[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Proposed Rules]
[Pages 28563-28566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13227]
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DEPARTMENT OF THE TREASURY
31 CFR Part 34
RIN 1505-AC55
Regulations for the Gulf Coast Restoration Trust Fund
AGENCY: Office of the Fiscal Assistant Secretary, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of the Treasury (Treasury) proposes to amend
its rules to revise the method by which the statutory three percent
limitation on administrative costs (referred to throughout this notice
of proposed rulemaking (NPRM) as the ``three percent administrative
cost cap'') is applied under the Direct Component, Comprehensive Plan
Component, and Spill Impact Component under the Resources and Ecosystem
Sustainability, Tourist Opportunities, and Revived Economies of the
Gulf Coast States Act of 2012 (RESTORE Act or Act). This proposed
amendment will help ensure that the Gulf Coast states and localities
have the necessary funding to efficiently and effectively oversee and
manage projects and programs for ecological and economic restoration of
the Gulf Coast Region while ensuring compliance with the statutory
three percent administrative cost cap. It does not change the
definition of ``administrative costs'' or the indirect cost
reimbursement calculation on an individual federal grant using the
negotiated indirect cost rate agreement (NICRA) or de minimis rate.
DATES: Written comments on this NPRM must be received on or before:
July 20, 2018.
ADDRESSES: Treasury invites comments on the topic addressed in this
NPRM. Comments may be submitted by any of the following methods:
Electronic Submission of Comments: Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. Electronic submission of comments allows
the commenter maximum time to prepare and submit a comment, ensures
timely receipt, and enables Treasury to make them available to the
public. Comments submitted electronically through the http://www.regulations.gov website can be viewed by other commenters and
interested members of the public.
Mail: Send to Department of the Treasury, Attention: Laurie
McGilvray, Office of Gulf Coast Restoration, Office of the Fiscal
Assistant Secretary, Room 2112; 1500 Pennsylvania Avenue NW,
Washington, DC 20220.
In general, Treasury will post all comments to http://www.regulations.gov without change, including any business or personal
information provided, such as names, addresses, email addresses, or
telephone numbers. All comments received, including attachments and
other supporting materials, will be part of the public record and
subject to public disclosure. You should submit only information that
you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: The Office of Gulf Coast Restoration
at [email protected], or Laurie McGilvray at 202-622-7340.
SUPPLEMENTARY INFORMATION:
I. Background
The RESTORE Act (33 U.S.C. 1321(t) and note) makes funds available
for the ecological and economic restoration of the Gulf Coast Region,
and certain programs with respect to the Gulf of Mexico, through a
trust fund in the Treasury of the United States known as the Gulf Coast
Restoration Trust Fund (trust fund). The trust fund holds 80 percent of
the administrative and civil penalties paid under the Federal Water
Pollution Control Act after July 6, 2012 in connection with the
Deepwater Horizon Oil Spill.
Treasury administers two of the five components established by the
Act, the Direct Component and Centers of Excellence Research Grants
Program. The Act also established an independent Federal entity, the
Gulf Coast Ecosystem Restoration Council (Council), to administer two
components of the Act, the Comprehensive Plan Component and the Spill
Impact Component. The National Oceanic and Atmospheric Administration
(NOAA) administers one component, the NOAA RESTORE Act Science Program.
This NPRM only affects grants under the Direct Component, Comprehensive
Plan Component, and Spill Impact Component of the Act, which are
collectively referred to throughout the NPRM as the three
``components.''
On December 14, 2015, Treasury promulgated a final rule on the
RESTORE Act, 80 FR 77239, which became effective on February 12, 2016.
[[Page 28564]]
The final rule contains two relevant limitations on the amount of grant
funds that may be used for administrative costs.
First, the final rule subjects the grants to government-wide cost
principles. Treasury's final rule defines ``administrative costs'' as
``indirect costs for administration'' and provides that such ``[c]osts
must comply with administrative requirements and cost principles in
applicable federal laws and policies on grants.'' 31 CFR 34.2,
34.200(a)(1). Treasury's final rule excludes ``indirect costs that are
identified specifically with, or readily assignable to, facilities''
from its definition of ``administrative costs.''
Indirect cost principles are contained in the Office of Management
and Budget's ``Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards'' in 2 CFR part 200, which
Treasury has adopted. 2 CFR 1000.10. Indirect costs are defined in 2
CFR 200.56 and are allowable subject to Subpart E of 2 CFR part 200 and
Appendix VII.
