123
OMB Guidance § 200.301
services, to procure replacement equip-
ment and services, and to ensure that
communications service to users and
customers is sustained.
(c) See Public Law 115–232, section 889
for additional information.
(d) See also § 200.471.
Subpart D—Post Federal Award
Requirements
SOURCE: 85 FR 49543, Aug. 13, 2020, unless
otherwise noted.
§ 200.300 Statutory and national policy
requirements.
(a) The Federal awarding agency
must manage and administer the Fed-
eral award in a manner so as to ensure
that Federal funding is expended and
associated programs are implemented
in full accordance with the U.S. Con-
stitution, Federal Law, and public pol-
icy requirements: Including, but not
limited to, those protecting free
speech, religious liberty, public wel-
fare, the environment, and prohibiting
discrimination. The Federal awarding
agency must communicate to the non-
Federal entity all relevant public pol-
icy requirements, including those in
general appropriations provisions, and
incorporate them either directly or by
reference in the terms and conditions
of the Federal award.
(b) The non-Federal entity is respon-
sible for complying with all require-
ments of the Federal award. For all
Federal awards, this includes the provi-
sions of FFATA, which includes re-
quirements on executive compensation,
and also requirements implementing
the Act for the non-Federal entity at 2
CFR parts 25 and 170. See also statu-
tory requirements for whistleblower
protections at 10 U.S.C. 2409, 41 U.S.C.
4712, and 10 U.S.C. 2324, 41 U.S.C. 4304
and 4310.
§ 200.301 Performance measurement.
(a) The Federal awarding agency
must measure the recipient’s perform-
ance to show achievement of program
goals and objectives, share lessons
learned, improve program outcomes,
and foster adoption of promising prac-
tices. Program goals and objectives
should be derived from program plan-
ning and design. See § 200.202 for more
information. Where appropriate, the
Federal award may include specific
program goals, indicators, targets,
baseline data, data collection, or ex-
pected outcomes (such as outputs, or
services performance or public impacts
of any of these) with an expected
timeline for accomplishment. Where
applicable, this should also include any
performance measures or independent
sources of data that may be used to
measure progress. The Federal award-
ing agency will determine how per-
formance progress is measured, which
may differ by program. Performance
measurement progress must be both
measured and reported. See § 200.329 for
more information on monitoring pro-
gram performance. The Federal award-
ing agency may include program-spe-
cific requirements, as applicable. These
requirements must be aligned, to the
extent permitted by law, with the Fed-
eral awarding agency strategic goals,
strategic objectives or performance
goals that are relevant to the program.
See also OMB Circular A–11, Prepara-
tion, Submission, and Execution of the
Budget Part 6.
(b) The Federal awarding agency
should provide recipients with clear
performance goals, indicators, targets,
and baseline data as described in
§ 200.211. Performance reporting fre-
quency and content should be estab-
lished to not only allow the Federal
awarding agency to understand the re-
cipient progress but also to facilitate
identification of promising practices
among recipients and build the evi-
dence upon which the Federal awarding
agency’s program and performance de-
cisions are made. See § 200.328 for more
information on reporting program per-
formance.
(c) This provision is designed to oper-
ate in tandem with evidence-related
statutes (e.g.; The Foundations for Evi-
dence-Based Policymaking Act of 2018,
which emphasizes collaboration and co-
ordination to advance data and evi-
dence-building functions in the Federal
government). The Federal awarding
agency should also specify any require-
ments of award recipients’ participa-
tion in a federally funded evaluation,
and any evaluation activities required
to be conducted by the Federal award.
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2 CFR Ch. II (1–1–21 Edition) § 200.302
§ 200.302 Financial management.
(a) Each state must expend and ac-
count for the Federal award in accord-
ance with state laws and procedures for
expending and accounting for the
state’s own funds. In addition, the
state’s and the other non-Federal enti-
ty’s financial management systems, in-
cluding records documenting compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award, must be sufficient
to permit the preparation of reports re-
quired by general and program-specific
terms and conditions; and the tracing
of funds to a level of expenditures ade-
quate to establish that such funds have
been used according to the Federal
statutes, regulations, and the terms
and conditions of the Federal award.
See also § 200.450.
(b) The financial management sys-
tem of each non-Federal entity must
provide for the following (see also
§§ 200.334, 200.335, 200.336, and 200.337):
(1) Identification, in its accounts, of
all Federal awards received and ex-
pended and the Federal programs under
which they were received. Federal pro-
gram and Federal award identification
must include, as applicable, the Assist-
ance Listings title and number, Fed-
eral award identification number and
year, name of the Federal agency, and
name of the pass-through entity, if
any.
(2) Accurate, current, and complete
disclosure of the financial results of
each Federal award or program in ac-
cordance with the reporting require-
ments set forth in §§ 200.328 and 200.329.
If a Federal awarding agency requires
reporting on an accrual basis from a re-
cipient that maintains its records on
other than an accrual basis, the recipi-
ent must not be required to establish
an accrual accounting system. This re-
cipient may develop accrual data for
its reports on the basis of an analysis
of the documentation on hand. Simi-
larly, a pass-through entity must not
require a subrecipient to establish an
accrual accounting system and must
allow the subrecipient to develop ac-
crual data for its reports on the basis
of an analysis of the documentation on
hand.
(3) Records that identify adequately
the source and application of funds for
federally-funded activities. These
records must contain information per-
taining to Federal awards, authoriza-
tions, financial obligations, unobli-
gated balances, assets, expenditures,
income and interest and be supported
by source documentation.
(4) Effective control over, and ac-
countability for, all funds, property,
and other assets. The non-Federal enti-
ty must adequately safeguard all assets
and assure that they are used solely for
authorized purposes. See § 200.303.
(5) Comparison of expenditures with
budget amounts for each Federal
award.
(6) Written procedures to implement
the requirements of § 200.305.
(7) Written procedures for deter-
mining the allowability of costs in ac-
cordance with subpart E of this part
and the terms and conditions of the
Federal award.
§ 200.303 Internal controls.
The non-Federal entity must:
(a) Establish and maintain effective
internal control over the Federal
award that provides reasonable assur-
ance that the non-Federal entity is
managing the Federal award in compli-
ance with Federal statutes, regula-
tions, and the terms and conditions of
the Federal award. These internal con-
trols should be in compliance with
guidance in ‘‘Standards for Internal
Control in the Federal Government’’
issued by the Comptroller General of
the United States or the ‘‘Internal Con-
trol Integrated Framework’’, issued by
the Committee of Sponsoring Organiza-
tions of the Treadway Commission
(COSO).
(b) Comply with the U.S. Constitu-
tion, Federal statutes, regulations, and
the terms and conditions of the Federal
awards.
(c) Evaluate and monitor the non-
Federal entity’s compliance with stat-
utes, regulations and the terms and
conditions of Federal awards.
(d) Take prompt action when in-
stances of noncompliance are identified
including noncompliance identified in
audit findings.
(e) Take reasonable measures to safe-
guard protected personally identifiable
information and other information the
Federal awarding agency or pass-
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OMB Guidance § 200.305
through entity designates as sensitive
or the non-Federal entity considers
sensitive consistent with applicable
Federal, State, local, and tribal laws
regarding privacy and responsibility
over confidentiality.
§ 200.304 Bonds.
The Federal awarding agency may in-
clude a provision on bonding, insur-
ance, or both in the following cir-
cumstances:
(a) Where the Federal Government
guarantees or insures the repayment of
money borrowed by the recipient, the
Federal awarding agency, at its discre-
tion, may require adequate bonding
and insurance if the bonding and insur-
ance requirements of the non-Federal
entity are not deemed adequate to pro-
tect the interest of the Federal Govern-
ment.
(b) The Federal awarding agency may
require adequate fidelity bond coverage
where the non-Federal entity lacks suf-
ficient coverage to protect the Federal
Government’s interest.
(c) Where bonds are required in the
situations described above, the bonds
must be obtained from companies hold-
ing certificates of authority as accept-
able sureties, as prescribed in 31 CFR
part 223.
§ 200.305 Federal payment.
(a) For states, payments are gov-
erned by Treasury-State Cash Manage-
ment Improvement Act (CMIA) agree-
ments and default procedures codified
at 31 CFR part 205 and Treasury Finan-
cial Manual (TFM) 4A–2000, ‘‘Overall
Disbursing Rules for All Federal Agen-
cies’’.
(b) For non-Federal entities other
than states, payments methods must
minimize the time elapsing between
the transfer of funds from the United
States Treasury or the pass-through
entity and the disbursement by the
non-Federal entity whether the pay-
ment is made by electronic funds
transfer, or issuance or redemption of
checks, warrants, or payment by other
means. See also § 200.302(b)(6). Except
as noted elsewhere in this part, Federal
agencies must require recipients to use
only OMB-approved, governmentwide
information collection requests to re-
quest payment.
(1) The non-Federal entity must be
paid in advance, provided it maintains
or demonstrates the willingness to
maintain both written procedures that
minimize the time elapsing between
the transfer of funds and disbursement
by the non-Federal entity, and finan-
cial management systems that meet
the standards for fund control and ac-
countability as established in this part.
Advance payments to a non-Federal en-
tity must be limited to the minimum
amounts needed and be timed to be in
accordance with the actual, immediate
cash requirements of the non-Federal
entity in carrying out the purpose of
the approved program or project. The
timing and amount of advance pay-
ments must be as close as is adminis-
tratively feasible to the actual dis-
bursements by the non-Federal entity
for direct program or project costs and
the proportionate share of any allow-
able indirect costs. The non-Federal
entity must make timely payment to
contractors in accordance with the
contract provisions.
(2) Whenever possible, advance pay-
ments must be consolidated to cover
anticipated cash needs for all Federal
awards made by the Federal awarding
agency to the recipient.
(i) Advance payment mechanisms in-
clude, but are not limited to, Treasury
check and electronic funds transfer and
must comply with applicable guidance
in 31 CFR part 208.
(ii) Non-Federal entities must be au-
thorized to submit requests for advance
payments and reimbursements at least
monthly when electronic fund transfers
are not used, and as often as they like
when electronic transfers are used, in
accordance with the provisions of the
Electronic Fund Transfer Act (15
U.S.C. 1693–1693r).
(3) Reimbursement is the preferred
method when the requirements in this
paragraph (b) cannot be met, when the
Federal awarding agency sets a specific
condition per § 200.208, or when the non-
Federal entity requests payment by re-
imbursement. This method may be
used on any Federal award for con-
struction, or if the major portion of the
construction project is accomplished
through private market financing or
Federal loans, and the Federal award
constitutes a minor portion of the
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2 CFR Ch. II (1–1–21 Edition) § 200.305
project. When the reimbursement
method is used, the Federal awarding
agency or pass-through entity must
make payment within 30 calendar days
after receipt of the billing, unless the
Federal awarding agency or pass-
through entity reasonably believes the
request to be improper.
(4) If the non-Federal entity cannot
meet the criteria for advance payments
and the Federal awarding agency or
pass-through entity has determined
that reimbursement is not feasible be-
cause the non-Federal entity lacks suf-
ficient working capital, the Federal
awarding agency or pass-through enti-
ty may provide cash on a working cap-
ital advance basis. Under this proce-
dure, the Federal awarding agency or
pass-through entity must advance cash
payments to the non-Federal entity to
cover its estimated disbursement needs
for an initial period generally geared
to the non-Federal entity’s disbursing
cycle. Thereafter, the Federal award-
ing agency or pass-through entity must
reimburse the non-Federal entity for
its actual cash disbursements. Use of
the working capital advance method of
payment requires that the pass-
through entity provide timely advance
payments to any subrecipients in order
to meet the subrecipient’s actual cash
disbursements. The working capital ad-
vance method of payment must not be
used by the pass-through entity if the
reason for using this method is the un-
willingness or inability of the pass-
through entity to provide timely ad-
vance payments to the subrecipient to
meet the subrecipient’s actual cash dis-
bursements.
(5) To the extent available, the non-
Federal entity must disburse funds
available from program income (in-
cluding repayments to a revolving
fund), rebates, refunds, contract settle-
ments, audit recoveries, and interest
earned on such funds before requesting
additional cash payments.
(6) Unless otherwise required by Fed-
eral statutes, payments for allowable
costs by non-Federal entities must not
be withheld at any time during the pe-
riod of performance unless the condi-
tions of § 200.208, subpart D of this part,
including § 200.339, or one or more of
the following applies:
(i) The non-Federal entity has failed
to comply with the project objectives,
Federal statutes, regulations, or the
terms and conditions of the Federal
award.
(ii) The non-Federal entity is delin-
quent in a debt to the United States as
defined in OMB Circular A–129, ‘‘Poli-
cies for Federal Credit Programs and
Non-Tax Receivables.’’ Under such con-
ditions, the Federal awarding agency
or pass-through entity may, upon rea-
sonable notice, inform the non-Federal
entity that payments must not be
made for financial obligations incurred
after a specified date until the condi-
tions are corrected or the indebtedness
to the Federal Government is liq-
uidated.
(iii) A payment withheld for failure
to comply with Federal award condi-
tions, but without suspension of the
Federal award, must be released to the
non-Federal entity upon subsequent
compliance. When a Federal award is
suspended, payment adjustments will
be made in accordance with § 200.343.
(iv) A payment must not be made to
a non-Federal entity for amounts that
are withheld by the non-Federal entity
from payment to contractors to assure
satisfactory completion of work. A
payment must be made when the non-
Federal entity actually disburses the
withheld funds to the contractors or to
escrow accounts established to assure
satisfactory completion of work.
