proceedings.                                responsible.
(b) Must--................................  Must conclude, based on a
(1) Have adequate evidence that there may    preponderance of the
 be a cause for debarment of a person; and.  evidence, that the person
(2) Conclude that immediate action is        has engaged in conduct that
 necessary to protect the Federal interest.  warrants debarment.
(c) Usually imposes the suspension first,   Imposes debarment after
 and then promptly notifies the suspended    giving the respondent
 person, giving the person an opportunity    notice of the action and an
 to contest the suspension and have it       opportunity to contest the
 lifted.                                     proposed debarment.
------------------------------------------------------------------------



Sec. 3017.610  What procedures does the Department of Agriculture use 
in suspension and debarment actions?

    In deciding whether to suspend or debar you, we handle the actions 
as informally as practicable, consistent with principles of fundamental 
fairness.
    (a) For suspension actions, we use the procedures in this subpart 
and subpart G of this part.
    (b) For debarment actions, we use the procedures in this subpart and 
subpart H of this part.



Sec. 3017.615  How does the Department of Agriculture notify a person 
of a suspension or debarment action?

    (a) The suspending or debarring official sends a written notice to 
the last known street address, facsimile number, or e-mail address of--
    (1) You or your identified counsel; or
    (2) Your agent for service of process, or any of your partners, 
officers, directors, owners, or joint venturers.
    (b) The notice is effective if sent to any of these persons.



Sec. 3017.620  Do Federal agencies coordinate suspension and debarment 
actions?

    Yes, when more than one Federal agency has an interest in a 
suspension or debarment, the agencies may consider designating one 
agency as the lead agency for making the decision. Agencies are 
encouraged to establish methods and procedures for coordinating their 
suspension and debarment actions.

[[Page 195]]



Sec. 3017.625  What is the scope of a suspension or debarment?

    If you are suspended or debarred, the suspension or debarment is 
effective as follows:
    (a) Your suspension or debarment constitutes suspension or debarment 
of all of your divisions and other organizational elements from all 
covered transactions, unless the suspension or debarment decision is 
limited--
    (1) By its terms to one or more specifically identified individuals, 
divisions, or other organizational elements; or
    (2) To specific types of transactions.
    (b) Any affiliate of a participant may be included in a suspension 
or debarment action if the suspending or debarring official--
    (1) Officially names the affiliate in the notice; and
    (2) Gives the affiliate an opportunity to contest the action.



Sec. 3017.630  May the Department of Agriculture impute conduct of one 
person to another?

    For purposes of actions taken under this rule, we may impute conduct 
as follows:
    (a) Conduct imputed from an individual to an organization. We may 
impute the fraudulent, criminal, or other improper conduct of any 
officer, director, shareholder, partner, employee, or other individual 
associated with an organization, to that organization when the improper 
conduct occurred in connection with the individual's performance of 
duties for or on behalf of that organization, or with the organization's 
knowledge, approval or acquiescence. The organization's acceptance of 
the benefits derived from the conduct is evidence of knowledge, approval 
or acquiescence.
    (b) Conduct imputed from an organization to an individual, or 
between individuals. We may impute the fraudulent, criminal, or other 
improper conduct of any organization to an individual, or from one 
individual to another individual, if the individual to whom the improper 
conduct is imputed either participated in, had knowledge of, or reason 
to know of the improper conduct.
    (c) Conduct imputed from one organization to another organization. 
We may impute the fraudulent, criminal, or other improper conduct of one 
organization to another organization when the improper conduct occurred 
in connection with a partnership, joint venture, joint application, 
association or similar arrangement, or when the organization to whom the 
improper conduct is imputed has the power to direct, manage, control or 
influence the activities of the organization responsible for the 
improper conduct. Acceptance of the benefits derived from the conduct is 
evidence of knowledge, approval or acquiescence.



Sec. 3017.635  May the Department of Agriculture settle a debarment or 
suspension action?

    Yes, we may settle a debarment or suspension action at any time if 
it is in the best interest of the Federal Government.



Sec. 3017.640  May a settlement include a voluntary exclusion?

    Yes, if we enter into a settlement with you in which you agree to be 
excluded, it is called a voluntary exclusion and has governmentwide 
effect.



Sec. 3017.645  Do other Federal agencies know if the Department of 
Agriculture agrees to a voluntary exclusion?

    (a) Yes, we enter information regarding a voluntary exclusion into 
the EPLS.
    (b) Also, any agency or person may contact us to find out the 
details of a voluntary exclusion.



                          Subpart G_Suspension



Sec. 3017.700  When may the suspending official issue a suspension?

    Suspension is a serious action. Using the procedures of this subpart 
and subpart F of this part, the suspending official may impose 
suspension only when that official determines that--
    (a) There exists an indictment for, or other adequate evidence to 
suspect, an offense listed under Sec. 3017.800(a), or
    (b) There exists adequate evidence to suspect any other cause for 
debarment listed under Sec. 3017.800(b) through (d); and

[[Page 196]]

    (c) Immediate action is necessary to protect the public interest.



Sec. 3017.705  What does the suspending official consider in issuing 
a suspension?

    (a) In determining the adequacy of the evidence to support the 
suspension, the suspending official considers 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. During this assessment, the suspending 
official may examine the basic documents, including grants, cooperative 
agreements, loan authorizations, contracts, and other relevant 
documents.
    (b) An indictment, conviction, civil judgment, or other official 
findings by Federal, State, or local bodies that determine factual and/
or legal matters, constitutes adequate evidence for purposes of 
suspension actions.
    (c) In deciding whether immediate action is needed to protect the 
public interest, the suspending official has wide discretion. For 
example, the suspending official may infer the necessity for immediate 
action to protect the public interest either from the nature of the 
circumstances giving rise to a cause for suspension or from potential 
business relationships or involvement with a program of the Federal 
Government.



Sec. 3017.710  When does a suspension take effect?

    A suspension is effective when the suspending official signs the 
decision to suspend.



Sec. 3017.715  What notice does the suspending official give me if I 
am suspended?

    After deciding to suspend you, the suspending official promptly 
sends you a Notice of Suspension advising you--
    (a) That you have been suspended;
    (b) That your suspension is based on--
    (1) An indictment;
    (2) A conviction;
    (3) Other adequate evidence that you have committed irregularities 
which seriously reflect on the propriety of further Federal Government 
dealings with you; or
    (4) Conduct of another person that has been imputed to you, or your 
affiliation with a suspended or debarred person;
    (c) Of any other irregularities in terms sufficient to put you on 
notice without disclosing the Federal Government's evidence;
    (d) Of the cause(s) upon which we relied under Sec. 3017.700 for 
imposing suspension;
    (e) That your suspension is for a temporary period pending the 
completion of an investigation or resulting legal or debarment 
proceedings;
    (f) Of the applicable provisions of this subpart, Subpart F of this 
part, and any other Department of Agriculture procedures governing 
suspension decision making; and
    (g) Of the governmentwide effect of your suspension from procurement 
and nonprocurement programs and activities.