Under Subpart E, a grant recipient's negotiated indirect cost rate
agreement (NICRA) with its cognizant agency determines the allowable
indirect cost rate for the recipient's grants, taking into account the
unique circumstances and cost structure of the recipient. The NICRA, or
a de minimis rate if elected, must be used across all of the
recipient's federal grants.\1\ 2 CFR 200.414(c)(1). In accordance with
the 2 CFR part 200 Uniform Guidance, Appendix VII--State and Local
Government and Indian Tribe Indirect Cost Proposals, these allowable
indirect costs are computed on each individual Federal award.
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\1\ Subpart E provides that when a recipient has never had a
NICRA and receives $35 million or less in direct federal funding, a
de minimis rate of 10 percent of modified total direct costs (MTDC)
may be used to calculate its allowable indirect costs in lieu of
establishing a NICRA. 2 CFR 200.414(f), 2 CFR part 200, Appendix
VII(D)(1)(b).
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The second limitation for RESTORE awards on the amount of grant
funds that can be used for administrative costs under the three
components is a three percent administrative cost cap. The Act provides
that ``[o]f the amounts received by a Gulf Coast State . . ., not more
than 3 percent may be used for administrative costs . . . .'' 33 U.S.C.
1321(t)(1)(B)(iii)(I). The Act does not specify the method by which
this three percent administrative cost cap is to be applied. Treasury's
final rule, however, provides that the three percent administrative
cost cap is to be applied on a grant-by-grant basis: ``The three
percent limit is applied to the total amount of funds received by a
recipient under each grant.'' 31 CFR 34.204(a). In other words, under
the current regulation, the administrative costs associated with each
particular grant may not exceed three percent of the total amount of
that grant.
Thus, under the current regulation, allowable administrative costs
for a particular grant, (i.e., the indirect costs for administration)
are limited to three percent of total funds received under that
particular grant even in cases where a recipient's NICRA (or its de
minimis rate) allows more.
For example, if a recipient with a NICRA with a direct labor base
were to contract out the labor on a project, the indirect costs under
its NICRA may be much lower than three percent of the total amount of
the grant. In contrast, if the bulk of the labor is performed in-house,
the indirect costs will typically be much greater than three percent of
the total amount of the grant.
To address this issue, Treasury proposes to provide a recipient the
option to apply the three percent administrative cost cap, within each
component, on either a grant-by-grant basis or on an aggregate basis.
More specifically, this proposed revision provides that the three
percent administrative cost cap may be applied by component to a Gulf
Coast State, coastal political subdivision, or coastal zone parish's
trust fund allocation, i.e., an aggregate of (1) all grants received by
it under one component, and (2) the amount in the trust fund for the
same component that is allocated to, but not yet received by it. As
used in this NPRM, the phrase ``allocated to, but not yet received
under that component by a Gulf Coast State, coastal political
subdivision, or coastal zone parish'' refers only to funds presently in
the trust fund and not to future deposits into the trust fund,\2\ and
includes the following amounts with respect to each component: (1) With
respect to the Direct Component, amounts made available in equal shares
for the Gulf Coast States in accordance with 31 CFR 34.302; (2) with
respect to the Comprehensive Plan Component, the estimated aggregate
cost of all projects included in all approved Funded Priorities Lists;
and (3) with respect to the Spill Impact Component, amounts allocated
to the Gulf Coast States in accordance with 31 CFR 34.502 and 40 CFR
1800.500.
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\2\ BP Exploration & Production Inc. began making annual civil
penalty payments in April 2017, and is expected to continue to make
annual payments through mid-2031 pursuant to a consent decree
entered on April 4, 2016 under the Federal Water Pollution Control
Act (Clean Water Act), of which 80 percent of the total will be
deposited into the trust fund and invested. The annual payments into
the trust fund through 2031 are expected to total $4.4 billion. In
2032, BP will make a final payment in the form of penalty interest.
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The Treasury regulations allocate precise sums to specific entities
based on criteria in the Act, which allows the flexibility to
administer the administrative cost cap on an aggregate basis.