(7) Standards governing the use of
banks and other institutions as deposi-
tories of advance payments under Fed-
eral awards are as follows.
(i) The Federal awarding agency and
pass-through entity must not require
separate depository accounts for funds
provided to a non-Federal entity or es-
tablish any eligibility requirements for
depositories for funds provided to the
non-Federal entity. However, the non-
Federal entity must be able to account
for funds received, obligated, and ex-
pended.
(ii) Advance payments of Federal
funds must be deposited and main-
tained in insured accounts whenever
possible.
(8) The non-Federal entity must
maintain advance payments of Federal
awards in interest-bearing accounts,
unless the following apply:
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OMB Guidance § 200.305
(i) The non-Federal entity receives
less than $250,000 in Federal awards per
year.
(ii) The best reasonably available in-
terest-bearing account would not be ex-
pected to earn interest in excess of $500
per year on Federal cash balances.
(iii) 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.
(iv) A foreign government or banking
system prohibits or precludes interest-
bearing accounts.
(9) Interest earned amounts up to $500
per year may be retained by the non-
Federal entity for administrative ex-
pense. Any additional interest earned
on Federal advance payments deposited
in interest-bearing accounts must be
remitted annually to the Department
of Health and Human Services Pay-
ment Management System (PMS)
through an electronic medium using ei-
ther Automated Clearing House (ACH)
network or a Fedwire Funds Service
payment.
(i) For returning interest on Federal
awards paid through PMS, the refund
should:
(A) Provide an explanation stating
that the refund is for interest;
(B) List the PMS Payee Account
Number(s) (PANs);
(C) List the Federal award number(s)
for which the interest was earned; and
(D) Make returns payable to: Depart-
ment of Health and Human Services.
(ii) For returning interest on Federal
awards not paid through PMS, the re-
fund should:
(A) Provide an explanation stating
that the refund is for interest;
(B) Include the name of the awarding
agency;
(C) List the Federal award number(s)
for which the interest was earned; and
(D) Make returns payable to: Depart-
ment of Health and Human Services.
(10) Funds, principal, and excess cash
returns must be directed to the origi-
nal Federal agency payment system.
The non-Federal entity should review
instructions from the original Federal
agency payment system. Returns
should include the following informa-
tion:
(i) Payee Account Number (PAN), if
the payment originated from PMS, or
Agency information to indicate whom
to credit the funding if the payment
originated from ASAP, NSF, or an-
other Federal agency payment system.
(ii) PMS document number and sub-
account(s), if the payment originated
from PMS, or relevant account num-
bers if the payment originated from an-
other Federal agency payment system.
(iii) The reason for the return ( e.g.,
excess cash, funds not spent, interest,
part interest part other, etc.)
(11) When returning funds or interest
to PMS you must include the following
as applicable:
(i) For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit Gate-
way—ACH Receiver St. Paul, MN
(ii) For Fedwire Returns
1:
Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal Re-
serve Bank Treas NYC/Funds Trans-
fer Division New York, NY
1 Please note that the organization
initiating payment is likely to incur a
charge from their Financial Institution
for this type of payment.
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve
Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street,
New York, NY 10013 USA
Payment Details (Line 70): Agency Lo-
cator Code (ALC): 75010501
Name (abbreviated when possible) and
ALC Agency POC
(iv) For recipients that do not have
electronic remittance capability,
please make check
2 payable to: ‘‘The
Department of Health and Human
Services.’’
Mail Check to Treasury approved
lockbox:
HHS Program Support Center, P.O.
Box 530231, Atlanta, GA 30353–0231
2 Please allow 4–6 weeks for proc-
essing of a payment by check to be ap-
plied to the appropriate PMS account. VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00139 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005Page 185 of 321
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2 CFR Ch. II (1–1–21 Edition) § 200.306
(v) Questions can be directed to PMS
at 877–614–5533 or
[email protected].
§ 200.306 Cost sharing or matching.
(a) Under Federal research proposals,
voluntary committed cost sharing is
not expected. It cannot be used as a
factor during the merit review of appli-
cations or proposals, but may be con-
sidered if it is both in accordance with
Federal awarding agency regulations
and specified in a notice of funding op-
portunity. Criteria for considering vol-
untary committed cost sharing and
any other program policy factors that
may be used to determine who may re-
ceive a Federal award must be explic-
itly described in the notice of funding
opportunity. See also §§ 200.414 and
200.204 and appendix I to this part.
(b) For all Federal awards, any
shared costs or matching funds and all
contributions, including cash and
third-party in-kind contributions,
must be accepted as part of the non-
Federal entity’s cost sharing or match-
ing when such contributions meet all
of the following criteria:
(1) Are verifiable from the non-Fed-
eral entity’s records;
(2) Are not included as contributions
for any other Federal award;
(3) Are necessary and reasonable for
accomplishment of project or program
objectives;
(4) Are allowable under subpart E of
this part;
(5) Are not paid by the Federal Gov-
ernment under another Federal award,
except where the Federal statute au-
thorizing a program specifically pro-
vides that Federal funds made avail-
able for such program can be applied to
matching or cost sharing requirements
of other Federal programs;
(6) Are provided for in the approved
budget when required by the Federal
awarding agency; and
(7) Conform to other provisions of
this part, as applicable.
(c) Unrecovered indirect costs, in-
cluding indirect costs on cost sharing
or matching may be included as part of
cost sharing or matching only with the
prior approval of the Federal awarding
agency. Unrecovered indirect cost
means the difference between the
amount charged to the Federal award
and the amount which could have been
charged to the Federal award under the
non-Federal entity’s approved nego-
tiated indirect cost rate.
(d) Values for non-Federal entity
contributions of services and property
must be established in accordance with
the cost principles in subpart E of this
part. If a Federal awarding agency au-
thorizes the non-Federal entity to do-
nate buildings or land for construction/
facilities acquisition projects or long-
term use, the value of the donated
property for cost sharing or matching
must be the lesser of paragraph (d)(1)
or (2) of this section.
(1) The value of the remaining life of
the property recorded in the non-Fed-
eral entity’s accounting records at the
time of donation.
(2) The current fair market value.
However, when there is sufficient jus-
tification, the Federal awarding agen-
cy may approve the use of the current
fair market value of the donated prop-
erty, even if it exceeds the value de-
scribed in paragraph (d)(1) of this sec-
tion at the time of donation.
(e) Volunteer services furnished by
third-party 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 third-party volunteer serv-
ices must be consistent with those paid
for similar work by the non-Federal en-
tity. In those instances in which the
required skills are not found in the
non-Federal entity, rates must be con-
sistent with those paid for similar
work in the labor market in which the
non-Federal entity competes for the
kind of services involved. In either
case, paid fringe benefits that are rea-
sonable, necessary, allocable, and oth-
erwise allowable may be included in
the valuation.
(f) When a third-party organization
furnishes the services of an employee,
these services must be valued at the
employee’s regular rate of pay plus an
amount of fringe benefits that is rea-
sonable, necessary, allocable, and oth-
erwise allowable, and indirect costs at
either the third-party organization’s
approved federally-negotiated indirect
cost rate or, a rate in accordance with
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§ 200.414(d) provided these services em-
ploy the same skill(s) for which the
employee is normally paid. Where do-
nated services are treated as indirect
costs, indirect cost rates will separate
the value of the donated services so
that reimbursement for the donated
services will not be made.
(g) Donated property from third par-
ties may include such items as equip-
ment, office supplies, laboratory sup-
plies, or workshop and classroom sup-
plies. Value assessed to donated prop-
erty included in the cost sharing or
matching share must not exceed the
fair market value of the property at
the time of the donation.
(h) The method used for determining
cost sharing or matching for third-
party-donated equipment, buildings
and land for which title passes to the
non-Federal entity may differ accord-
ing to the purpose of the Federal
award, if paragraph (h)(1) or (2) of this
section applies.
(1) If the purpose of the Federal
award is to assist the non-Federal enti-
ty in the acquisition of equipment,
buildings or land, the aggregate value
of the donated property may be
claimed as cost sharing or matching.
(2) If the purpose of the Federal
award is to support activities that re-
quire the use of equipment, buildings
or land, normally only depreciation
charges for equipment and buildings
may be made. However, the fair market
value of equipment or other capital as-
sets and fair rental charges for land
may be allowed, provided that the Fed-
eral awarding agency has approved the
charges. See also § 200.420.
(i) The value of donated property
must be determined in accordance with
the usual accounting policies of the
non-Federal entity, with the following
qualifications:
(1) The value of donated land and
buildings must not exceed its fair mar-
ket value at the time of donation to
the non-Federal entity as established
by an independent appraiser ( e.g., cer-
tified real property appraiser or Gen-
eral Services Administration rep-
resentative) and certified by a respon-
sible official of the non-Federal entity
as required by the Uniform Relocation
Assistance and Real Property Acquisi-
tion Policies Act of 1970, as amended,
(42 U.S.C. 4601–4655) (Uniform Act) ex-
cept as provided in the implementing
regulations at 49 CFR part 24, ‘‘Uni-
form Relocation Assistance And Real
Property Acquisition For Federal And
Federally-Assisted Programs’’.
(2) The value of donated equipment
must not exceed the fair market value
of equipment of the same age and con-
dition at the time of donation.
(3) The value of donated space must
not exceed the fair rental value of com-
parable space as established by an inde-
pendent appraisal of comparable space
and facilities in a privately-owned
building in the same locality.
(4) The value of loaned equipment
must not exceed its fair rental value.
(j) For third-party in-kind contribu-
tions, the fair market value of goods
and services must be documented and
to the extent feasible supported by the
same methods used internally by the
non-Federal entity.
(k) For IHEs, see also OMB memo-
randum M–01–06, dated January 5, 2001,
Clarification of OMB A–21 Treatment
of Voluntary Uncommitted Cost Shar-
ing and Tuition Remission Costs.
§ 200.307 Program income.
(a) General. Non-Federal entities are
encouraged to earn income to defray
program costs where appropriate.
(b) Cost of generating program income.
If authorized by Federal regulations or
the Federal award, costs incidental to
the generation of program income may
be deducted from gross income to de-
termine program income, provided
these costs have not been charged to
the Federal award.
(c) Governmental revenues. Taxes, spe-
cial assessments, levies, fines, and
other such revenues raised by a non-
Federal entity are not program income
unless the revenues are specifically
identified in the Federal award or Fed-
eral awarding agency regulations as
program income.
(d) Property. Proceeds from the sale
of real property, equipment, or supplies
are not program income; such proceeds
will be handled in accordance with the
requirements of the Property Stand-
ards §§ 200.311, 200.313, and 200.314, or as
specifically identified in Federal stat-
utes, regulations, or the terms and con-
ditions of the Federal award.
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2 CFR Ch. II (1–1–21 Edition) § 200.308
(e) Use of program income. If the Fed-
eral awarding agency does not specify
in its regulations or the terms and con-
ditions of the Federal award, or give
prior approval for how program income
is to be used, paragraph (e)(1) of this
section must apply. For Federal awards
made to IHEs and nonprofit research
institutions, if the Federal awarding
agency does not specify in its regula-
tions or the terms and conditions of
the Federal award how program income
is to be used, paragraph (e)(2) of this
section must apply. In specifying alter-
natives to paragraphs (e)(1) and (2) of
this section, the Federal awarding
agency may distinguish between in-
come earned by the recipient and in-
come earned by subrecipients and be-
tween the sources, kinds, or amounts
of income. When the Federal awarding
agency authorizes the approaches in
paragraphs (e)(2) and (3) of this section,
program income in excess of any
amounts specified must also be de-
ducted from expenditures.
(1) Deduction. Ordinarily program in-
come must be deducted from total al-
lowable costs to determine the net al-
lowable costs. Program income must be
used for current costs unless the Fed-
eral awarding agency authorizes other-
wise. Program income that the non-
Federal entity did not anticipate at the
time of the Federal award must be used
to reduce the Federal award and non-
Federal entity contributions rather
than to increase the funds committed
to the project.
(2) Addition. With prior approval of
the Federal awarding agency (except
for IHEs and nonprofit research insti-
tutions, as described in this paragraph
(e)) program income may be added to
the Federal award by the Federal agen-
cy and the non-Federal entity. The pro-
gram income must be used for the pur-
poses and under the conditions of the
Federal award.
(3) Cost sharing or matching. With
prior approval of the Federal awarding
agency, program income may be used
to meet the cost sharing or matching
requirement of the Federal award. The
amount of the Federal award remains
the same.
(f) Income after the period of perform-
ance. There are no Federal require-
ments governing the disposition of in-
come earned after the end of the period
of performance for the Federal award,
unless the Federal awarding agency
regulations or the terms and condi-
tions of the Federal award provide oth-
erwise. The Federal awarding agency
may negotiate agreements with recipi-
ents regarding appropriate uses of in-
come earned after the period of per-
formance as part of the grant closeout
process. See also § 200.344.
(g) License fees and royalties. Unless
the Federal statute, regulations, or
terms and conditions for the Federal
award provide otherwise, the non-Fed-
eral entity is not accountable to the
Federal awarding agency with respect
to program income earned from license
fees and royalties for copyrighted ma-
terial, patents, patent applications,
trademarks, and inventions made
under a Federal award to which 37 CFR
part 401 is applicable.
§ 200.308 Revision of budget and pro-
gram plans.