Sec. 3017.720  How may I contest a suspension?

    If you as a respondent wish to contest a suspension, you or your 
representative must provide the suspending official with information in 
opposition to the suspension. You may do this orally or in writing, but 
any information provided orally that you consider important must also be 
submitted in writing for the official record.



Sec. 3017.725  How much time do I have to contest a suspension?

    (a) As a respondent you or your representative must either send, or 
make rrangements to appear and present, the information and argument to 
the suspending official within 30 days after you receive the Notice of 
Suspension.
    (b) We consider the notice to be received by you--
    (1) When delivered, if we mail the notice to the last known street 
address, or five days after we send it if the letter is undeliverable;
    (2) When sent, if we send the notice by facsimile or five days after 
we send it if the facsimile is undeliverable; or

[[Page 197]]

    (3) When delivered, if we send the notice by e-mail or five days 
after we send it if the e-mail is undeliverable.



Sec. 3017.730  What information must I provide to the suspending official 
if I contest a suspension?

    (a) In addition to any information and argument in opposition, as a 
respondent your submission to the suspending official must identify--
    (1) Specific facts that contradict the statements contained in the 
Notice of Suspension. A general denial is insufficient to raise a 
genuine dispute over facts material to the suspension;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing E.O. 12549 and all similar actions taken by Federal, state, 
or local agencies, including administrative agreements that affect only 
those agencies;
    (3) All criminal and civil proceedings not included in the Notice of 
Suspension that grew out of facts relevant to the cause(s) stated in the 
notice; and
    (4) All of your affiliates.
    (b) If you fail to disclose this information, or provide false 
information, the Department of Agriculture may seek further criminal, 
civil or administrative action against you, as appropriate.



Sec. 3017.735  Under what conditions do I get an additional opportunity 
to challenge the facts on which the suspension is based?

    (a) You as a respondent will not have an additional opportunity to 
challenge the facts if the suspending official determines that--
    (1) Your suspension is based upon an indictment, conviction, civil 
judgment, or other finding by a Federal, State, or local body for which 
an opportunity to contest the facts was provided;
    (2) Your presentation in opposition contains only general denials to 
information contained in the Notice of Suspension;
    (3) The issues raised in your presentation in opposition to the 
suspension are not factual in nature, or are not material to the 
suspending official's initial decision to suspend, or the official's 
decision whether to continue the suspension; or
    (4) On the basis of advice from the Department of Justice, an office 
of the United States Attorney, a State attorney general's office, or a 
State or local prosecutor's office, that substantial interests of the 
government in pending or contemplated legal proceedings based on the 
same facts as the suspension would be prejudiced by conducting fact-
finding.
    (b) You will have an opportunity to challenge the facts if the 
suspending official determines that--
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the suspension.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the suspending official or designee must conduct 
additional proceedings to resolve those facts.



Sec. 3017.740  Are suspension proceedings formal?

    (a) Suspension proceedings are conducted in a fair and informal 
manner. The suspending official may use flexible procedures to allow you 
to present matters in opposition. In so doing, the suspending official 
is not required to follow formal rules of evidence or procedure in 
creating an official record upon which the official will base a final 
suspension decision.
    (b) You as a respondent or your representative must submit any 
documentary evidence you want the suspending official to consider.



Sec. 3017.745  How is fact-finding conducted?

    (a) If fact-finding is conducted--
    (1) You may present witnesses and other evidence, and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.
    (b) A transcribed record of fact-finding proceedings must be made, 
unless you as a respondent and the Department of Agriculture agree to 
waive it in advance. If you want a copy of the transcribed record, you 
may purchase it.

[[Page 198]]



Sec. 3017.750  What does the suspending official consider in deciding 
whether to continue or terminate my suspension?

    (a) The suspending official bases the decision on all information 
contained in the official record. The record includes--
    (1) All information in support of the suspending official's initial 
decision to suspend you;
    (2) Any further information and argument presented in support of, or 
opposition to, the suspension; and
    (3) Any transcribed record of fact-finding proceedings.
    (b) The suspending official may refer disputed material facts to 
another official for findings of fact. The suspending official may 
reject any resulting findings, in whole or in part, only after 
specifically determining them to be arbitrary, capricious, or clearly 
erroneous.



Sec. 3017.755  When will I know whether the suspension is continued 
or terminated?

    The suspending official must make a written decision whether to 
continue, modify, or terminate your suspension within 45 days of closing 
the official record. The official record closes upon the suspending 
official's receipt of final submissions, information and findings of 
fact, if any. The suspending official may extend that period for good 
cause. However, the record will remain open for the full 30 days, as 
called for in Sec. 3017.725, even when you make a submission before the 
30 days expire.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66565, Nov. 26, 
2003]



Sec. 3017.760  How long may my suspension last?

    (a) If legal or debarment proceedings are initiated at the time of, 
or during your suspension, the suspension may continue until the 
conclusion of those proceedings. However, if proceedings are not 
initiated, a suspension may not exceed 12 months.
    (b) The suspending official may extend the 12 month limit under 
paragraph (a) of this section for an additional 6 months if an office of 
a U.S. Assistant Attorney General, U.S. Attorney, or other responsible 
prosecuting official requests an extension in writing. In no event may a 
suspension exceed 18 months without initiating proceedings under 
paragraph (a) of this section.
    (c) The suspending official must notify the appropriate officials 
under paragraph (b) of this section of an impending termination of a 
suspension at least 30 days before the 12 month period expires to allow 
the officials an opportunity to request an extension.



Sec. 3017.765  How may I appeal my suspension?

    (a) You may file an appeal only after you have exhausted the option 
provided for in Sec. 3017.720 to contest the suspension. You must file 
your appeal within 30 days of receiving the decision required by Sec. 
3017.755 and your filing must specify the basis of the appeal. You must 
submit your appeal in writing to the Hearing Clerk in the Office of 
Administrative Law Judges (OALJ), United States Department of 
Agriculture (USDA), Washington, DC 20250. The assigned appeals officer 
may vacate the decision of the suspending official only 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 the decision solely on the 
administrative record.
    (c) Within 90 days of the date that you file your appeal with USDA's 
OALJ Hearing Clerk, the appeals officer will give written notification 
of the decision to you and to the suspending official who took the 
action being appealed.
    (d) The appeals officer's decision is final and is not appealable 
within USDA.

[68 FR 66565, Nov. 26, 2003]



                           Subpart H_Debarment



Sec. 3017.800  What are the causes for debarment?