Permitting recipients to allocate administrative costs by component
from their ``pool'' in the trust fund toward the indirect costs in
their grants will enable them to recover the maximum amount of indirect
costs allowed under the Act and to more efficiently and effectively
oversee and manage projects and programs. Under this methodology, if a
recipient's allowable indirect costs for administration for one grant
are less than three percent of the total amount of that grant, the
difference would be available to cover allowable indirect costs for
administration exceeding three percent on other grants.
The two methods for applying the three percent administrative cost
cap are illustrated by the examples below.
Example 1--Grant-by-Grant Method
A recipient receives a Direct Component planning assistance grant
totaling $216,494. The grant consists of $210,000 for direct costs and,
under the three percent cap, $6,494 for indirect costs.
Example 2--Aggregate Method
As in the first example, a recipient with a NICRA receives a Direct
Component planning assistance grant which includes $210,000 for direct
costs. Under the aggregate method, its grant may also include $56,000
for indirect costs under its NICRA, for a grant totaling $266,000. The
recipient has a total administrative cost pool of $2,600,000, based on
three percent of its gross trust fund allocation for the Direct
Component. The recipient has received indirect costs for administration
totaling $112,000 for two prior grants, leaving a net amount of
$2,488,000 available in its administrative cost pool. Therefore, the
recipient may use $56,000 for indirect costs in this grant award
because the funds are available in the pool.
At least annually, Treasury will post publicly the amounts
available in the administrative cost ``pool'' by component,
simultaneously with its updates to the trust fund allocations. At no
time, however, may the total amount of administrative costs of a Gulf
Coast State, coastal political subdivision, or coastal zone parish
exceed three percent of the aggregate of (1) all grants received by it
under one of the three components, and (2) the amount in the trust fund
for
[[Page 28565]]
the same component that is allocated to, but not yet received by such
Gulf Coast State, coastal political subdivision, or coastal zone
parish. Also, at no time would a recipient be able to recover more in
indirect costs under an individual award than it would receive under
its NICRA or its de minimis rate.
Treasury invites public comments on all aspects of this proposed
amendment for 30 days, and anticipates publishing a final rule on this
revision soon after the 30 day public comment period. In particular,
Treasury solicits comments from eligible entities on the following: (1)
Is the aggregate method an attractive option and if so, describe the
benefits; (2) How would you manage and track administrative indirect
costs under each method; (3) Is there an additional burden associated
with managing the administrative indirect cost cap using the aggregate
method?
II. This Notice of Proposed Rulemaking
For the reasons described above, Treasury proposes amending the
method by which the statutory three percent administrative cost cap is
applied under 31 CFR 34.204(a). Conceptually, the proposed revision
allows each recipient to establish a ``pool'' of funds for
administrative costs under each component if it so chooses. Within each
component, a recipient may budget these funds among its grants,
consistent with the definition of administrative costs at 31 CFR 34.2
and Subpart E. Treasury believes that this NPRM will help ensure that
recipients have the necessary funding to efficiently and effectively
oversee and manage projects and programs while ensuring compliance with
the statutory three percent administrative cost cap and a recipient's
NICRA or de minimis rate under Subpart E.
To clarify that recipients are no longer required to apply the
three percent administrative cost cap on a grant-by-grant basis,
Treasury proposes deleting ``in a grant'' from the first sentence of
Sec. 34.204(a). Treasury proposes replacing the second sentence in
existing Sec. 34.204(a), which currently requires the three percent
administrative cost cap to be applied on a grant-by-grant basis, with
language permitting the three percent administrative cost cap to be
applied on either a grant-by-grant basis or on an aggregated basis
within each component. For the latter method, this NPRM states that
amounts used for administrative costs may not at any time exceed three
percent of the aggregate of: (1) The amounts received under a component
by a recipient, beginning with the first grant through the most recent
grant, and (2) the amounts in the trust fund that are allocated to, but
not yet received under such component, by a Gulf Coast State, coastal
political subdivision, or coastal zone parish under Sec. 34.103,
consistent with the definition of administrative costs in Sec. 34.2.
This proposed revision helps ensure that the recipient will not exceed
the statutory three percent administrative cost cap before the
termination of the trust fund. Please note the NPRM does not amend the
definition of administrative costs in Sec. 34.2.
Treasury also proposes adding ``recipient and'' before
``subrecipient'' in the last sentence of Sec. 34.204(a) to clarify
that Federal grant law and policies apply to recipient costs as well as
to subrecipient costs.