(a) The approved budget for the Fed-
eral award summarizes the financial
aspects of the project or program as ap-
proved during the Federal award proc-
ess. It may include either the Federal
and non-Federal share (see definition
for Federal share in § 200.1) or only the
Federal share, depending upon Federal
awarding agency requirements. The
budget and program plans include con-
siderations for performance and pro-
gram evaluation purposes whenever re-
quired in accordance with the terms
and conditions of the award.
(b) Recipients are required to report
deviations from budget or project scope
or objective, and request prior approv-
als from Federal awarding agencies for
budget and program plan revisions, in
accordance with this section.
(c) For non-construction Federal
awards, recipients must request prior
approvals from Federal awarding agen-
cies for the following program or budg-
et-related reasons:
(1) Change in the scope or the objec-
tive 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 the Federal
award.
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OMB Guidance § 200.308
(3) The disengagement from the
project 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 inclusion, unless waived by
the Federal awarding agency, of costs
that require prior approval in accord-
ance with subpart E of this part as ap-
plicable.
(5) The transfer of funds budgeted for
participant support costs to other cat-
egories of expense.
(6) Unless described in the applica-
tion and funded in the approved Fed-
eral awards, the subawarding, transfer-
ring or contracting out of any work
under a Federal award, including fixed
amount subawards as described in
§ 200.333. This provision does not apply
to the acquisition of supplies, material,
equipment or general support services.
(7) Changes in the approved cost-
sharing or matching provided by the
non-Federal entity.
(8) The need arises for additional
Federal funds to complete the project.
(d) No other prior approval require-
ments for specific items may be im-
posed unless an exception has been ap-
proved by OMB. See also §§ 200.102 and
200.407.
(e) Except for requirements listed in
paragraphs (c)(1) through (8) of this
section, the Federal awarding agency is
authorized, at its option, to waive
other cost-related and administrative
prior written approvals contained in
subparts D and E of this part. Such
waivers may include authorizing re-
cipients to do any one or more of the
following:
(1) Incur project costs 90 calendar
days before the Federal awarding agen-
cy makes the Federal award. Expenses
more than 90 calendar days pre-award
require prior approval of the Federal
awarding agency. All costs incurred be-
fore the Federal awarding agency
makes the Federal award are at the re-
cipient’s risk (i.e., the Federal award-
ing agency is not required to reimburse
such costs if for any reason the recipi-
ent does not receive a Federal award or
if the Federal award is less than antici-
pated and inadequate to cover such
costs). See also § 200.458.
(2) Initiate a one-time extension of
the period of performance by up to 12
months unless one or more of the con-
ditions outlined in paragraphs (e)(2)(i)
through (iii) of this section apply. For
one-time extensions, the recipient
must notify the Federal awarding
agency in writing with the supporting
reasons and revised period of perform-
ance at least 10 calendar days before
the end of the period of performance
specified in the Federal award. This
one-time extension must not be exer-
cised merely for the purpose of using
unobligated balances. Extensions re-
quire explicit prior Federal awarding
agency approval when:
(i) The terms and conditions of the
Federal 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 bal-
ances to subsequent budget periods.
(4) For Federal awards that support
research, unless the Federal awarding
agency provides otherwise in the Fed-
eral award or in the Federal awarding
agency’s regulations, the prior ap-
proval requirements described in this
paragraph (e) are automatically waived
(i.e., recipients need not obtain such
prior approvals) unless one of the con-
ditions 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 Federal awards in which the Fed-
eral share of the project exceeds the
simplified acquisition threshold and
the cumulative amount of such trans-
fers exceeds or is expected to exceed 10
percent of the total budget as last ap-
proved by the Federal awarding agen-
cy. The Federal awarding agency can-
not permit a transfer that would cause
any Federal appropriation to be used
for purposes other than those con-
sistent with the appropriation.
(g) All other changes to non-con-
struction budgets, except for the
changes described in paragraph (c) of
this section, do not require prior ap-
proval (see also § 200.407).
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2 CFR Ch. II (1–1–21 Edition) § 200.309
(h) For construction Federal awards,
the recipient must request prior writ-
ten approval promptly from the Fed-
eral awarding agency for budget revi-
sions whenever paragraph (h)(1), (2), or
(3) of this section applies:
(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 in-
volves specific costs for which prior
written approval requirements may be
imposed consistent with applicable
OMB cost principles listed in subpart
E.
(4) No other prior approval require-
ments for budget revisions may be im-
posed unless an exception has been ap-
proved by OMB.
(5) When a Federal awarding agency
makes a Federal award that provides
support for construction and non-con-
struction work, the Federal awarding
agency may require the recipient to ob-
tain prior approval from the Federal
awarding agency before making any
fund or budget transfers between the
two types of work supported.
(i) When requesting approval for
budget revisions, the recipient must
use the same format for budget infor-
mation that was used in the applica-
tion, unless the Federal awarding agen-
cy indicates a letter of request suffices.
(j) Within 30 calendar days from the
date of receipt of the request for budg-
et revisions, the Federal awarding
agency must review the request and
notify the recipient whether the budget
revisions have been approved. If the re-
vision is still under consideration at
the end of 30 calendar days, the Federal
awarding agency must inform the re-
cipient in writing of the date when the
recipient may expect the decision.
§ 200.309 Modifications to Period of
Performance.
If a Federal awarding agency or pass-
through entity approves an extension,
or if a recipient extends under
§ 200.308(e)(2), the Period of Perform-
ance will be amended to end at the
completion of the extension. If a termi-
nation occurs, the Period of Perform-
ance will be amended to end upon the
effective date of termination. If a re-
newal award is issued, a distinct Period
of Performance will begin.
P
ROPERTY STANDARDS
§ 200.310 Insurance coverage.
The non-Federal entity must, at a
minimum, provide the equivalent in-
surance coverage for real property and
equipment acquired or improved with
Federal funds as provided to property
owned by the non-Federal entity. Fed-
erally-owned property need not be in-
sured unless required by the terms and
conditions of the Federal award.
§ 200.311 Real property.
(a) Title. Subject to the requirements
and conditions set forth in this section,
title to real property acquired or im-
proved under a Federal award will vest
upon acquisition in the non-Federal en-
tity.
(b) Use. Except as otherwise provided
by Federal statutes or by the Federal
awarding agency, real property will be
used for the originally authorized pur-
pose as long as needed for that purpose,
during which time the non-Federal en-
tity must not dispose of or encumber
its title or other interests.
(c) Disposition. When real property is
no longer needed for the originally au-
thorized purpose, the non-Federal enti-
ty must obtain disposition instructions
from the Federal awarding agency or
pass-through entity. The instructions
must provide for one of the following
alternatives:
(1) Retain title after compensating
the Federal awarding agency. The
amount paid to the Federal awarding
agency will be computed by applying
the Federal awarding agency’s percent-
age of participation in the cost of the
original purchase (and costs of any im-
provements) to the fair market value
of the property. However, in those situ-
ations where the non-Federal entity is
disposing of real property acquired or
improved with a Federal award and ac-
quiring replacement real property
under the same Federal award, the net
proceeds from the disposition may be
used as an offset to the cost of the re-
placement property.
(2) Sell the property and compensate
the Federal awarding agency. The
amount due to the Federal awarding
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OMB Guidance § 200.313
agency will be calculated by applying
the Federal awarding agency’s percent-
age of participation in the cost of the
original purchase (and cost of any im-
provements) to the proceeds of the sale
after deduction of any actual and rea-
sonable selling and fixing-up expenses.
If the Federal award has not been
closed out, the net proceeds from sale
may be offset against the original cost
of the property. When the non-Federal
entity is directed to sell property, sales
procedures must be followed that pro-
vide for competition to the extent
practicable and result in the highest
possible return.
(3) Transfer title to the Federal
awarding agency or to a third party
designated/approved by the Federal
awarding agency. The non-Federal en-
tity is entitled to be paid an amount
calculated by applying the non-Federal
entity’s percentage of participation in
the purchase of the real property (and
cost of any improvements) to the cur-
rent fair market value of the property.
§ 200.312 Federally-owned and exempt
property.
(a) Title to federally-owned property
remains vested in the Federal Govern-
ment. The non-Federal entity must
submit annually an inventory listing of
federally-owned property in its custody
to the Federal awarding agency. Upon
completion of the Federal award or
when the property is no longer needed,
the non-Federal entity must report the
property to the Federal awarding agen-
cy for further Federal agency utiliza-
tion.
(b) If the Federal awarding agency
has no further need for the property, it
must declare the property excess and
report it for disposal to the appropriate
Federal disposal authority, unless the
Federal awarding agency has statutory
authority to dispose of the property by
alternative methods ( e.g., the author-
ity provided by the Federal Technology
Transfer Act (15 U.S.C. 3710 (i)) to do-
nate research equipment to edu-
cational and nonprofit organizations in
accordance with Executive Order 12999,
‘‘Educational Technology: Ensuring
Opportunity for All Children in the
Next Century.’’). The Federal awarding
agency must issue appropriate instruc-
tions to the non-Federal entity.
(c) Exempt property means property
acquired under a Federal award where
the Federal awarding agency has cho-
sen to vest title to the property to the
non-Federal entity without further re-
sponsibility to the Federal Govern-
ment, based upon the explicit terms
and conditions of the Federal award.
The Federal awarding agency may ex-
ercise this option when statutory au-
thority exists. Absent statutory au-
thority and specific terms and condi-
tions of the Federal award, title to ex-
empt property acquired under the Fed-
eral award remains with the Federal
Government.
§ 200.313 Equipment.
See also § 200.439.
(a) Title. Subject to the requirements
and conditions set forth in this section,
title to equipment acquired under a
Federal award will vest upon acquisi-
tion in the non-Federal entity. Unless
a statute specifically authorizes the
Federal agency to vest title in the non-
Federal entity without further respon-
sibility to the Federal Government,
and the Federal agency elects to do so,
the title must be a conditional title.
Title must vest in the non-Federal en-
tity subject to the following condi-
tions:
(1) Use the equipment for the author-
ized purposes of the project during the
period of performance, or until the
property is no longer needed for the
purposes of the project.
(2) Not encumber the property with-
out approval of the Federal awarding
agency or pass-through entity.
(3) Use and dispose of the property in
accordance with paragraphs (b), (c),
and (e) of this section.
(b) General. A state must use, manage
and dispose of equipment acquired
under a Federal award by the state in
accordance with state laws and proce-
dures. Other non-Federal entities must
follow paragraphs (c) through (e) of
this section.
(c) Use. (1) Equipment must be used
by the non-Federal entity in the pro-
gram or project for which it was ac-
quired as long as needed, whether or
not the project or program continues
to be supported by the Federal award,
and the non-Federal entity must not
encumber the property without prior
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2 CFR Ch. II (1–1–21 Edition) § 200.313
approval of the Federal awarding agen-
cy. The Federal awarding agency may
require the submission of the applica-
ble common form for equipment. When
no longer needed for the original pro-
gram or project, the equipment may be
used in other activities supported by
the Federal awarding agency, in the
following order of priority:
(i) Activities under a Federal award
from the Federal awarding agency
which funded the original program or
project, then
(ii) Activities under Federal awards
from other Federal awarding agencies.
This includes consolidated equipment
for information technology systems.
(2) During the time that equipment is
used on the project or program for
which it was acquired, the non-Federal
entity must also make equipment
available for use on other projects or
programs currently or previously sup-
ported by the Federal Government,
provided that such use will not inter-
fere with the work on the projects or
program for which it was originally ac-
quired. First preference for other use
must be given to other programs or
projects supported by Federal awarding
agency that financed the equipment
and second preference must be given to
programs or projects under Federal
awards from other Federal awarding
agencies. Use for non-federally-funded
programs or projects is also permis-
sible. User fees should be considered if
appropriate.
(3) Notwithstanding the encourage-
ment in § 200.307 to earn program in-
come, the non-Federal entity must not
use equipment acquired with the Fed-
eral award to provide services for a fee
that is less than private companies
charge for equivalent services unless
specifically authorized by Federal stat-
ute for as long as the Federal Govern-
ment retains an interest in the equip-
ment.
(4) When acquiring replacement
equipment, the non-Federal entity 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.
(d) Management requirements. Proce-
dures for managing equipment (includ-
ing replacement equipment), whether
acquired in whole or in part under a
Federal award, until disposition takes
place will, as a minimum, meet the fol-
lowing requirements:
(1) Property records must be main-
tained that include a description of the
property, a serial number or other
identification number, the source of
funding for the property (including the
FAIN), who holds title, the acquisition
date, and cost of the property, percent-
age of Federal participation in the
project costs for the Federal award
under which the property was acquired,
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 prop-
erty must be taken and the results rec-
onciled with the property records at
least once every two years.
(3) A control system must be devel-
oped to ensure adequate safeguards to
prevent loss, damage, or theft of the
property. Any loss, damage, or theft
must be investigated.
(4) Adequate maintenance procedures
must be developed to keep the property
in good condition.
(5) If the non-Federal entity is au-
thorized or required to sell the prop-
erty, proper sales procedures must be
established to ensure the highest pos-
sible return.
(e) Disposition. When original or re-
placement equipment acquired under a
Federal award is no longer needed for
the original project or program or for
other activities currently or previously
supported by a Federal awarding agen-
cy, except as otherwise provided in
Federal statutes, regulations, or Fed-
eral awarding agency disposition in-
structions, the non-Federal entity
must request disposition instructions
from the Federal awarding agency if
required by the terms and conditions of
the Federal award. Disposition of the
equipment will be made as follows, in
accordance with Federal awarding
agency disposition instructions:
(1) Items of equipment with a current
per unit fair market value of $5,000 or
less may be retained, sold or otherwise
disposed of with no further responsi-
bility to the Federal awarding agency.