    We may debar a person for--
    (a) Conviction of or civil judgment for--

[[Page 199]]

    (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, tax 
evasion, 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 your 
present responsibility;
    (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 
October 1, 1988, or a procurement debarment by any Federal agency taken 
pursuant to 48 CFR part 9, subpart 9.4, before August 25, 1995;
    (2) Knowingly doing business with an ineligible person, except as 
permitted under Sec. 3017.120;
    (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. 3017.640 or of any settlement of a 
debarment or suspension action; or
    (5) Violation of the provisions of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701); or
    (d) Any other cause of so serious or compelling a nature that it 
affects your present responsibility.
    (e) Notwithstanding paragraph (c) (1) of this section, within the 
Department of Agriculture a nonprocurement debarment by any Federal 
agency taken before March 1, 1989.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66565, Nov. 26, 
2003]



Sec. 3017.805  What notice does the debarring official give me if I 
am proposed for debarment?

    After consideration of the causes in Sec. 3017.800 of this subpart, 
if the debarring official proposes to debar you, the official sends you 
a Notice of Proposed Debarment, pursuant to Sec. 3017.615, advising 
you--
    (a) That the debarring official is considering debarring you;
    (b) Of the reasons for proposing to debar you in terms sufficient to 
put you on notice of the conduct or transactions upon which the proposed 
debarment is based;
    (c) Of the cause(s) under Sec. 3017.800 upon which the debarring 
official relied for proposing your debarment;
    (d) Of the applicable provisions of this subpart, Subpart F of this 
part, and any other Department of Agriculture procedures governing 
debarment; and
    (e) Of the governmentwide effect of a debarment from procurement and 
nonprocurement programs and activities.



Sec. 3017.810  When does a debarment take effect?

    A debarment is not effective until the debarring official issues a 
decision. The debarring official does not issue a decision until the 
respondent has had an opportunity to contest the proposed debarment.



Sec. 3017.815  How may I contest a proposed debarment?

    If you as a respondent wish to contest a proposed debarment, you or 
your

[[Page 200]]

representative must provide the debarring official with information in 
opposition to the proposed debarment. You may do this orally or in 
writing, but any information provided orally that you consider important 
must also be submitted in writing for the official record.



Sec. 3017.820  How much time do I have to contest a proposed debarment?

    (a) As a respondent you or your representative must either send, or 
make arrangements to appear and present, the information and argument to 
the debarring official within 30 days after you receive the Notice of 
Proposed Debarment.
    (b) We consider the Notice of Proposed Debarment to be received by 
you--
    (1) When delivered, if we mail the notice to the last known street 
address, or five days after we send it if the letter is undeliverable;
    (2) When sent, if we send the notice by facsimile or five days after 
we send it if the facsimile is undeliverable; or
    (3) When delivered, if we send the notice by e-mail or five days 
after we send it if the e-mail is undeliverable.



Sec. 3017.825  What information must I provide to the debarring official 
if I contest a proposed debarment?

    (a) In addition to any information and argument in opposition, as a 
respondent your submission to the debarring official must identify--
    (1) Specific facts that contradict the statements contained in the 
Notice of Proposed Debarment. Include any information about any of the 
factors listed in Sec. 3017.860. A general denial is insufficient to 
raise a genuine dispute over facts material to the debarment;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing E.O. 12549 and all similar actions taken by Federal, State, 
or local agencies, including administrative agreements that affect only 
those agencies;
    (3) All criminal and civil proceedings not included in the Notice of 
Proposed Debarment that grew out of facts relevant to the cause(s) 
stated in the notice; and
    (4) All of your affiliates.
    (b) If you fail to disclose this information, or provide false 
information, the Department of Agriculture may seek further criminal, 
civil or administrative action against you, as appropriate.



Sec. 3017.830  Under what conditions do I get an additional opportunity 
to challenge the facts on which a proposed debarment is based?

    (a) You as a respondent will not have an additional opportunity to 
challenge the facts if the debarring official determines that--
    (1) Your debarment is based upon a conviction or civil judgment;
    (2) Your presentation in opposition contains only general denials to 
information contained in the Notice of Proposed Debarment; or
    (3) The issues raised in your presentation in opposition to the 
proposed debarment are not factual in nature, or are not material to the 
debarring official's decision whether to debar.
    (b) You will have an additional opportunity to challenge the facts 
if the debarring official determines that--
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the proposed debarment.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the debarring official or designee must conduct 
additional proceedings to resolve those facts.



Sec. 3017.835  Are debarment proceedings formal?

    (a) Debarment proceedings are conducted in a fair and informal 
manner. The debarring official may use flexible procedures to allow you 
as a respondent to present matters in opposition. In so doing, the 
debarring official is not required to follow formal rules of evidence or 
procedure in creating an official record upon which the official will 
base the decision whether to debar.
    (b) You or your representative must submit any documentary evidence 
you want the debarring official to consider.



Sec. 3017.840  How is fact-finding conducted?

    (a) If fact-finding is conducted--

[[Page 201]]

    (1) You may present witnesses and other evidence, and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.
    (b) A transcribed record of fact-finding proceedings must be made, 
unless you as a respondent and the Department of Agriculture agree to 
waive it in advance. If you want a copy of the transcribed record, you 
may purchase it.



Sec. 3017.845  What does the debarring official consider in deciding 
whether to debar me?

    (a) The debarring official may debar you for any of the causes in 
Sec. 3017.800. However, the official need not debar you even if a cause 
for debarment exists. The official may consider the seriousness of your 
acts or omissions and the mitigating or aggravating factors set forth at 
Sec. 3017.860.
    (b) The debarring official bases the decision on all information 
contained in the official record. The record includes--
    (1) All information in support of the debarring official's proposed 
debarment;
    (2) Any further information and argument presented in support of, or 
in opposition to, the proposed debarment; and
    (3) Any transcribed record of fact-finding proceedings.
    (c) The debarring official may refer disputed material facts to 
another official for findings of fact. The debarring official may reject 
any resultant findings, in whole or in part, only after specifically 
determining them to be arbitrary, capricious, or clearly erroneous.



Sec. 3017.850  What is the standard of proof in a debarment action?

    (a) In any debarment action, we must establish the cause for 
debarment by a preponderance of the evidence.
    (b) If the proposed debarment is based upon a conviction or civil 
judgment, the standard of proof is met.



Sec. 3017.855  Who has the burden of proof in a debarment action?

    (a) We have the burden to prove that a cause for debarment exists.
    (b) Once a cause for debarment is established, you as a respondent 
have the burden of demonstrating to the satisfaction of the debarring 
official that you are presently responsible and that debarment is not 
necessary.



Sec. 3017.860  What factors may influence the debarring official's 
decision?