Treasury will conduct a retrospective analysis of this proposed
revision no later than seven years after the date it becomes effective.
This review will consider whether the revision ensures that the Gulf
Coast states, coastal political subdivisions, and coastal zone parishes
have the necessary funding to efficiently and effectively oversee and
manage projects and programs for ecological and economic restoration of
the Gulf Coast Region while ensuring compliance with the statutory
three percent administrative cost cap, and whether it helps them to
administer RESTORE grant projects effectively and efficiently.
III. Procedural Requirements
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally
requires agencies to prepare a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements under the
Administrative Procedures Act or any other statute, unless the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities.
Six of the 20 Louisiana parishes and six of the 23 Florida counties
eligible to receive grants under the RESTORE Act have fewer than 50,000
residents. (2010 U.S. Census) and thus qualify as small governmental
jurisdictions under the Regulatory Flexibility Act. (5 U.S.C. 601(5)).
Treasury anticipates that this proposed revision will have no
significant economic impact on these small entities because all
recipients have the option to continue applying the three percent
administrative cost cap on a grant-by-grant basis. Accordingly,
Treasury certifies that the amendment to this regulation will not have
a significant impact upon a substantial number of small entities, and
no regulatory flexibility analysis is required.
B. Regulatory Planning and Review (Executive Orders 12866 and 13563)
The amendment to the regulation is a significant regulatory action
as defined in Executive Order 12866, as supplemented by Executive Order
13563.
C. Catalog of Federal Domestic Assistance
The affected program for Treasury is listed in the Catalog of
Federal Domestic Assistance Program under 21.015, Resources and
Ecosystems Sustainability, Tourist Opportunities, and Revived Economies
of the Gulf Coast States. The affected programs for the Council are
listed under 87.051, and 87.052, for its Comprehensive Plan and Spill
Impact Components, respectively.
List of Subjects in 31 CFR Part 34
Coastal zone, Fisheries, Grant programs, Grants administration,
Intergovernmental relations, Marine resources, Natural resources, Oil
pollution, Research, Science and technology, Trusts, Wildlife.
For the reasons set forth herein, the Department of the Treasury
proposes to amend 31 CFR part 34 to read as follows:
PART 34--RESOURCES AND ECOSYSTEMS SUSTAINABILITY, TOURIST
OPPORTUNITIES, AND REVIVED ECONOMIES OF THE GULF COAST STATES
0
1. The authority citation continues to read as follows:
Authority: 31 U.S.C. 301; 31 U.S.C. 321; 33 U.S.C. 1251 et seq.
0
2. Amend Sec. 34.204 by revising paragraph (a) to read as follows:
Sec. 34.204 Limitations on administrative costs and administrative
expenses.
(a)(1) Of the amounts received by a Gulf Coast State, coastal
political subdivision, or coastal zone parish from Treasury under the
Direct Component, or from the Council under the Comprehensive Plan
Component or Spill Impact Component, not more than three percent may be
used for administrative costs. The three percent limit on
administrative costs may be applied to the total amount of funds
received by a recipient under each of the three Components either on a
grant-by-grant basis or on an aggregate basis. For the latter method,
amounts used for administrative costs under each of the
[[Page 28566]]
three Components may not at any time exceed three percent of the
aggregate of:
(i) The amounts received under a Component by a recipient,
beginning with the first grant through the most recent grant; and
(ii) The amounts in the Trust Fund that are allocated to, but not
yet received under such Component by a Gulf Coast State, coastal
political subdivision, or coastal zone parish under Sec. 34.103,
consistent with the definition of administrative costs in Sec. 34.2.
The three percent limit does not apply to the administrative costs of
subrecipients. All recipient and subrecipient costs are subject to the
cost principles in Federal laws and policies on grants.
(2) Treasury will conduct a retrospective analysis of this
provision no later than seven years after the date it becomes
effective. This review will consider whether the revision ensures that
the Gulf Coast states, coastal political subdivisions, and coastal zone
parishes have the necessary funding to efficiently and effectively
oversee and manage projects and programs for ecological and economic
restoration of the Gulf Coast Region while ensuring compliance with the
statutory three percent administrative cost cap, and whether it helps
them to administer RESTORE grant projects effectively and efficiently.
* * * * *
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2018-13227 Filed 6-19-18; 8:45 am]
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