(2) Except as provided in § 200.312(b),
or if the Federal awarding agency fails
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OMB Guidance § 200.315
to provide requested disposition in-
structions within 120 days, items of
equipment with a current per-unit fair
market value in excess of $5,000 may be
retained by the non-Federal entity or
sold. The Federal awarding agency is
entitled to an amount calculated by
multiplying the current market value
or proceeds from sale by the Federal
awarding agency’s percentage of par-
ticipation in the cost of the original
purchase. If the equipment is sold, the
Federal awarding agency may permit
the non-Federal entity to deduct and
retain from the Federal share $500 or
ten percent of the proceeds, whichever
is less, for its selling and handling ex-
penses.
(3) The non-Federal entity may
transfer title to the property to the
Federal Government or to an eligible
third party provided that, in such
cases, the non-Federal entity must be
entitled to compensation for its attrib-
utable percentage of the current fair
market value of the property.
(4) In cases where a non-Federal enti-
ty fails to take appropriate disposition
actions, the Federal awarding agency
may direct the non-Federal entity to
take disposition actions.
§ 200.314 Supplies.
See also § 200.453.
(a) Title to supplies will vest in the
non-Federal entity upon acquisition. If
there is a residual inventory of unused
supplies exceeding $5,000 in total aggre-
gate value upon termination or com-
pletion of the project or program and
the supplies are not needed for any
other Federal award, the non-Federal
entity must retain the supplies for use
on other activities or sell them, but
must, in either case, compensate the
Federal Government for its share. The
amount of compensation must be com-
puted in the same manner as for equip-
ment. See § 200.313 (e)(2) for the calcula-
tion methodology.
(b) As long as the Federal Govern-
ment retains an interest in the sup-
plies, the non-Federal entity must not
use supplies acquired under a Federal
award to provide services to other or-
ganizations for a fee that is less than
private companies charge for equiva-
lent services, unless specifically au-
thorized by Federal statute.
§ 200.315 Intangible property.
(a) Title to intangible property (see
definition for Intangible property in
§ 200.1) acquired under a Federal award
vests upon acquisition in the non-Fed-
eral entity. The non-Federal entity
must use that property for the origi-
nally-authorized purpose, and must not
encumber the property without ap-
proval of the Federal awarding agency.
When no longer needed for the origi-
nally authorized purpose, disposition of
the intangible property must occur in
accordance with the provisions in
§ 200.313(e).
(b) The non-Federal entity may copy-
right any work that is subject to copy-
right and was developed, or for which
ownership was acquired, under a Fed-
eral award. The Federal awarding agen-
cy reserves a royalty-free, nonexclu-
sive and irrevocable right to reproduce,
publish, or otherwise use the work for
Federal purposes, and to authorize oth-
ers to do so.
(c) The non-Federal entity is subject
to applicable regulations governing
patents and inventions, including gov-
ernmentwide 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
Awards, Contracts and Cooperative
Agreements.’’
(d) The Federal Government has the
right to:
(1) Obtain, reproduce, publish, or oth-
erwise use the data produced under a
Federal award; and
(2) Authorize others to receive, repro-
duce, publish, or otherwise use such
data for Federal purposes.
(e)(1) In response to a Freedom of In-
formation Act (FOIA) request for re-
search data relating to published re-
search findings produced under a Fed-
eral award that were used by the Fed-
eral Government in developing an
agency action that has the force and
effect of law, the Federal awarding
agency must request, and the non-Fed-
eral entity must provide, within a rea-
sonable time, the research data so that
they can be made available to the pub-
lic through the procedures established
under the FOIA. If the Federal award-
ing agency obtains the research data
solely in response to a FOIA request,
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2 CFR Ch. II (1–1–21 Edition) § 200.316
the Federal awarding 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
Federal agency and the non-Federal en-
tity. This fee is in addition to any fees
the Federal awarding agency may as-
sess under the FOIA (5 U.S.C.
552(a)(4)(A)).
(2) Published research findings means
when:
(i) Research findings are published in
a peer-reviewed scientific or technical
journal; or
(ii) A Federal agency publicly and of-
ficially cites the research findings in
support of an agency action that has
the force and effect of law. ‘‘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 agen-
cy action that has the force and effect
of law.
(3) Research data means the recorded
factual material commonly accepted in
the scientific community as necessary
to validate research findings, but not
any of the following: Preliminary anal-
yses, drafts of scientific papers, plans
for future research, peer reviews, or
communications with colleagues. This
‘‘recorded’’ material excludes physical
objects ( e.g., laboratory samples). Re-
search data also do not include:
(i) Trade secrets, commercial infor-
mation, materials necessary to be held
confidential by a researcher until they
are published, or similar information
which is protected under law; and
(ii) Personnel and medical informa-
tion and similar information the dis-
closure of which would constitute a
clearly unwarranted invasion of per-
sonal privacy, such as information that
could be used to identify a particular
person in a research study.
§ 200.316 Property trust relationship.
Real property, equipment, and intan-
gible property, that are acquired or im-
proved with a Federal award must be
held in trust by the non-Federal entity
as trustee for the beneficiaries of the
project or program under which the
property was acquired or improved.
The Federal awarding agency may re-
quire the non-Federal entity to record
liens or other appropriate notices of
record to indicate that personal or real
property has been acquired or improved
with a Federal award and that use and
disposition conditions apply to the
property.
Procurement Standards
§ 200.317 Procurements by states.
When procuring property and serv-
ices under a Federal award, a State
must follow the same policies and pro-
cedures it uses for procurements from
its non-Federal funds. The State will
comply with §§ 200.321, 200.322, and
200.323 and ensure that every purchase
order or other contract includes any
clauses required by § 200.327. All other
non-Federal entities, including sub-
recipients of a State, must follow the
procurement standards in §§ 200.318
through 200.327.
§ 200.318 General procurement stand-
ards.
(a) The non-Federal entity must have
and use documented procurement pro-
cedures, consistent with State, local,
and tribal laws and regulations and the
standards of this section, for the acqui-
sition of property or services required
under a Federal award or subaward.
The non-Federal entity’s documented
procurement procedures must conform
to the procurement standards identi-
fied in §§ 200.317 through 200.327.
(b) Non-Federal entities must main-
tain oversight to ensure that contrac-
tors perform in accordance with the
terms, conditions, and specifications of
their contracts or purchase orders.
(c)(1) The non-Federal entity must
maintain written standards of conduct
covering conflicts of interest and gov-
erning the actions of its employees en-
gaged in the selection, award and ad-
ministration of contracts. No em-
ployee, officer, or agent may partici-
pate in the selection, award, or admin-
istration of a contract supported by a
Federal award if he or she has a real or
apparent conflict of interest. Such a
conflict of interest would arise when
the employee, officer, or agent, any
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member of his or her immediate fam-
ily, his or her partner, or an organiza-
tion which employs or is about to em-
ploy any of the parties indicated here-
in, has a financial or other interest in
or a tangible personal benefit from a
firm considered for a contract. The of-
ficers, employees, and agents of the
non-Federal entity may neither solicit
nor accept gratuities, favors, or any-
thing of monetary value from contrac-
tors or parties to subcontracts. How-
ever, non-Federal entities may set
standards for situations in which the
financial interest is not substantial or
the gift is an unsolicited item of nomi-
nal value. The standards of conduct
must provide for disciplinary actions
to be applied for violations of such
standards by officers, employees, or
agents of the non-Federal entity.
(2) If the non-Federal entity has a
parent, affiliate, or subsidiary organi-
zation that is not a State, local govern-
ment, or Indian tribe, the non-Federal
entity must also maintain written
standards of conduct covering organi-
zational conflicts of interest. Organiza-
tional conflicts of interest means that
because of relationships with a parent
company, affiliate, or subsidiary orga-
nization, the non-Federal entity is un-
able or appears to be unable to be im-
partial in conducting a procurement
action involving a related organiza-
tion.
(d) The non-Federal entity’s proce-
dures must avoid acquisition of unnec-
essary or duplicative items. Consider-
ation should be given to consolidating
or breaking out procurements to ob-
tain a more economical purchase.
Where appropriate, an analysis will be
made of lease versus purchase alter-
natives, and any other appropriate
analysis to determine the most eco-
nomical approach.
(e) To foster greater economy and ef-
ficiency, and in accordance with efforts
to promote cost-effective use of shared
services across the Federal Govern-
ment, the non-Federal entity is encour-
aged to enter into state and local inter-
governmental agreements or inter-en-
tity agreements where appropriate for
procurement or use of common or
shared goods and services. Competition
requirements will be met with applied
to documented procurement actions
using strategic sourcing, shared serv-
ices, and other similar procurement ar-
rangements.
(f) The non-Federal entity is encour-
aged to use Federal excess and surplus
property in lieu of purchasing new
equipment and property whenever such
use is feasible and reduces project
costs.
(g) The non-Federal entity is encour-
aged to use value engineering clauses
in contracts for construction projects
of sufficient size to offer reasonable op-
portunities for cost reductions. Value
engineering is a systematic and cre-
ative analysis of each contract item or
task to ensure that its essential func-
tion is provided at the overall lower
cost.
(h) The non-Federal entity must
award contracts only to responsible
contractors possessing the ability to
perform successfully under the terms
and conditions of a proposed procure-
ment. Consideration will be given to
such matters as contractor integrity,
compliance with public policy, record
of past performance, and financial and
technical resources. See also § 200.214.
(i) The non-Federal entity must
maintain records sufficient to detail
the history of procurement. These
records will include, but are not nec-
essarily limited to, the following: Ra-
tionale for the method of procurement,
selection of contract type, contractor
selection or rejection, and the basis for
the contract price.
(j)(1) The non-Federal entity may use
a time-and-materials type contract
only after a determination that no
other contract is suitable and if the
contract includes a ceiling price that
the contractor exceeds at its own risk.
Time-and-materials type contract
means a contract whose cost to a non-
Federal entity is the sum of:
(i) The actual cost of materials; and
(ii) Direct labor hours charged at
fixed hourly rates that reflect wages,
general and administrative expenses,
and profit.
(2) Since this formula generates an
open-ended contract price, a time-and-
materials contract provides no positive
profit incentive to the contractor for
cost control or labor efficiency. There-
fore, each contract must set a ceiling
price that the contractor exceeds at its
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2 CFR Ch. II (1–1–21 Edition) § 200.319
own risk. Further, the non-Federal en-
tity awarding such a contract must as-
sert a high degree of oversight in order
to obtain reasonable assurance that
the contractor is using efficient meth-
ods and effective cost controls.
(k) The non-Federal entity alone
must be responsible, in accordance
with good administrative practice and
sound business judgment, for the set-
tlement of all contractual and adminis-
trative issues arising out of procure-
ments. These issues include, but are
not limited to, source evaluation, pro-
tests, disputes, and claims. These
standards do not relieve the non-Fed-
eral entity of any contractual respon-
sibilities under its contracts. The Fed-
eral awarding agency will not sub-
stitute its judgment for that of the
non-Federal entity unless the matter is
primarily a Federal concern. Viola-
tions of law will be referred to the
local, state, or Federal authority hav-
ing proper jurisdiction.
§ 200.319 Competition.
(a) All procurement transactions for
the acquisition of property or services
required under a Federal award must
be conducted in a manner providing
full and open competition consistent
with the standards of this section and
§ 200.320.
(b) In order to ensure objective con-
tractor performance and eliminate un-
fair competitive advantage, contrac-
tors that develop or draft specifica-
tions, requirements, statements of
work, or invitations for bids or re-
quests for proposals must be excluded
from competing for such procurements.
Some of the situations considered to be
restrictive of competition include but
are not limited to:
(1) Placing unreasonable require-
ments on firms in order for them to
qualify to do business;
(2) Requiring unnecessary experience
and excessive bonding;
(3) Noncompetitive pricing practices
between firms or between affiliated
companies;
(4) Noncompetitive contracts to con-
sultants that are on retainer contracts;
(5) Organizational conflicts of inter-
est;
(6) Specifying only a ‘‘brand name’’
product instead of allowing ‘‘an equal’’
product to be offered and describing
the performance or other relevant re-
quirements of the procurement; and
(7) Any arbitrary action in the pro-
curement process.
(c) The non-Federal entity must con-
duct procurements in a manner that
prohibits the use of statutorily or ad-
ministratively imposed state, local, or
tribal geographical preferences in the
evaluation of bids or proposals, except
in those cases where applicable Federal
statutes expressly mandate or encour-
age geographic preference. Nothing in
this section preempts state licensing
laws. When contracting for architec-
tural and engineering (A/E) services,
geographic location may be a selection
criterion provided its application
leaves an appropriate number of quali-
fied firms, given the nature and size of
the project, to compete for the con-
tract.
(d) The non-Federal entity must have
written procedures for procurement
transactions. These procedures must
ensure that all solicitations:
(1) Incorporate a clear and accurate
description of the technical require-
ments for the material, product, or
service to be procured. Such descrip-
tion must not, in competitive procure-
ments, contain features which unduly
restrict competition. The description
may include a statement of the quali-
tative nature of the material, product
or service to be procured and, when
necessary, must set forth those min-
imum essential characteristics and
standards to which it must conform if
it is to satisfy its intended use. De-
tailed 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 equivalent’’ description may be used
as a means to define the performance
or other salient requirements of pro-
curement. The specific features of the
named brand which must be met by of-
fers must be clearly stated; and
(2) Identify all requirements which
the offerors must fulfill and all other
factors to be used in evaluating bids or
proposals.