    This section lists the mitigating and aggravating factors that the 
debarring official may consider in determining whether to debar you and 
the length of your debarment period. The debarring official may consider 
other factors if appropriate in light of the circumstances of a 
particular case. The existence or nonexistence of any factor, such as 
one of those set forth in this section, is not necessarily determinative 
of your present responsibility. In making a debarment decision, the 
debarring official may consider the following factors:
    (a) The actual or potential harm or impact that results or may 
result from the wrongdoing.
    (b) The frequency of incidents and/or duration of the wrongdoing.
    (c) Whether there is a pattern or prior history of wrongdoing. For 
example, if you have been found by another Federal agency or a State 
agency to have engaged in wrongdoing similar to that found in the 
debarment action, the existence of this fact may be used by the 
debarring official in determining that you have a pattern or prior 
history of wrongdoing.
    (d) Whether you are or have been excluded or disqualified by an 
agency of the Federal Government or have not been allowed to participate 
in State or local contracts or assistance agreements on a basis of 
conduct similar to one or more of the causes for debarment specified in 
this part.
    (e) Whether you have entered into an administrative agreement with a 
Federal agency or a State or local government that is not governmentwide 
but is based on conduct similar to one or more of the causes for 
debarment specified in this part.
    (f) Whether and to what extent you planned, initiated, or carried 
out the wrongdoing.
    (g) Whether you have accepted responsibility for the wrongdoing and

[[Page 202]]

recognize the seriousness of the misconduct that led to the cause for 
debarment.
    (h) Whether you have paid or agreed to pay all criminal, civil and 
administrative liabilities for the improper activity, including any 
investigative or administrative costs incurred by the government, and 
have made or agreed to make full restitution.
    (i) Whether you have cooperated fully with the government agencies 
during the investigation and any court or administrative action. In 
determining the extent of cooperation, the debarring official may 
consider when the cooperation began and whether you disclosed all 
pertinent information known to you.
    (j) Whether the wrongdoing was pervasive within your organization.
    (k) The kind of positions held by the individuals involved in the 
wrongdoing.
    (l) Whether your organization took appropriate corrective action or 
remedial measures, such as establishing ethics training and implementing 
programs to prevent recurrence.
    (m) Whether your principals tolerated the offense.
    (n) Whether you brought the activity cited as a basis for the 
debarment to the attention of the appropriate government agency in a 
timely manner.
    (o) Whether you have fully investigated the circumstances 
surrounding the cause for debarment and, if so, made the result of the 
investigation available to the debarring official.
    (p) Whether you had effective standards of conduct and internal 
control systems in place at the time the questioned conduct occurred.
    (q) Whether you have taken appropriate disciplinary action against 
the individuals responsible for the activity which constitutes the cause 
for debarment.
    (r) Whether you have had adequate time to eliminate the 
circumstances within your organization that led to the cause for the 
debarment.
    (s) Other factors that are appropriate to the circumstances of a 
particular case.



Sec. 3017.865  How long may my debarment last?

    (a) If the debarring official decides to debar you, your period of 
debarment will be based on the seriousness of the cause(s) upon which 
your debarment is based. Generally, debarment should not exceed three 
years. However, if circumstances warrant, the debarring official may 
impose a longer period of debarment.
    (b) In determining the period of debarment, the debarring official 
may consider the factors in Sec. 3017.860. If a suspension has preceded 
your debarment, the debarring official must consider the time you were 
suspended.
    (c) If the debarment is for a violation of the provisions of the 
Drug-Free Workplace Act of 1988, your period of debarment may not exceed 
five years.



Sec. 3017.870  When do I know if the debarring official debars me?

    (a) The debarring official must make a written decision whether to 
debar within 45 days of closing the official record. The official record 
closes upon the debarring official's receipt of final submissions, 
information and findings of fact, if any. The debarring official may 
extend that period for good cause. However, the record will remain open 
for the full 30 days, as called for in Sec. 3017.820, even when you 
make a submission before the 30 days expire.
    (b) The debarring official sends you written notice, pursuant to 
Sec. 3017.615 that the official decided, either--
    (1) Not to debar you; or
    (2) To debar you. In this event, the notice:
    (i) Refers to the Notice of Proposed Debarment;
    (ii) Specifies the reasons for your debarment;
    (iii) States the period of your debarment, including the effective 
dates; and
    (iv) Advises you that your debarment is effective for covered 
transactions and contracts that are subject to the Federal Acquisition 
Regulation (48 CFR chapter 1), throughout the executive branch of the 
Federal Government unless an agency head or an authorized designee 
grants an exception.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66565, Nov. 26, 
2003]

[[Page 203]]



Sec. 3017.875  May I ask the debarring official to reconsider a decision 
to debar me?

    Yes, as a debarred person you may ask the debarring official to 
reconsider the debarment decision or to reduce the time period or scope 
of the debarment. However, you must put your request in writing and 
support it with documentation.



Sec. 3017.880  What factors may influence the debarring official during 
reconsideration?

    The debarring official may reduce or terminate your debarment based 
on--
    (a) Newly discovered material evidence;
    (b) A reversal of the conviction or civil judgment upon which your 
debarment was based;
    (c) A bona fide change in ownership or management;
    (d) Elimination of other causes for which the debarment was imposed; 
or
    (e) Other reasons the debarring official finds appropriate.



Sec. 3017.885  May the debarring official extend a debarment?

    (a) Yes, the debarring official may extend a debarment for an 
additional period, if that official determines that an extension is 
necessary to protect the public interest.
    (b) However, the debarring official may not extend a debarment 
solely on the basis of the facts and circumstances upon which the 
initial debarment action was based.
    (c) If the debarring official decides that a debarment for an 
additional period is necessary, the debarring official must follow the 
applicable procedures in this subpart, and subpart F of this part, to 
extend the debarment.



Sec. 3017.890  How may I appeal my debarment?

    (a) You may file an appeal only after you have exhausted the option 
provided for in Sec. 3017.815 to contest the debarment. You must file 
your appeal within 30 days of receiving the decision required by Sec. 
3017.870 and your filing must specify the basis of the appeal. You must 
submit your appeal in writing to the Hearing Clerk in the Office of 
Administrative Law Judges (OALJ), United States Department of 
Agriculture (USDA), Washington, DC 20250. The assigned appeals officer 
may vacate the decision of the debarring official only 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 the decision solely on the 
administrative record.
    (c) Within 90 days of the date that you file your appeal with USDA's 
OALJ Hearing Clerk, the appeals officer will give written notification 
of the decision to you and to the debarring official who took the action 
being appealed.
    (d) The appeals officer's decision is final and is not appealable 
within USDA.

[68 FR 66565, Nov. 26, 2003]



                          Subpart I_Definitions



Sec. 3017.900  Adequate evidence.

    Adequate evidence means information sufficient to support the 
reasonable belief that a particular act or omission has occurred.



Sec. 3017.905  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. The ways we use to 
determine control include, but are not limited to--
    (a) Interlocking management or ownership;
    (b) Identity of interests among family members;
    (c) Shared facilities and equipment;
    (d) Common use of employees; or
    (e) A business entity which has been organized following the 
exclusion of a person which has the same or similar management, 
ownership, or principal employees as the excluded person.



Sec. 3017.910  Agency.