(e) The non-Federal entity must en-
sure that all prequalified lists of per-
sons, firms, or products which are used
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OMB Guidance § 200.320
in acquiring goods and services are cur-
rent and include enough qualified
sources to ensure maximum open and
free competition. Also, the non-Federal
entity must not preclude potential bid-
ders from qualifying during the solici-
tation period.
(f) Noncompetitive procurements can
only be awarded in accordance with
§ 200.320(c).
§ 200.320 Methods of procurement to
be followed.
The non-Federal entity must have
and use documented procurement pro-
cedures, consistent with the standards
of this section and §§ 200.317, 200.318,
and 200.319 for any of the following
methods of procurement used for the
acquisition of property or services re-
quired under a Federal award or sub-
award.
(a) Informal procurement methods.
When the value of the procurement for
property or services under a Federal
award does not exceed the simplified ac-
quisition threshold (SAT), as defined in
§ 200.1, or a lower threshold established
by a non-Federal entity, formal pro-
curement methods are not required.
The non-Federal entity may use infor-
mal procurement methods to expedite
the completion of its transactions and
minimize the associated administra-
tive burden and cost. The informal
methods used for procurement of prop-
erty or services at or below the SAT in-
clude:
(1) Micro-purchases—(i) Distribution.
The acquisition of supplies or services,
the aggregate dollar amount of which
does not exceed the micro-purchase
threshold (See the definition of micro-
purchase in § 200.1). To the maximum
extent practicable, the non-Federal en-
tity should distribute micro-purchases
equitably among qualified suppliers.
(ii) Micro-purchase awards. Micro-pur-
chases may be awarded without solic-
iting competitive price or rate
quotations if the non-Federal entity
considers the price to be reasonable
based on research, experience, purchase
history or other information and docu-
ments it files accordingly. Purchase
cards can be used for micro-purchases
if procedures are documented and ap-
proved by the non-Federal entity.
(iii) Micro-purchase thresholds. The
non-Federal entity is responsible for
determining and documenting an ap-
propriate micro-purchase threshold
based on internal controls, an evalua-
tion of risk, and its documented pro-
curement procedures. The micro-pur-
chase threshold used by the non-Fed-
eral entity must be authorized or not
prohibited under State, local, or tribal
laws or regulations. Non-Federal enti-
ties may establish a threshold higher
than the Federal threshold established
in the Federal Acquisition Regulations
(FAR) in accordance with paragraphs
(a)(1)(iv) and (v) of this section.
(iv) Non-Federal entity increase to the
micro-purchase threshold up to $50,000.
Non-Federal entities may establish a
threshold higher than the micro-pur-
chase threshold identified in the FAR
in accordance with the requirements of
this section. The non-Federal entity
may self-certify a threshold up to
$50,000 on an annual basis and must
maintain documentation to be made
available to the Federal awarding
agency and auditors in accordance with
§ 200.334. The self-certification must in-
clude a justification, clear identifica-
tion of the threshold, and supporting
documentation of any of the following:
(A) A qualification as a low-risk
auditee, in accordance with the criteria
in § 200.520 for the most recent audit;
(B) An annual internal institutional
risk assessment to identify, mitigate,
and manage financial risks; or,
(C) For public institutions, a higher
threshold consistent with State law.
(v) Non-Federal entity increase to the
micro-purchase threshold over $50,000.
Micro-purchase thresholds higher than
$50,000 must be approved by the cog-
nizant agency for indirect costs. The
non-federal entity must submit a re-
quest with the requirements included
in paragraph (a)(1)(iv) of this section.
The increased threshold is valid until
there is a change in status in which the
justification was approved.
(2) Small purchases—(i) Small purchase
procedures. The acquisition of property
or services, the aggregate dollar
amount of which is higher than the
micro-purchase threshold but does not
exceed the simplified acquisition
threshold. If small purchase procedures
are used, price or rate quotations must
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2 CFR Ch. II (1–1–21 Edition) § 200.320
be obtained from an adequate number
of qualified sources as determined ap-
propriate by the non-Federal entity.
(ii) Simplified acquisition thresholds.
The non-Federal entity is responsible
for determining an appropriate sim-
plified acquisition threshold based on
internal controls, an evaluation of risk
and its documented procurement proce-
dures which must not exceed the
threshold established in the FAR.
When applicable, a lower simplified ac-
quisition threshold used by the non-
Federal entity must be authorized or
not prohibited under State, local, or
tribal laws or regulations.
(b) Formal procurement methods. When
the value of the procurement for prop-
erty or services under a Federal finan-
cial assistance award exceeds the SAT,
or a lower threshold established by a
non-Federal entity, formal procure-
ment methods are required. Formal
procurement methods require following
documented procedures. Formal pro-
curement methods also require public
advertising unless a non-competitive
procurement can be used in accordance
with § 200.319 or paragraph (c) of this
section. The following formal methods
of procurement are used for procure-
ment of property or services above the
simplified acquisition threshold or a
value below the simplified acquisition
threshold the non-Federal entity deter-
mines to be appropriate:
(1) Sealed bids. A procurement method
in which bids are publicly solicited and
a firm fixed-price contract (lump sum
or unit price) is awarded to the respon-
sible bidder whose bid, conforming with
all the material terms and conditions
of the invitation for bids, is the lowest
in price. The sealed bids method is the
preferred method for procuring con-
struction, if the conditions.
(i) In order for sealed bidding to be
feasible, the following conditions
should be present:
(A) A complete, adequate, and real-
istic specification or purchase descrip-
tion is available;
(B) Two or more responsible bidders
are willing and able to compete effec-
tively for the business; and
(C) The procurement lends itself to a
firm fixed price contract and the selec-
tion of the successful bidder can be
made principally on the basis of price.
(ii) If sealed bids are used, the fol-
lowing requirements apply:
(A) Bids must be solicited from an
adequate number of qualified sources,
providing them sufficient response
time prior to the date set for opening
the bids, for local, and tribal govern-
ments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which
will include any specifications and per-
tinent attachments, must define the
items or services in order for the bidder
to properly respond;
(C) All bids will be opened at the
time and place prescribed in the invita-
tion for bids, and for local and tribal
governments, the bids must be opened
publicly;
(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, transpor-
tation cost, and life cycle costs must
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.
(2) Proposals. A procurement method
in which either a fixed price or cost-re-
imbursement type contract is awarded.
Proposals are generally used when con-
ditions are not appropriate for the use
of sealed bids. They are awarded in ac-
cordance with the following require-
ments:
(i) Requests for proposals must be
publicized and identify all evaluation
factors and their relative importance.
Proposals must be solicited from an
adequate number of qualified offerors.
Any response to publicized requests for
proposals must be considered to the
maximum extent practical;
(ii) The non-Federal entity must
have a written method for conducting
technical evaluations of the proposals
received and making selections;
(iii) Contracts must be awarded to
the responsible offeror whose proposal
is most advantageous to the non-Fed-
eral entity, with price and other fac-
tors considered; and
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(iv) The non-Federal entity may use
competitive proposal procedures for
qualifications-based procurement of ar-
chitectural/engineering (A/E) profes-
sional services whereby offeror’s quali-
fications are evaluated and the most
qualified offeror is selected, subject to
negotiation of fair and reasonable com-
pensation. The method, where price is
not used as a selection factor, can only
be used in procurement of A/E profes-
sional services. It cannot be used to
purchase other types of services though
A/E firms that are a potential source to
perform the proposed effort.
(c) Noncompetitive procurement. There
are specific circumstances in which
noncompetitive procurement can be
used. Noncompetitive procurement can
only be awarded if one or more of the
following circumstances apply:
(1) The acquisition of property or
services, the aggregate dollar amount
of which does not exceed the micro-
purchase threshold (see paragraph
(a)(1) of this section);
(2) The item is available only from a
single source;
(3) The public exigency or emergency
for the requirement will not permit a
delay resulting from publicizing a com-
petitive solicitation;
(4) The Federal awarding agency or
pass-through entity expressly author-
izes a noncompetitive procurement in
response to a written request from the
non-Federal entity; or
(5) After solicitation of a number of
sources, competition is determined in-
adequate.
§ 200.321 Contracting with small and
minority businesses, women’s busi-
ness enterprises, and labor surplus
area firms.
(a) The non-Federal entity must take
all necessary affirmative steps to as-
sure that minority businesses, women’s
business enterprises, and labor surplus
area firms are used when possible.
(b) Affirmative steps must include:
(1) Placing qualified small and mi-
nority businesses and women’s business
enterprises on solicitation lists;
(2) Assuring that small and minority
businesses, and women’s business en-
terprises are solicited whenever they
are potential sources;
(3) Dividing total requirements, when
economically feasible, into smaller
tasks or quantities to permit max-
imum participation by small and mi-
nority businesses, and women’s busi-
ness enterprises;
(4) Establishing delivery schedules,
where the requirement permits, which
encourage participation by small and
minority businesses, and women’s busi-
ness enterprises;
(5) Using the services and assistance,
as appropriate, of such organizations as
the Small Business Administration and
the Minority Business Development
Agency of the Department of Com-
merce; and
(6) Requiring the prime contractor, if
subcontracts are to be let, to take the
affirmative steps listed in paragraphs
(b)(1) through (5) of this section.
§ 200.322 Domestic preferences for pro-
curements.
(a) As appropriate and to the extent
consistent with law, the non-Federal
entity should, to the greatest extent
practicable under a Federal award, pro-
vide a preference for the purchase, ac-
quisition, or use of goods, products, or
materials produced in the United
States (including but not limited to
iron, aluminum, steel, cement, and
other manufactured products). The re-
quirements of this section must be in-
cluded in all subawards including all
contracts and purchase orders for work
or products under this award.
(b) For purposes of this section:
(1) ‘‘Produced in the United States’’
means, for iron and steel products, that
all manufacturing processes, from the
initial melting stage through the appli-
cation of coatings, occurred in the
United States.
(2) ‘‘Manufactured products’’ means
items and construction materials com-
posed in whole or in part of non-ferrous
metals such as aluminum; plastics and
polymer-based products such as poly-
vinyl chloride pipe; aggregates such as
concrete; glass, including optical fiber;
and lumber.
§ 200.323 Procurement of recovered
materials.
A non-Federal entity that is a state
agency or agency of a political subdivi-
sion of a state and its contractors must
comply with section 6002 of the Solid
Waste Disposal Act, as amended by the
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Resource Conservation and Recovery
Act. The requirements of Section 6002
include procuring only items des-
ignated in guidelines of the Environ-
mental Protection Agency (EPA) at 40
CFR part 247 that contain the highest
percentage of recovered materials prac-
ticable, consistent with maintaining a
satisfactory level of competition,
where the purchase price of the item
exceeds $10,000 or the value of the
quantity acquired during the preceding
fiscal year exceeded $10,000; procuring
solid waste management services in a
manner that maximizes energy and re-
source recovery; and establishing an af-
firmative procurement program for
procurement of recovered materials
identified in the EPA guidelines.
§ 200.324 Contract cost and price.
(a) The non-Federal entity must per-
form a cost or price analysis in connec-
tion with every procurement action in
excess of the Simplified Acquisition
Threshold including contract modifica-
tions. The method and degree of anal-
ysis is dependent on the facts sur-
rounding the particular procurement
situation, but as a starting point, the
non-Federal entity must make inde-
pendent estimates before receiving bids
or proposals.
(b) The non-Federal entity must ne-
gotiate 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 prof-
it, consideration must be given to the
complexity of the work to be per-
formed, the risk borne by the con-
tractor, the contractor’s investment,
the amount of subcontracting, the
quality of its record of past perform-
ance, and industry profit rates in the
surrounding geographical area for
similar work.
(c) Costs or prices based on estimated
costs for contracts under the Federal
award are allowable only to the extent
that costs incurred or cost estimates
included in negotiated prices would be
allowable for the non-Federal entity
under subpart E of this part. The non-
Federal entity may reference its own
cost principles that comply with the
Federal cost principles.
(d) The cost plus a percentage of cost
and percentage of construction cost
methods of contracting must not be
used.
§ 200.325 Federal awarding agency or
pass-through entity review.
(a) The non-Federal entity must
make available, upon request of the
Federal awarding agency or pass-
through entity, technical specifica-
tions on proposed procurements where
the Federal awarding agency or pass-
through entity believes such review is
needed to ensure that the item or serv-
ice specified is the one being proposed
for acquisition. This review generally
will take place prior to the time the
specification is incorporated into a so-
licitation document. However, if the
non-Federal entity desires to have the
review accomplished after a solicita-
tion has been developed, the Federal
awarding agency or pass-through enti-
ty may still review the specifications,
with such review usually limited to the
technical aspects of the proposed pur-
chase.
(b) The non-Federal entity must
make available upon request, for the
Federal awarding agency or pass-
through entity pre-procurement re-
view, procurement documents, such as
requests for proposals or invitations
for bids, or independent cost estimates,
when:
(1) The non-Federal entity’s procure-
ment procedures or operation fails to
comply with the procurement stand-
ards in this part;
(2) 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;
(3) The procurement, which is ex-
pected to exceed the Simplified Acqui-
sition Threshold, specifies a ‘‘brand
name’’ product;
(4) The proposed contract 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
(5) A proposed contract modification
changes the scope of a contract or in-
creases the contract amount by more
than the Simplified Acquisition
Threshold.
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OMB Guidance § 200.329
(c) The non-Federal entity is exempt
from the pre-procurement review in
paragraph (b) of this section if the Fed-
eral awarding agency or pass-through
entity determines that its procurement
systems comply with the standards of
this part.
(1) The non-Federal entity may re-
quest that its procurement system be
reviewed by the Federal awarding
agency or pass-through entity to deter-
mine whether its system meets these
standards in order for its system to be
certified. Generally, these reviews
must occur where there is continuous
high-dollar funding, and third-party
contracts are awarded on a regular
basis;
(2) The non-Federal entity may self-
certify its procurement system. Such
self-certification must not limit the
Federal awarding agency’s right to sur-
vey the system. Under a self-certifi-
cation procedure, the Federal awarding
agency may rely on written assurances
from the non-Federal entity that it is
complying with these standards. The
non-Federal entity must cite specific
policies, procedures, regulations, or
standards as being in compliance with
these requirements and have its system
available for review.
§ 200.326 Bonding requirements.
For construction or facility improve-
ment contracts or subcontracts exceed-
ing the Simplified Acquisition Thresh-
old, the Federal awarding agency or
pass-through entity may accept the
bonding policy and requirements of the
non-Federal entity provided that the
Federal awarding agency or pass-
through entity has made a determina-
tion that the Federal interest is ade-
quately protected. If such a determina-
tion has not been made, the minimum
requirements must be as follows:
(a) A bid guarantee from each bidder
equivalent to five percent of the bid
price. The ‘‘bid guarantee’’ must con-
sist of a firm commitment such as a
bid bond, certified check, or other ne-
gotiable instrument accompanying a
bid as assurance that the bidder will,
upon acceptance of the bid, execute
such contractual documents as may be
required within the time specified.
(b) 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 requirements under such
contract.
(c) A payment bond on the part of the
contractor for 100 percent of the con-
tract 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 ma-
terial in the execution of the work pro-
vided for in the contract.
§ 200.327 Contract provisions.
The non-Federal entity’s contracts
must contain the applicable provisions
described in appendix II to this part.
P
ERFORMANCE AND FINANCIAL
MONITORING AND REPORTING
§ 200.328 Financial reporting.
Unless otherwise approved by OMB,
the Federal awarding agency must so-
licit only the OMB-approved govern-
mentwide data elements for collection
of financial information (at time of
publication the Federal Financial Re-
port or such future, OMB-approved,
governmentwide data elements avail-
able from the OMB-designated stand-
ards lead. This information must be
collected with the frequency required
by the terms and conditions of the Fed-
eral award, but no less frequently than
annually nor more frequently than
quarterly except in unusual cir-
cumstances, for example where more
frequent reporting is necessary for the
effective monitoring of the Federal
award or could significantly affect pro-
gram outcomes, and preferably in co-
ordination with performance reporting.
The Federal awarding agency must use
OMB-approved common information
collections, as applicable, when pro-
viding financial and performance re-
porting information.
§ 200.329 Monitoring and reporting
program performance.
(a) Monitoring by the non-Federal enti-
ty. The non-Federal entity is respon-
sible for oversight of the operations of
the Federal award supported activities.
The non-Federal entity must monitor
its activities under Federal awards to
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assure compliance with applicable Fed-
eral requirements and performance ex-
pectations are being achieved. Moni-
toring by the non-Federal entity must
cover each program, function or activ-
ity. See also § 200.332.
(b) Reporting program performance.
The Federal awarding agency must use
OMB-approved common information
collections, as applicable, when pro-
viding financial and performance re-
porting information. As appropriate
and in accordance with above men-
tioned information collections, the
Federal awarding agency must require
the recipient to relate financial data
and accomplishments to performance
goals and objectives of the Federal
award. Also, in accordance with above
mentioned common information collec-
tions, and when required by the terms
and conditions of the Federal award,
recipients must provide cost informa-
tion to demonstrate cost effective
practices (e.g., through unit cost data).
In some instances ( e.g., discretionary
research awards), this will be limited
to the requirement to submit technical
performance reports (to be evaluated in
accordance with Federal awarding
agency policy). Reporting require-
ments must be clearly articulated such
that, where appropriate, performance
during the execution of the Federal
award has a standard against which
non-Federal entity performance can be
measured.
(c) Non-construction performance re-
ports. The Federal awarding agency
must use standard, governmentwide
OMB-approved data elements for col-
lection of performance information in-
cluding performance progress reports,
Research Performance Progress Re-
ports.
(1) The non-Federal entity must sub-
mit performance reports at the inter-
val required by the Federal awarding
agency or pass-through entity to best
inform improvements in program out-
comes and productivity. Intervals must
be no less frequent than annually nor
more frequent than quarterly except in
unusual circumstances, for example
where more frequent reporting is nec-
essary for the effective monitoring of
the Federal award or could signifi-
cantly affect program outcomes. Re-
ports submitted annually by the non-
Federal entity and/or pass-through en-
tity must be due no later than 90 cal-
endar days after the reporting period.
Reports submitted quarterly or semi-
annually must be due no later than 30
calendar days after the reporting pe-
riod. Alternatively, the Federal award-
ing agency or pass-through entity may
require annual reports before the anni-
versary dates of multiple year Federal
awards. The final performance report
submitted by the non-Federal entity
and/or pass-through entity must be due
no later than 120 calendar days after
the period of performance end date. A
subrecipient must submit to the pass-
through entity, no later than 90 cal-
endar days after the period of perform-
ance end date, all final performance re-
ports as required by the terms and con-
ditions of the Federal award. See also
§ 200.344. If a justified request is sub-
mitted by a non-Federal entity, the
Federal agency may extend the due
date for any performance report.
(2) As appropriate in accordance with
above mentioned performance report-
ing, these reports will contain, for each
Federal award, brief information on
the following unless other data ele-
ments are approved by OMB in the
agency information collection request:
(i) A comparison of actual accom-
plishments to the objectives of the
Federal award established for the pe-
riod. Where the accomplishments of
the Federal award can be quantified, a
computation of the cost (for example,
related to units of accomplishment)
may be required if that information
will be useful. Where performance
trend data and analysis would be in-
formative to the Federal awarding
agency program, the Federal awarding
agency should include this as a per-
formance reporting requirement.
(ii) The reasons why established
goals were not met, if appropriate.
(iii) Additional pertinent information
including, when appropriate, analysis
and explanation of cost overruns or
high unit costs.
(d) Construction performance reports.
For the most part, onsite technical in-
spections and certified percentage of
completion data are relied on heavily
by Federal awarding agencies and pass-
through entities to monitor progress
under Federal awards and subawards
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OMB Guidance § 200.331
for construction. The Federal awarding
agency may require additional per-
formance reports only when considered
necessary.
(e) Significant developments. Events
may occur between the scheduled per-
formance reporting dates that have sig-
nificant impact upon the supported ac-
tivity. In such cases, the non-Federal
entity must inform the Federal award-
ing agency or pass-through entity as
soon as the following types of condi-
tions become known:
(1) Problems, delays, or adverse con-
ditions which will materially impair
the ability to meet the objective of the
Federal award. This disclosure must in-
clude a statement of the action taken,
or contemplated, and any assistance
needed to resolve the situation.
(2) Favorable developments which en-
able meeting time schedules and objec-
tives sooner or at less cost than antici-
pated or producing more or different
beneficial results than originally
planned.
(f) Site visits. The Federal awarding
agency may make site visits as war-
ranted by program needs.
(g) Performance report requirement
waiver. The Federal awarding agency
may waive any performance report re-
quired by this part if not needed.
§ 200.330 Reporting on real property.
The Federal awarding agency or pass-
through entity must require a non-Fed-
eral entity to submit reports at least
annually on the status of real property
in which the Federal Government re-
tains an interest, unless the Federal in-
terest in the real property extends 15
years or longer. In those instances
where the Federal interest attached is
for a period of 15 years or more, the
Federal awarding agency or pass-
through entity, at its option, may re-
quire the non-Federal entity to report
at various multi-year frequencies ( e.g.,
every two years or every three years,
not to exceed a five-year reporting pe-
riod; or a Federal awarding agency or
pass-through entity may require an-
nual reporting for the first three years
of a Federal award and thereafter re-
quire reporting every five years).
S
UBRECIPIENT MONITORING AND
MANAGEMENT
§ 200.331 Subrecipient and contractor
determinations.
The non-Federal entity may concur-
rently receive Federal awards as a re-
cipient, a subrecipient, and a con-
tractor, depending on the substance of
its agreements with Federal awarding
agencies and pass-through entities.
Therefore, a pass-through entity must
make case-by-case determinations
whether each agreement it makes for
the disbursement of Federal program
funds casts the party receiving the
funds in the role of a subrecipient or a
contractor. The Federal awarding
agency may supply and require recipi-
ents to comply with additional guid-
ance to support these determinations
provided such guidance does not con-
flict with this section.
(a) Subrecipients. A subaward is for
the purpose of carrying out a portion of
a Federal award and creates a Federal
assistance relationship with the sub-
recipient. See definition for Subaward
in § 200.1 of this part. Characteristics
which support the classification of the
non-Federal entity as a subrecipient
include when the non-Federal entity:
(1) Determines who is eligible to re-
ceive what Federal assistance;
(2) Has its performance measured in
relation to whether objectives of a Fed-
eral program were met;
(3) Has responsibility for pro-
grammatic decision-making;
(4) Is responsible for adherence to ap-
plicable Federal program requirements
specified in the Federal award; and
(5) In accordance with its agreement,
uses the Federal funds to carry out a
program for a public purpose specified
in authorizing statute, as opposed to
providing goods or services for the ben-
efit of the pass-through entity.
(b) Contractors. A contract is for the
purpose of obtaining goods and services
for the non-Federal entity’s own use
and creates a procurement relationship
with the contractor. See the definition
of contract in § 200.1 of this part. Char-
acteristics indicative of a procurement
relationship between the non-Federal
entity and a contractor are when the
contractor:
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(1) Provides the goods and services
within normal business operations;
(2) Provides similar goods or services
to many different purchasers;
(3) Normally operates in a competi-
tive environment;
(4) Provides goods or services that
are ancillary to the operation of the
Federal program; and
(5) Is not subject to compliance re-
quirements of the Federal program as a
result of the agreement, though similar
requirements may apply for other rea-
sons.
(c) Use of judgment in making deter-
mination. In determining whether an
agreement between a pass-through en-
tity and another non-Federal entity
casts the latter as a subrecipient or a
contractor, the substance of the rela-
tionship is more important than the
form of the agreement. All of the char-
acteristics listed above may not be
present in all cases, and the pass-
through entity must use judgment in
classifying each agreement as a
subaward or a procurement contract.
§ 200.332 Requirements for pass-
through entities.
All pass-through entities must:
(a) Ensure that every subaward is
clearly identified to the subrecipient as
a subaward and includes the following
information at the time of the
subaward and if any of these data ele-
ments change, include the changes in
subsequent subaward modification.
When some of this information is not
available, the pass-through entity
must provide the best information
available to describe the Federal award
and subaward. Required information
includes:
(1) Federal award identification.
(i) Subrecipient name (which must
match the name associated with its
unique entity identifier);
(ii) Subrecipient’s unique entity
identifier;
(iii) Federal Award Identification
Number (FAIN);
(iv) Federal Award Date (see the defi-
nition of Federal award date in § 200.1 of
this part) of award to the recipient by
the Federal agency;
(v) Subaward Period of Performance
Start and End Date;
(vi) Subaward Budget Period Start
and End Date;
(vii) Amount of Federal Funds Obli-
gated by this action by the pass-
through entity to the subrecipient;
(viii) Total Amount of Federal Funds
Obligated to the subrecipient by the
pass-through entity including the cur-
rent financial obligation;
(ix) Total Amount of the Federal
Award committed to the subrecipient
by the pass-through entity;
(x) Federal award project description,
as required to be responsive to the Fed-
eral Funding Accountability and
Transparency Act (FFATA);
(xi) Name of Federal awarding agen-
cy, pass-through entity, and contact
information for awarding official of the
Pass-through entity;
(xii) Assistance Listings number and
Title; the pass-through entity must
identify the dollar amount made avail-
able under each Federal award and the
Assistance Listings Number at time of
disbursement;
(xiii) Identification of whether the
award is R&D; and
(xiv) Indirect cost rate for the Fed-
eral award (including if the de minimis
rate is charged) per § 200.414.
(2) All requirements imposed by the
pass-through entity on the sub-
recipient so that the Federal award is
used in accordance with Federal stat-
utes, regulations and the terms and
conditions of the Federal award;
(3) Any additional requirements that
the pass-through entity imposes on the
subrecipient in order for the pass-
through entity to meet its own respon-
sibility to the Federal awarding agency
including identification of any required
financial and performance reports;
(4)(i) An approved federally recog-
nized indirect cost rate negotiated be-
tween the subrecipient and the Federal
Government. If no approved rate exists,
the pass-through entity must deter-
mine the appropriate rate in collabora-
tion with the subrecipient, which is ei-
ther:
(A) The negotiated indirect cost rate
between the pass-through entity and
the subrecipient; which can be based on
a prior negotiated rate between a dif-
ferent PTE and the same subrecipient.
If basing the rate on a previously nego-
tiated rate, the pass-through entity is
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OMB Guidance § 200.332
not required to collect information jus-
tifying this rate, but may elect to do
so;
(B) The de minimis indirect cost
rate.
(ii) The pass-through entity must not
require use of a de minimis indirect
cost rate if the subrecipient has a Fed-
erally approved rate. Subrecipients can
elect to use the cost allocation method
to account for indirect costs in accord-
ance with § 200.405(d).