    Agency means any United States executive department, military 
department, defense agency, or any other

[[Page 204]]

agency of the executive branch. Other agencies of the Federal government 
are not considered ``agencies'' for the purposes of this part unless 
they issue regulations adopting the governmentwide Debarment and 
Suspension system under Executive orders 12549 and 12689.



Sec. 3017.915  Agent or representative.

    Agent or representative means any person who acts on behalf of, or 
who is authorized to commit, a participant in a covered transaction.



Sec. 3017.920  Civil judgment.

    Civil judgment means the disposition of a civil action by any court 
of competent jurisdiction, whether by verdict, decision, settlement, 
stipulation, other disposition which creates a civil liability for the 
complained of wrongful acts, or a final determination of liability under 
the Program Fraud Civil Remedies Act of 1988 (31 U.S.C. 3801-3812).



Sec. 3017.925  Conviction.

    Conviction means--
    (a) A judgment or any other determination of guilt of a criminal 
offense by any court of competent jurisdiction, whether entered upon a 
verdict or plea, including a plea of nolo contendere; or
    (b) Any other resolution that is the functional equivalent of a 
judgment, including probation before judgment and deferred prosecution. 
A disposition without the participation of the court is the functional 
equivalent of a judgment only if it includes an admission of guilt.



Sec. 3017.930  Debarment.

    Debarment means an action taken by a debarring official under 
subpart H of this part to exclude a person from participating in covered 
transactions and transactions covered under the Federal Acquisition 
Regulation (48 CFR chapter 1). A person so excluded is debarred.



Sec. 3017.935  Debarring official.

    (a) Debarring official means an agency official who is authorized to 
impose debarment. A debarring official is either--
    (1) The agency head; or
    (2) An official designated by the agency head.
    (b) The head of an organizational unit within the Department of 
Agriculture (e.g., Administrator, Food and Nutrition Service), who has 
been delegated authority in part 2 of this title to carry out a covered 
transaction, is delegated authority to act as the debarring official in 
connection with such transaction. This authority to act as a debarring 
official may not be redelegated below the head of the organizational 
unit, 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.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66565, Nov. 26, 
2003]



Sec. 3017.940  Disqualified.

    Disqualified means that a person is prohibited from participating in 
specified Federal procurement or nonprocurement transactions as required 
under a statute, Executive order (other than Executive Orders 12549 and 
12689) or other authority. Examples of disqualifications include persons 
prohibited under--
    (a) The Davis-Bacon Act (40 U.S.C. 276(a));
    (b) The equal employment opportunity acts and Executive orders; or
    (c) The Clean Air Act (42 U.S.C. 7606), Clean Water Act (33 U.S.C. 
1368) and Executive Order 11738 (3 CFR, 1973 Comp., p. 799).



Sec. 3017.945  Excluded or exclusion.

    Excluded or exclusion means--
    (a) That a person or commodity is prohibited from being a 
participant in covered transactions, whether the person has been 
suspended; debarred; proposed for debarment under 48 CFR part 9, subpart 
9.4; voluntarily excluded; or
    (b) The act of excluding a person.



Sec. 3017.950  Excluded Parties List System

    Excluded Parties List System (EPLS) means the list maintained and 
disseminated by the General Services Administration (GSA) containing the 
names and other information about persons who are ineligible. The EPLS 
system includes the printed version entitled,

[[Page 205]]

``List of Parties Excluded or Disqualified from Federal Procurement and 
Nonprocurement Programs,'' so long as published.



Sec. 3017.955  Indictment.

    Indictment means an indictment for a criminal offense. A 
presentment, information, or other filing by a competent authority 
charging a criminal offense shall be given the same effect as an 
indictment.



Sec. 3017.960  Ineligible or ineligibility.

    Ineligible or ineligibility means that a person or commodity is 
prohibited from covered transactions because of an exclusion or 
disqualification.



Sec. 3017.965  Legal proceedings.

    Legal proceedings means any criminal proceeding or any civil 
judicial proceeding, including a proceeding under the Program Fraud 
Civil Remedies Act (31 U.S.C. 3801-3812), to which the Federal 
Government or a State or local government or quasi-governmental 
authority is a party. The term also includes appeals from those 
proceedings.



Sec. 3017.970  Nonprocurement transaction.

    (a) Nonprocurement transaction means any transaction, regardless of 
type (except procurement contracts), including, but not limited to the 
following:
    (1) Grants.
    (2) Cooperative agreements.
    (3) Scholarships.
    (4) Fellowships.
    (5) Contracts of assistance.
    (6) Loans.
    (7) Loan guarantees.
    (8) Subsidies.
    (9) Insurances.
    (10) Payments for specified uses.
    (11) Donation agreements.
    (b) A nonprocurement transaction at any tier does not require the 
transfer of Federal funds.



Sec. 3017.975  Notice.

    Notice means a written communication served in person, sent by 
certified mail or its equivalent, or sent electronically by e-mail or 
facsimile. (See Sec. 3017. 615.)



Sec. 3017.980  Participant.

    Participant means any person who submits a proposal for or who 
enters into a covered transaction, including an agent or representative 
of a participant.



Sec. 3017.985  Person.

    Person means any individual, corporation, partnership, association, 
unit of government, or legal entity, however organized.



Sec. 3017.990  Preponderance of the evidence.

    Preponderance of the evidence means proof by information that, 
compared with information opposing it, leads to the conclusion that the 
fact at issue is more probably true than not.



Sec. 3017.995  Principal.

    Principal means--
    (a) An officer, director, owner, partner, principal investigator, or 
other person within a participant with management or supervisory 
responsibilities related to a covered transaction; or
    (b) A consultant or other person, whether or not employed by the 
participant or paid with Federal funds, who--
    (1) Is in a position to handle Federal funds;
    (2) Is in a position to influence or control the use of those funds; 
or,
    (3) Occupies a technical or professional position capable of 
substantially influencing the development or outcome of an activity 
required to perform the covered transaction.



Sec. 3017.1000  Respondent.

    Respondent means a person against whom an agency has initiated a 
debarment or suspension action.



Sec. 3017.1005  State.

    (a) State means--
    (1) Any of the states of the United States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) Any territory or possession of the United States; or
    (5) Any agency or instrumentality of a state.

[[Page 206]]

    (b) For purposes of this part, State does not include institutions 
of higher education, hospitals, or units of local government.



Sec. 3017.1010  Suspending official.

    (a) Suspending official means an agency official who is authorized 
to impose suspension. The suspending official is either:
    (1) The agency head; or
    (2) An official designated by the agency head.
    (b) The head of an organizational unit within the Department of 
Agriculture (e.g., Administrator, Food and Nutrition Service), who has 
been delegated authority in part 2 of this title to carry out a covered 
transaction, is delegated authority to act as the suspending official in 
connection with such transaction. This authority to act as a suspending 
official may not be redelegated below the head of the organizational 
unit, 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.