(5) A requirement that the sub-
recipient permit the pass-through enti-
ty and auditors to have access to the
subrecipient’s records and financial
statements as necessary for the pass-
through entity to meet the require-
ments of this part; and
(6) Appropriate terms and conditions
concerning closeout of the subaward.
(b) Evaluate each subrecipient’s risk
of noncompliance with Federal stat-
utes, regulations, and the terms and
conditions of the subaward for purposes
of determining the appropriate sub-
recipient monitoring described in para-
graphs (d) and (e) of this section, which
may include consideration of such fac-
tors as:
(1) The subrecipient’s prior experi-
ence with the same or similar sub-
awards;
(2) The results of previous audits in-
cluding whether or not the sub-
recipient receives a Single Audit in ac-
cordance with Subpart F of this part,
and the extent to which the same or
similar subaward has been audited as a
major program;
(3) Whether the subrecipient has new
personnel or new or substantially
changed systems; and
(4) The extent and results of Federal
awarding agency monitoring ( e.g., if
the subrecipient also receives Federal
awards directly from a Federal award-
ing agency).
(c) Consider imposing specific
subaward conditions upon a sub-
recipient if appropriate as described in
§ 200.208.
(d) Monitor the activities of the sub-
recipient as necessary to ensure that
the subaward is used for authorized
purposes, in compliance with Federal
statutes, regulations, and the terms
and conditions of the subaward; and
that subaward performance goals are
achieved. Pass-through entity moni-
toring of the subrecipient must in-
clude:
(1) Reviewing financial and perform-
ance reports required by the pass-
through entity.
(2) Following-up and ensuring that
the subrecipient takes timely and ap-
propriate action on all deficiencies per-
taining to the Federal award provided
to the subrecipient from the pass-
through entity detected through au-
dits, on-site reviews, and written con-
firmation from the subrecipient, high-
lighting the status of actions planned
or taken to address Single Audit find-
ings related to the particular
subaward.
(3) Issuing a management decision for
applicable audit findings pertaining
only to the Federal award provided to
the subrecipient from the pass-through
entity as required by § 200.521.
(4) The pass-through entity is respon-
sible for resolving audit findings spe-
cifically related to the subaward and
not responsible for resolving cross-cut-
ting findings. If a subrecipient has a
current Single Audit report posted in
the Federal Audit Clearinghouse and
has not otherwise been excluded from
receipt of Federal funding ( e.g., has
been debarred or suspended), the pass-
through entity may rely on the sub-
recipient’s cognizant audit agency or
cognizant oversight agency to perform
audit follow-up and make management
decisions related to cross-cutting find-
ings in accordance with section
§ 300.513(a)(3)(vii). Such reliance does
not eliminate the responsibility of the
pass-through entity to issue subawards
that conform to agency and award-spe-
cific requirements, to manage risk
through ongoing subaward monitoring,
and to monitor the status of the find-
ings that are specifically related to the
subaward.
(e) Depending upon the pass-through
entity’s assessment of risk posed by
the subrecipient (as described in para-
graph (b) of this section), the following
monitoring tools may be useful for the
pass-through entity to ensure proper
accountability and compliance with
program requirements and achieve-
ment of performance goals:
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2 CFR Ch. II (1–1–21 Edition) § 200.333
(1) Providing subrecipients with
training and technical assistance on
program-related matters; and
(2) Performing on-site reviews of the
subrecipient’s program operations;
(3) Arranging for agreed-upon-proce-
dures engagements as described in
§ 200.425.
(f) Verify that every subrecipient is
audited as required by Subpart F of
this part when it is expected that the
subrecipient’s Federal awards expended
during the respective fiscal year
equaled or exceeded the threshold set
forth in § 200.501.
(g) Consider whether the results of
the subrecipient’s audits, on-site re-
views, or other monitoring indicate
conditions that necessitate adjust-
ments to the pass-through entity’s own
records.
(h) Consider taking enforcement ac-
tion against noncompliant subrecipi-
ents as described in § 200.339 of this part
and in program regulations.
§ 200.333 Fixed amount subawards.
With prior written approval from the
Federal awarding agency, a pass-
through entity may provide subawards
based on fixed amounts up to the Sim-
plified Acquisition Threshold, provided
that the subawards meet the require-
ments for fixed amount awards in
§ 200.201.
R
ECORD RETENTION AND ACCESS
§ 200.334 Retention requirements for
records.
Financial records, supporting docu-
ments, statistical records, and all
other non-Federal entity records perti-
nent to a Federal award must be re-
tained for a period of three years from
the date of submission of the final ex-
penditure report or, for Federal awards
that are renewed quarterly or annu-
ally, from the date of the submission of
the quarterly or annual financial re-
port, respectively, as reported to the
Federal awarding agency or pass-
through entity in the case of a sub-
recipient. Federal awarding agencies
and pass-through entities must not im-
pose any other record retention re-
quirements upon non-Federal entities.
The only exceptions are the following:
(a) If any litigation, claim, or audit
is started before the expiration of the
3-year period, the records must be re-
tained until all litigation, claims, or
audit findings involving the records
have been resolved and final action
taken.
(b) When the non-Federal entity is
notified in writing by the Federal
awarding agency, cognizant agency for
audit, oversight agency for audit, cog-
nizant agency for indirect costs, or
pass-through entity to extend the re-
tention period.
(c) Records for real property and
equipment acquired with Federal funds
must be retained for 3 years after final
disposition.
(d) When records are transferred to or
maintained by the Federal awarding
agency or pass-through entity, the 3-
year retention requirement is not ap-
plicable to the non-Federal entity.
(e) Records for program income
transactions after the period of per-
formance. In some cases recipients
must report program income after the
period of performance. Where there is
such a requirement, the retention pe-
riod for the records pertaining to the
earning of the program income starts
from the end of the non-Federal enti-
ty’s fiscal year in which the program
income is earned.
(f) Indirect cost rate proposals and
cost allocations plans. This paragraph
applies to the following types of docu-
ments and their supporting records: In-
direct cost rate computations or pro-
posals, 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
proposal, plan, or other computation is
required to be submitted to the Federal
Government (or to the pass-through
entity) to form the basis for negotia-
tion of the rate, then the 3-year reten-
tion period for its supporting records
starts from the date of such submis-
sion.
(2) If not submitted for negotiation. If
the proposal, plan, or other computa-
tion is not required to be submitted to
the Federal Government (or to the
pass-through entity) for negotiation
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OMB Guidance § 200.338
purposes, then the 3-year retention pe-
riod for the proposal, plan, or computa-
tion and its supporting records starts
from the end of the fiscal year (or
other accounting period) covered by
the proposal, plan, or other computa-
tion.
§ 200.335 Requests for transfer of
records.
The Federal awarding agency must
request transfer of certain records to
its custody from the non-Federal enti-
ty when it determines that the records
possess long-term retention value.
However, in order to avoid duplicate
recordkeeping, the Federal awarding
agency may make arrangements for
the non-Federal entity to retain any
records that are continuously needed
for joint use.
§ 200.336 Methods for collection, trans-
mission, and storage of information.
The Federal awarding agency and the
non-Federal entity should, whenever
practicable, collect, transmit, and
store Federal award-related informa-
tion in open and machine-readable for-
mats rather than in closed formats or
on paper in accordance with applicable
legislative requirements. A machine-
readable format is a format in a stand-
ard computer language (not English
text) that can be read automatically by
a web browser or computer system. The
Federal awarding agency or pass-
through entity must always provide or
accept paper versions of Federal award-
related information to and from the
non-Federal entity upon request. If
paper copies are submitted, the Federal
awarding agency or pass-through enti-
ty must not require more than an
original and two copies. When original
records are electronic and cannot be al-
tered, there is no need to create and re-
tain paper copies. When original
records are paper, electronic versions
may be substituted through the use of
duplication or other forms of elec-
tronic media provided that they are
subject to periodic quality control re-
views, provide reasonable safeguards
against alteration, and remain read-
able.
§ 200.337 Access to records.
(a) Records of non-Federal entities. The
Federal awarding agency, Inspectors
General, the Comptroller General of
the United States, and the pass-
through entity, or any of their author-
ized representatives, must have the
right of access to any documents, pa-
pers, or other records of the non-Fed-
eral entity which are pertinent to the
Federal award, in order to make au-
dits, examinations, excerpts, and tran-
scripts. The right also includes timely
and reasonable access to the non-Fed-
eral entity’s personnel for the purpose
of interview and discussion related to
such documents.
(b) Extraordinary and rare cir-
cumstances. Only under extraordinary
and rare circumstances would such ac-
cess include review of the true name of
victims of a crime. Routine monitoring
cannot be considered extraordinary and
rare circumstances that would neces-
sitate access to this information. When
access to the true name of victims of a
crime is necessary, appropriate steps to
protect this sensitive information must
be taken by both the non-Federal enti-
ty and the Federal awarding agency.
Any such access, other than under a
court order or subpoena pursuant to a
bona fide confidential investigation,
must be approved by the head of the
Federal awarding agency or delegate.
(c) Expiration of right of access. The
rights of access in this section are not
limited to the required retention pe-
riod but last as long as the records are
retained. Federal awarding agencies
and pass-through entities must not im-
pose any other access requirements
upon non-Federal entities.
§ 200.338 Restrictions on public access
to records.
No Federal awarding agency may
place restrictions on the non-Federal
entity that limit public access to the
records of the non-Federal entity perti-
nent to a Federal award, except for
protected personally identifiable infor-
mation (PII) or when the Federal
awarding agency can demonstrate that
such records will be kept confidential
and would have been exempted from
disclosure pursuant to the Freedom of
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2 CFR Ch. II (1–1–21 Edition) § 200.339
Information Act (5 U.S.C. 552) or con-
trolled unclassified information pursu-
ant to Executive Order 13556 if the
records had belonged to the Federal
awarding agency. The Freedom of In-
formation Act (5 U.S.C. 552) (FOIA)
does not apply to those records that re-
main under a non-Federal entity’s con-
trol except as required under § 200.315.
Unless required by Federal, state,
local, and tribal statute, non-Federal
entities are not required to permit pub-
lic access to their records. The non-
Federal entity’s records provided to a
Federal agency generally will be sub-
ject to FOIA and applicable exemp-
tions.
R
EMEDIES FOR NONCOMPLIANCE
§ 200.339 Remedies for noncompliance.
If a non-Federal entity fails to com-
ply with the U.S. Constitution, Federal
statutes, regulations or the terms and
conditions of a Federal award, the Fed-
eral awarding agency or pass-through
entity may impose additional condi-
tions, as described in § 200.208. If the
Federal awarding agency or pass-
through entity determines that non-
compliance cannot be remedied by im-
posing additional conditions, the Fed-
eral awarding agency or pass-through
entity may take one or more of the fol-
lowing actions, as appropriate in the
circumstances:
(a) Temporarily withhold cash pay-
ments pending correction of the defi-
ciency by the non-Federal entity or
more severe enforcement action by the
Federal awarding agency or pass-
through entity.
(b) 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.
(c) Wholly or partly suspend or ter-
minate the Federal award.
(d) Initiate suspension or debarment
proceedings as authorized under 2 CFR
part 180 and Federal awarding agency
regulations (or in the case of a pass-
through entity, recommend such a pro-
ceeding be initiated by a Federal
awarding agency).
(e) Withhold further Federal awards
for the project or program.
(f) Take other remedies that may be
legally available.
§ 200.340 Termination.
(a) The Federal award may be termi-
nated in whole or in part as follows:
(1) By the Federal awarding agency
or pass-through entity, if a non-Fed-
eral entity fails to comply with the
terms and conditions of a Federal
award;
(2) By the Federal awarding agency
or pass-through entity, to the greatest
extent authorized by law, if an award
no longer effectuates the program
goals or agency priorities;
(3) By the Federal awarding agency
or pass-through entity with the con-
sent of the non-Federal entity, in
which case the two parties must agree
upon the termination conditions, in-
cluding the effective date and, in the
case of partial termination, the portion
to be terminated;
(4) By the non-Federal entity upon
sending to the Federal awarding agen-
cy or pass-through entity written noti-
fication 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 or pass-
through entity determines in the case
of partial termination that the reduced
or modified portion of the Federal
award or subaward will not accomplish
the purposes for which the Federal
award was made, the Federal awarding
agency or pass-through entity may ter-
minate the Federal award in its en-
tirety; or
(5) By the Federal awarding agency
or pass-through entity pursuant to ter-
mination provisions included in the
Federal award.
(b) A Federal awarding agency should
clearly and unambiguously specify ter-
mination provisions applicable to each
Federal award, in applicable regula-
tions or in the award, consistent with
this section.
(c) When a Federal awarding agency
terminates a Federal award prior to
the end of the period of performance
due to the non-Federal entity’s mate-
rial failure to comply with the Federal
award terms and conditions, the Fed-
eral awarding agency must report the
termination to the OMB-designated in-
tegrity and performance system acces-
sible through SAM (currently FAPIIS).
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OMB Guidance § 200.341
(1) The information required under
paragraph (c) of this section is not to
be reported to designated integrity and
performance system until the non-Fed-
eral entity either—
(i) Has exhausted its opportunities to
object or challenge the decision, see
§ 200.342; or
(ii) Has not, within 30 calendar days
after being notified of the termination,
informed the Federal awarding agency
that it intends to appeal the Federal
awarding agency’s decision to termi-
nate.