[68 FR 66544, 66563, Nov. 26, 2003, as amended at 68 FR 66565, Nov. 26, 
2003]



Sec. 3017.1015  Suspension.

    Suspension is an action taken by a suspending official under subpart 
G of this part that immediately prohibits a person from participating in 
covered transactions and transactions covered under the Federal 
Acquisition Regulation (48 CFR chapter 1) for a temporary period, 
pending completion of an agency investigation and any judicial or 
administrative proceedings that may ensue. A person so excluded is 
suspended.



Sec. 3017.1020  Voluntary exclusion or voluntarily excluded.

    (a) Voluntary exclusion means a person's agreement to be excluded 
under the terms of a settlement between the person and one or more 
agencies. Voluntary exclusion must have governmentwide effect.
    (b) Voluntarily excluded means the status of a person who has agreed 
to a voluntary exclusion.

Subpart J [Reserved]

[[Page 207]]

               Appendix to Part 3017--Covered Transactions
[GRAPHIC] [TIFF OMITTED] TR26NO03.000



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, 6746, Feb. 26, 1990, unless otherwise noted.

[[Page 208]]


    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 209]]

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 210]]

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 211]]

    (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 212]]

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 213]]

    (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 214]]

    (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 and submit Standard Form-LLL, 
``Disclosure

[[Page 215]]

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 216]]

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


[[Page 217]]


[GRAPHIC] [TIFF OMITTED] TC13SE91.001


[[Page 218]]


[GRAPHIC] [TIFF OMITTED] TC13SE91.002


[[Page 219]]





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 Sec. Sec. 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 220]]

    (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 221]]

    (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 Sec. Sec. 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 222]]

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 223]]

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 224]]



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 225]]

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 226]]

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 227]]

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 228]]

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 229]]

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 230]]

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 
Sec. Sec. 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 231]]

    (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 232]]

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 233]]

provided it observes the provisions of Sec. Sec. 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 234]]

    (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 235]]

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 236]]

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 237]]

    (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 238]]



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 239]]

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 240]]

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 241]]

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. Recipients shall 
provide short

[[Page 242]]

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.
    (e) The Federal awarding agency, the Inspector General, Comptroller 
General of the United States, or any of

[[Page 243]]

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, whether stated in a 
Federal statute, regulation, assurance, application, or notice of award, 
the Federal awarding

[[Page 244]]

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 Sec. Sec. 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 245]]

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 Sec. Sec. 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 246]]

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 3021_GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (FINANCIAL 
ASSISTANCE)--Table of Contents




                     Subpart A_Purpose and Coverage

Sec.
3021.100 What does this part do?
3021.105 Does this part apply to me?
3021.110 Are any of my Federal assistance awards exempt from this part?
3021.115 Does this part affect the Federal contracts that I receive?

      Subpart B_Requirements for Recipients Other Than Individuals

3021.200 What must I do to comply with this part?
3021.205 What must I include in my drug-free workplace statement?
3021.210 To whom must I distribute my drug-free workplace statement?
3021.215 What must I include in my drug-free awareness program?
3021.220 By when must I publish my drug-free workplace statement and 
          establish my drug-free awareness program?
3021.225 What actions must I take concerning employees who are convicted 
          of drug violations in the workplace?
3021.230 How and when must I identify workplaces?

        Subpart C_Requirements for Recipients Who Are Individuals

3021.300 What must I do to comply with this part if I am an individual 
          recipient?
3021.301 [Reserved]

[[Page 247]]

    Subpart D_Responsibilities of Department of Agriculture Awarding 
                                Officials

3021.400 What are my responsibilities as a Department of Agriculture 
          awarding official?

           Subpart E_Violations of This Part and Consequences

3021.500 How are violations of this part determined for recipients other 
          than individuals?
3021.505 How are violations of this part determined for recipients who 
          are individuals?
3021.510 What actions will the Federal Government take against a 
          recipient determined to have violated this part?
3021.515 Are there any exceptions to those actions?

                          Subpart F_Definitions

3021.605 Award.
3021.610 Controlled substance.
3021.615 Conviction.
3021.620 Cooperative agreement.
3021.625 Criminal drug statute.
3021.630 Debarment.
3021.635 Drug-free workplace.
3021.640 Employee.
3021.645 Federal agency or agency.
3021.650 Grant.
3021.655 Individual.
3021.660 Recipient.
3021.665 State.
3021.670 Suspension.

    Authority: 5 U.S.C. 301; 41 U.S.C. 701 et seq.; Pub. L. 101-576, 104 
Stat. 2838; 7 CFR Sec. 2.28.

    Source: 68 FR 66557, 66565, Nov. 26, 2003, unless otherwise noted.



                     Subpart A_Purpose and Coverage



Sec. 3021.100  What does this part do?

    This part carries out the portion of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701 et seq., as amended) that applies to grants. It also 
applies the provisions of the Act to cooperative agreements and other 
financial assistance awards, as a matter of Federal Government policy.



Sec. 3021.105  Does this part apply to me?

    (a) Portions of this part apply to you if you are either--
    (1) A recipient of an assistance award from the Department of 
Agriculture; or
    (2) A(n) Department of Agriculture awarding official. (See 
definitions of award and recipient in Sec. Sec. 3021.605 and 3021.660, 
respectively.)
    (b) The following table shows the subparts that apply to you:

------------------------------------------------------------------------
             If you are . . .                    see subparts . . .
------------------------------------------------------------------------
(1) A recipient who is not an individual..  A, B and E.
(2) A recipient who is an individual......  A, C and E.
(3) A(n) Department of Agriculture          A, D and E.
 awarding official.
------------------------------------------------------------------------



Sec. 3021.110  Are any of my Federal assistance awards exempt from 
this part?

    This part does not apply to any award that the Secretary of 
Agriculture or designee determines that the application of this part 
would be inconsistent with the international obligations of the United 
States or the laws or regulations of a foreign government.



Sec. 3021.115  Does this part affect the Federal contracts that I receive?

    It will affect future contract awards indirectly if you are debarred 
or suspended for a violation of the requirements of this part, as 
described in Sec. 3021. 510(c). However, this part does not apply 
directly to procurement contracts. The portion of the Drug-Free 
Workplace Act of 1988 that applies to Federal procurement contracts is 
carried out through the Federal Acquisition Regulation in chapter 1 of 
Title 48 of the Code of Federal Regulations (the drug-free workplace 
coverage currently is in 48 CFR part 23, subpart 23.5).



      Subpart B_Requirements for Recipients Other Than Individuals



Sec. 3021.200  What must I do to comply with this part?

    There are two general requirements if you are a recipient other than 
an individual.
    (a) First, you must make a good faith effort, on a continuing basis, 
to maintain a drug-free workplace. You must agree to do so as a 
condition for receiving any award covered by this part. The specific 
measures that you must take in this regard are described in more detail 
in subsequent sections of this subpart. Briefly, those measures are to--

[[Page 248]]

    (1) Publish a drug-free workplace statement and establish a drug-
free awareness program for your employees (see Sec. Sec. 3021.205 
through 3021.220); and
    (2) Take actions concerning employees who are convicted of violating 
drug statutes in the workplace (see Sec. 3021.225).
    (b) Second, you must identify all known workplaces under your 
Federal awards (see Sec. 3021.230).



Sec. 3021.205  What must I include in my drug-free workplace statement?

    You must publish a statement that--
    (a) Tells your employees that the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance 
is prohibited in your workplace;
    (b) Specifies the actions that you will take against employees for 
violating that prohibition; and
    (c) Lets each employee know that, as a condition of employment under 
any award, he or she:
    (1) Will abide by the terms of the statement; and
    (2) Must notify you in writing if he or she is convicted for a 
violation of a criminal drug statute occurring in the workplace and must 
do so no more than five calendar days after the conviction.



Sec. 3021.210  To whom must I distribute my drug-free workplace statement?

    You must require that a copy of the statement described in Sec. 
3021.205 be given to each employee who will be engaged in the 
performance of any Federal award.



Sec. 3021.215  What must I include in my drug-free awareness program?

    You must establish an ongoing drug-free awareness program to inform 
employees about--
    (a) The dangers of drug abuse in the workplace;
    (b) Your policy of maintaining a drug-free workplace;
    (c) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (d) The penalties that you may impose upon them for drug abuse 
violations occurring in the workplace.



Sec. 3021.220  By when must I publish my drug-free workplace statement 
and establish my drug-free awareness program?

    If you are a new recipient that does not already have a policy 
statement as described in Sec. 3021.205 and an ongoing awareness 
program as described in Sec. 3021.215, you must publish the statement 
and establish the program by the time given in the following table:

------------------------------------------------------------------------
                 If . . .                          then you . . .
------------------------------------------------------------------------
(a) The performance period of the award is  must have the policy
 less than 30 days.                          statement and program in
                                             place as soon as possible,
                                             but before the date on
                                             which performance is
                                             expected to be completed.
(b) The performance period of the award is  must have the policy
 30 days or more.                            statement and program in
                                             place within 30 days after
                                             award.
(c) You believe there are extraordinary     may ask the Department of
 circumstances that will require more than   Agriculture awarding
 30 days for you to publish the policy       official to give you more
 statement and establish the awareness       time to do so. The amount
 program.                                    of additional time, if any,
                                             to be given is at the
                                             discretion of the awarding
                                             official.
------------------------------------------------------------------------



Sec. 3021.225  What actions must I take concerning employees who are 
convicted of drug violations in the workplace?

    There are two actions you must take if an employee is convicted of a 
drug violation in the workplace:
    (a) First, you must notify Federal agencies if an employee who is 
engaged in the performance of an award informs you about a conviction, 
as required by Sec. 3021.205(c)(2), or you otherwise learn of the 
conviction. Your notification to the Federal agencies must--
    (1) Be in writing;
    (2) Include the employee's position title;
    (3) Include the identification number(s) of each affected award;
    (4) Be sent within ten calendar days after you learn of the 
conviction; and
    (5) Be sent to every Federal agency on whose award the convicted 
employee was working. It must be sent to every awarding official or his 
or her official designee, unless the Federal agency has specified a 
central point for the receipt of the notices.
    (b) Second, within 30 calendar days of learning about an employee's 
conviction, you must either--

[[Page 249]]

    (1) Take appropriate personnel action against the employee, up to 
and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973 (29 U.S.C. 794), as amended; or
    (2) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for these purposes 
by a Federal, State or local health, law enforcement, or other 
appropriate agency.



Sec. 3021.230  How and when must I identify workplaces?

    (a) You must identify all known workplaces under each Department of 
Agriculture award. A failure to do so is a violation of your drug-free 
workplace requirements. You may identify the workplaces--
    (1) To the Department of Agriculture official that is making the 
award, either at the time of application or upon award; or
    (2) In documents that you keep on file in your offices during the 
performance of the award, in which case you must make the information 
available for inspection upon request by Department of Agriculture 
officials or their designated representatives.
    (b) Your workplace identification for an award must include the 
actual address of buildings (or parts of buildings) or other sites where 
work under the award 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).
    (c) If you identified workplaces to the Department of Agriculture 
awarding official at the time of application or award, as described in 
paragraph (a)(1) of this section, and any workplace that you identified 
changes during the performance of the award, you must inform the 
Department of Agriculture awarding official.



        Subpart C_Requirements for Recipients Who Are Individuals



Sec. 3021.300  What must I do to comply with this part if I am an 
individual recipient?

    As a condition of receiving a(n) Department of Agriculture award, if 
you are an individual recipient, you must agree that--
    (a) You will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity related to the award; and
    (b) If you are convicted of a criminal drug offense resulting from a 
violation occurring during the conduct of any award activity, you will 
report the conviction:
    (1) In writing.
    (2) Within 10 calendar days of the conviction.
    (3) To the Department of Agriculture awarding official or other 
designee for each award that you currently have, unless Sec. 3021.301 
or the award document designates a central point for the receipt of the 
notices. When notice is made to a central point, it must include the 
identification number(s) of each affected award.



Sec. 3021.301  [Reserved]



    Subpart D_Responsibilities of Department of Agriculture Awarding 
                                Officials



Sec. 3021.400  What are my responsibilities as a(n) Department of 
Agriculture awarding official?

    As a(n) Department of Agriculture awarding official, you must obtain 
each recipient's agreement, as a condition of the award, to comply with 
the requirements in--
    (a) Subpart B of this part, if the recipient is not an individual; 
or
    (b) Subpart C of this part, if the recipient is an individual.

[[Page 250]]



           Subpart E_Violations of this Part and Consequences



Sec. 3021.500  How are violations of this part determined for recipients 
other than individuals?

    A recipient other than an individual is in violation of the 
requirements of this part if the Secretary of Agriculture or designee 
determines, in writing, that--
    (a) The recipient has violated the requirements of subpart B of this 
part; or
    (b) The number of convictions of the recipient's employees for 
violating criminal drug statutes in the workplace is large enough to 
indicate that the recipient has failed to make a good faith effort to 
provide a drug-free workplace.



Sec. 3021.505  How are violations of this part determined for recipients 
who are individuals?

    An individual recipient is in violation of the requirements of this 
part if the Secretary of Agriculture or designee determines, in writing, 
that--
    (a) The recipient has violated the requirements of subpart C of this 
part; or
    (b) The recipient is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any award activity.



Sec. 3021.510  What actions will the Federal Government take against a 
recipient determined to have violated this part?

    If a recipient is determined to have violated this part, as 
described in Sec. 3021.500 or Sec. 3021.505, the Department of 
Agriculture may take one or more of the following actions--
    (a) Suspension of payments under the award;
    (b) Suspension or termination of the award; and
    (c) Suspension or debarment of the recipient under 7 CFR part 3017, 
for a period not to exceed five years.

[68 FR 66557, 66565, Nov. 26, 2003, as amended at 68 FR 66566, Nov. 26, 
2003]



Sec. 3021.515  Are there any exceptions to those actions?

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



                          Subpart F_Definitions



Sec. 3021.605  Award.

    Award means an award of financial assistance by the Department of 
Agriculture or other Federal agency directly to a recipient.
    (a) The term award includes:
    (1) A Federal grant or cooperative agreement, in the form of money 
or property in lieu of money.
    (2) A block grant or a grant in an entitlement program, whether or 
not the grant is exempted from coverage under the Governmentwide rule 7 
CFR part 3016 that implements OMB Circular A-102 (for availability, see 
5 CFR 1310.3) and specifies uniform administrative requirements.
    (b) The term award does not include:
    (1) Technical assistance that provides services instead of money.
    (2) Loans.
    (3) Loan guarantees.
    (4) Interest subsidies.
    (5) Insurance.
    (6) Direct appropriations.
    (7) 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).

[68 FR 66557, 66565, Nov. 26, 2003, as amended at 68 FR 66566, Nov. 26, 
2003]



Sec. 3021.610  Controlled substance.

    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.



Sec. 3021.615  Conviction.

    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

[[Page 251]]

Federal or State criminal drug statutes.



Sec. 3021.620  Cooperative agreement.

    Cooperative agreement means an award of financial assistance that, 
consistent with 31 U.S.C. 6305, is used to enter into the same kind of 
relationship as a grant (see definition of grant in Sec. 3021.650), 
except that substantial involvement is expected between the Federal 
agency and the recipient when carrying out the activity contemplated by 
the award. The term does not include cooperative research and 
development agreements as defined in 15 U.S.C. 3710a.



Sec. 3021.625  Criminal drug statute.

    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance.



Sec. 3021.630  Debarment.

    Debarment means an action taken by a Federal agency to prohibit a 
recipient from participating in Federal Government procurement contracts 
and covered nonprocurement transactions. A recipient so prohibited is 
debarred, in accordance with the Federal Acquisition Regulation for 
procurement contracts (48 CFR part 9, subpart 9.4) and the common rule, 
Government-wide Debarment and Suspension (Nonprocurement), that 
implements Executive Order 12549 and Executive Order 12689.



Sec. 3021.635  Drug-free workplace.

    Drug-free workplace means a site for the performance of work done in 
connection with a specific award at which employees of the recipient are 
prohibited from engaging in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance.



Sec. 3021.640  Employee.

    (a) Employee means the employee of a recipient directly engaged in 
the performance of work under the award, including--
    (1) All direct charge employees;
    (2) All indirect charge employees, unless their impact or 
involvement in the performance of work under the award is insignificant 
to the performance of the award; and
    (3) Temporary personnel and consultants who are directly engaged in 
the performance of work under the award and who are on the recipient's 
payroll.
    (b) This definition does not include workers not on the payroll of 
the recipient (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).



Sec. 3021.645  Federal agency or agency.

    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.



Sec. 3021.650  Grant.

    Grant means an award of financial assistance that, consistent with 
31 U.S.C. 6304, is used to enter into a relationship--
    (a) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or stimulation 
authorized by a law of the United States, rather than to acquire 
property or services for the Federal Government's direct benefit or use; 
and
    (b) In which substantial involvement is not expected between the 
Federal agency and the recipient when carrying out the activity 
contemplated by the award.



Sec. 3021.655  Individual.

    Individual means a natural person.



Sec. 3021.660  Recipient.

    Recipient means any individual, corporation, partnership, 
association, unit of government (except a Federal agency) or legal 
entity, however organized, that receives an award directly from a 
Federal agency.

[[Page 252]]



Sec. 3021.665  State.

    State means any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, or any territory or 
possession of the United States.



Sec. 3021.670  Suspension.

    Suspension means an action taken by a Federal agency that 
immediately prohibits a recipient from participating in Federal 
Government procurement contracts and covered nonprocurement transactions 
for a temporary period, pending completion of an investigation and any 
judicial or administrative proceedings that may ensue. A recipient so 
prohibited is suspended, in accordance with the Federal Acquisition 
Regulation for procurement contracts (48 CFR part 9, subpart 9.4) and 
the common rule, Government-wide Debarment and Suspension 
(Nonprocurement), that implements Executive Order 12549 and Executive 
Order 12689. Suspension of a recipient is a distinct and separate action 
from suspension of an award or suspension of payments under an award.



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.

    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

[[Page 253]]

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:
    (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;

[[Page 254]]

    (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
    (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). A Federal agency with 
oversight for an auditee may reassign oversight to another Federal 
agency, which provides substantial funding and agrees to be the 
oversight agency for audit. Within 30 days after any reassignment, both 
the old and the new oversight agency for audit shall notify the auditee, 
and, if known, the auditor of the reassignment.
    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;

[[Page 255]]

    (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.
    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.

[62 FR 45949, Aug. 29, 1997, as amended at 70 FR 34986, June 16, 2005]



                            Subpart B_Audits



Sec. 3052.200  Audit requirements.

    (a) Audit required. Non-Federal entities that expend $500,000 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 $500,000 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

[[Page 256]]

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 $500,000. 
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.

[62 FR 45949, Aug. 29, 1997, as amended at 70 FR 34986, June 16, 2005]



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 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

[[Page 257]]

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 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

[[Page 258]]

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.
    (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

[[Page 259]]

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 $500,000 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.

[62 FR 45949, Aug. 29, 1997, as amended at 70 FR 34986, June 16, 2005]



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;
    (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;

[[Page 260]]

    (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 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

[[Page 261]]

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 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

[[Page 262]]

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.
    (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.

[[Page 263]]

    (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.
    (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

[[Page 264]]

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 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

[[Page 265]]

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 $50 million in 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. 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 2004, 2009, 
2014, and every fifth year thereafter. For example, audit cognizance for 
periods ending in 2006 through 2010 will be determined based on Federal 
awards expended in 2004. (However, for 2001 through 2005, the cognizant 
agency for audit is determined based on the predominant amount of direct 
Federal awards expended in the recipient's fiscal year ending in 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,

[[Page 266]]

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.
    (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 $500,000 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

[[Page 267]]

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.

[62 FR 45949, Aug. 29, 1997, as amended at 70 FR 34986, June 16, 2005]



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 
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

[[Page 268]]

    (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.



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

[[Page 269]]

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 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

[[Page 270]]

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.
    (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.

[[Page 271]]



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 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.

[[Page 272]]

    (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 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

[[Page 273]]

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.
    (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

[[Page 274]]

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 275]]



CHAPTER XXXI--OFFICE OF ENVIRONMENTAL QUALITY, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
3100            Cultural and environmental quality..........         277

[[Page 277]]



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 278]]

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 279]]

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 a