(2) If a Federal awarding agency,
after entering information into the
designated integrity and performance
system about a termination, subse-
quently:
(i) Learns that any of that informa-
tion is erroneous, the Federal awarding
agency must correct the information in
the system within three business days;
(ii) Obtains an update to that infor-
mation that could be helpful to other
Federal awarding agencies, the Federal
awarding agency is strongly encour-
aged to amend the information in the
system to incorporate the update in a
timely way.
(3) Federal awarding agencies, must
not post any information that will be
made publicly available in the non-
public segment of designated integrity
and performance system that is cov-
ered by a disclosure exemption under
the Freedom of Information Act. If the
non-Federal entity asserts within
seven calendar days to the Federal
awarding agency who posted the infor-
mation, that some of the information
made publicly available is covered by a
disclosure exemption under the Free-
dom of Information Act, the Federal
awarding agency who posted the infor-
mation must remove the posting with-
in seven calendar days of receiving the
assertion. Prior to reposting the releas-
able information, the Federal agency
must resolve the issue in accordance
with the agency’s Freedom of Informa-
tion Act procedures.
(d) When a Federal award is termi-
nated or partially terminated, both the
Federal awarding agency or pass-
through entity and the non-Federal en-
tity remain responsible for compliance
with the requirements in §§ 200.344 and
200.345.
§ 200.341 Notification of termination
requirement.
(a) The Federal agency or pass-
through entity must provide to the
non-Federal entity a notice of termi-
nation.
(b) If the Federal award is terminated
for the non-Federal entity’s material
failure to comply with the U.S. Con-
stitution, Federal statutes, regula-
tions, or terms and conditions of the
Federal award, the notification must
state that—
(1) The termination decision will be
reported to the OMB-designated integ-
rity and performance system accessible
through SAM (currently FAPIIS);
(2) The information will be available
in the OMB-designated integrity and
performance system for a period of five
years from the date of the termination,
then archived;
(3) Federal awarding agencies that
consider making a Federal award to
the non-Federal entity during that five
year period must consider that infor-
mation in judging whether the non-
Federal entity is qualified to receive
the Federal award, when the Federal
share of the Federal award is expected
to exceed the simplified acquisition
threshold over the period of perform-
ance;
(4) The non-Federal entity may com-
ment on any information the OMB-des-
ignated integrity and performance sys-
tem contains about the non-Federal en-
tity for future consideration by Fed-
eral awarding agencies. The non-Fed-
eral entity may submit comments to
the awardee integrity and performance
portal accessible through SAM (cur-
rently (CPARS).
(5) Federal awarding agencies will
consider non-Federal entity comments
when determining whether the non-
Federal entity is qualified for a future
Federal award.
(c) Upon termination of a Federal
award, the Federal awarding agency
must provide the information required
under FFATA to the Federal website
established to fulfill the requirements
of FFATA, and update or notify any
other relevant governmentwide sys-
tems or entities of any indications of
poor performance as required by 41
U.S.C. 417b and 31 U.S.C. 3321 and im-
plementing guidance at 2 CFR part 77
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2 CFR Ch. II (1–1–21 Edition) § 200.342
(forthcoming at time of publication).
See also the requirements for Suspen-
sion and Debarment at 2 CFR part 180.
§ 200.342 Opportunities to object, hear-
ings, and appeals.
Upon taking any remedy for non-
compliance, the Federal awarding
agency must provide the non-Federal
entity an opportunity to object and
provide information and documenta-
tion challenging the suspension or ter-
mination action, in accordance with
written processes and procedures pub-
lished by the Federal awarding agency.
The Federal awarding agency or pass-
through entity must comply with any
requirements for hearings, appeals or
other administrative proceedings to
which the non-Federal entity is enti-
tled under any statute or regulation
applicable to the action involved.
§ 200.343 Effects of suspension and ter-
mination.
Costs to the non-Federal entity re-
sulting from financial obligations in-
curred by the non-Federal entity dur-
ing a suspension or after termination
of a Federal award or subaward are not
allowable unless the Federal awarding
agency or pass-through entity ex-
pressly authorizes them in the notice
of suspension or termination or subse-
quently. However, costs during suspen-
sion or after termination are allowable
if:
(a) The costs result from financial
obligations which were properly in-
curred by the non-Federal entity before
the effective date of suspension or ter-
mination, are not in anticipation of it;
and
(b) The costs would be allowable if
the Federal award was not suspended
or expired normally at the end of the
period of performance in which the ter-
mination takes effect.
C
LOSEOUT
§ 200.344 Closeout.
The Federal awarding agency or pass-
through entity will close out the Fed-
eral award when it determines that all
applicable administrative actions and
all required work of the Federal award
have been completed by the non-Fed-
eral entity. If the non-Federal entity
fails to complete the requirements, the
Federal awarding agency or pass-
through entity will proceed to close
out the Federal award with the infor-
mation available. This section specifies
the actions the non-Federal entity and
Federal awarding agency or pass-
through entity must take to complete
this process at the end of the period of
performance.
(a) The recipient must submit, no
later than 120 calendar days after the
end date of the period of performance,
all financial, performance, and other
reports as required by the terms and
conditions of the Federal award. A sub-
recipient must submit to the pass-
through entity, no later than 90 cal-
endar days (or an earlier date as agreed
upon by the pass-through entity and
subrecipient) after the end date of the
period of performance, all financial,
performance, and other reports as re-
quired by the terms and conditions of
the Federal award. The Federal award-
ing agency or pass-through entity may
approve extensions when requested and
justified by the non-Federal entity, as
applicable.
(b) Unless the Federal awarding agen-
cy or pass-through entity authorizes an
extension, a non-Federal entity must
liquidate all financial obligations in-
curred under the Federal award no
later than 120 calendar days after the
end date of the period of performance
as specified in the terms and conditions
of the Federal award.
(c) The Federal awarding agency or
pass-through entity must make prompt
payments to the non-Federal entity for
costs meeting the requirements in Sub-
part E of this part under the Federal
award being closed out.
(d) The non-Federal entity must
promptly refund any balances of unob-
ligated cash that the Federal awarding
agency or pass-through entity paid in
advance or paid and that are not au-
thorized to be retained by the non-Fed-
eral entity for use in other projects.
See OMB Circular A–129 and see
§ 200.346, for requirements regarding
unreturned amounts that become de-
linquent debts.
(e) Consistent with the terms and
conditions of the Federal award, the
Federal awarding agency or pass-
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OMB Guidance § 200.346
through entity must make a settle-
ment for any upward or downward ad-
justments to the Federal share of costs
after closeout reports are received.
(f) The non-Federal entity must ac-
count for any real and personal prop-
erty acquired with Federal funds or re-
ceived from the Federal Government in
accordance with §§ 200.310 through
200.316 and 200.330.
(g) When a recipient or subrecipient
completes all closeout requirements,
the Federal awarding agency or pass-
through entity must promptly com-
plete all closeout actions for Federal
awards. The Federal awarding agency
must make every effort to complete
closeout actions no later than one year
after the end of the period of perform-
ance unless otherwise directed by au-
thorizing statutes. Closeout actions in-
clude Federal awarding agency actions
in the grants management and pay-
ment systems.
(h) If the non-Federal entity does not
submit all reports in accordance with
this section and the terms and condi-
tions of the Federal Award, the Federal
awarding agency must proceed to close
out with the information available
within one year of the period of per-
formance end date.
(i) If the non-Federal entity does not
submit all reports in accordance with
this section within one year of the pe-
riod of performance end date, the Fed-
eral awarding agency must report the
non-Federal entity’s material failure
to comply with the terms and condi-
tions of the award with the OMB-des-
ignated integrity and performance sys-
tem (currently FAPIIS). Federal
awarding agencies may also pursue
other enforcement actions per § 200.339.
P
OST-CLOSEOUT ADJUSTMENTS AND
CONTINUING RESPONSIBILITIES
§ 200.345 Post-closeout adjustments
and continuing responsibilities.
(a) The closeout of a Federal award
does not affect any of the following:
(1) The right of the Federal awarding
agency or pass-through entity to dis-
allow costs and recover funds on the
basis of a later audit or other review.
The Federal awarding agency or pass-
through entity must make any cost
disallowance determination and notify
the non-Federal entity within the
record retention period.
(2) The requirement for the non-Fed-
eral entity to return any funds due as
a result of later refunds, corrections, or
other transactions including final indi-
rect cost rate adjustments.
(3) The ability of the Federal award-
ing agency to make financial adjust-
ments to a previously closed award
such as resolving indirect cost pay-
ments and making final payments.
(4) Audit requirements in subpart F
of this part.
(5) Property management and dis-
position requirements in §§ 200.310
through 200.316 of this subpart.
(6) Records retention as required in
§§ 200.334 through 200.337 of this sub-
part.
(b) After closeout of the Federal
award, a relationship created under the
Federal award may be modified or
ended in whole or in part with the con-
sent of the Federal awarding agency or
pass-through entity and the non-Fed-
eral entity, provided the responsibil-
ities of the non-Federal entity referred
to in paragraph (a) of this section, in-
cluding those for property management
as applicable, are considered and provi-
sions made for continuing responsibil-
ities of the non-Federal entity, as ap-
propriate.
C
OLLECTION OF AMOUNTS DUE
§ 200.346 Collection of amounts due.
(a) Any funds paid to the non-Federal
entity in excess of the amount to
which the non-Federal entity is finally
determined to be entitled under the
terms of the Federal award constitute
a debt to the Federal Government. If
not paid within 90 calendar days after
demand, the Federal awarding agency
may reduce the debt by:
(1) Making an administrative offset
against other requests for reimburse-
ments;
(2) Withholding advance payments
otherwise due to the non-Federal enti-
ty; or
(3) Other action permitted by Federal
statute.
(b) Except where otherwise provided
by statutes or regulations, the Federal
awarding agency will charge interest
on an overdue debt in accordance with
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154
2 CFR Ch. II (1–1–21 Edition) § 200.400
the Federal Claims Collection Stand-
ards (31 CFR parts 900 through 999). The
date from which interest is computed
is not extended by litigation or the fil-
ing of any form of appeal.
Subpart E—Cost Principles
GENERAL PROVISIONS
§ 200.400 Policy guide.
The application of these cost prin-
ciples is based on the fundamental
premises that:
(a) The non-Federal entity is respon-
sible for the efficient and effective ad-
ministration of the Federal award
through the application of sound man-
agement practices.
(b) The non-Federal entity assumes
responsibility for administering Fed-
eral funds in a manner consistent with
underlying agreements, program objec-
tives, and the terms and conditions of
the Federal award.
(c) The non-Federal entity, in rec-
ognition of its own unique combination
of staff, facilities, and experience, has
the primary responsibility for employ-
ing whatever form of sound organiza-
tion and management techniques may
be necessary in order to assure proper
and efficient administration of the
Federal award.
(d) The application of these cost prin-
ciples should require no significant
changes in the internal accounting
policies and practices of the non-Fed-
eral entity. However, the accounting
practices of the non-Federal entity
must be consistent with these cost
principles and support the accumula-
tion of costs as required by the prin-
ciples, and must provide for adequate
documentation to support costs
charged to the Federal award.
(e) In reviewing, negotiating and ap-
proving cost allocation plans or indi-
rect cost proposals, the cognizant agen-
cy for indirect costs should generally
assure that the non-Federal entity is
applying these cost accounting prin-
ciples on a consistent basis during
their review and negotiation of indirect
cost proposals. Where wide variations
exist in the treatment of a given cost
item by the non-Federal entity, the
reasonableness and equity of such
treatments should be fully considered.
See the definition of indirect (facilities &
administrative (F&A)) costs in § 200.1 of
this part.
(f) For non-Federal entities that edu-
cate and engage students in research,
the dual role of students as both train-
ees and employees (including pre- and
post-doctoral staff) contributing to the
completion of Federal awards for re-
search must be recognized in the appli-
cation of these principles.
(g) The non-Federal entity may not
earn or keep any profit resulting from
Federal financial assistance, unless ex-
plicitly authorized by the terms and
conditions of the Federal award. See
also § 200.307.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13,
2020]
§ 200.401 Application.
(a) General. These principles must be
used in determining the allowable costs
of work performed by the non-Federal
entity under Federal awards. These
principles also must be used by the
non-Federal entity as a guide in the
pricing of fixed-price contracts and
subcontracts where costs are used in
determining the appropriate price. The
principles do not apply to:
(1) Arrangements under which Fed-
eral financing is in the form of loans,
scholarships, fellowships, traineeships,
or other fixed amounts based on such
items as education allowance or pub-
lished tuition rates and fees.
(2) For IHEs, capitation awards,
which are awards based on case counts
or number of beneficiaries according to
the terms and conditions of the Federal
award.
(3) Fixed amount awards. See also
§ 200.1 Definitions and 200.201.
(4) Federal awards to hospitals (see
appendix IX to this part).
(5) Other awards under which the
non-Federal entity is not required to
account to the Federal Government for
actual costs incurred.
(b) Federal contract. Where a Federal
contract awarded to a non-Federal en-
tity is subject to the Cost Accounting
Standards (CAS), it incorporates the
applicable CAS clauses, Standards, and
CAS administration requirements per
the 48 CFR Chapter 99 and 48 CFR part
30 (FAR Part 30). CAS applies directly
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OMB Guidance § 200.404
to the CAS-covered contract and the
Cost Accounting Standards at 48 CFR
parts 9904 or 9905 takes precedence over
the cost principles in this subpart E
with respect to the allocation of costs.
When a contract with a non-Federal
entity is subject to full CAS coverage,
the allowability of certain costs under
the cost principles will be affected by
the allocation provisions of the Cost
Accounting Standards ( e.g., CAS 414—
48 CFR 9904.414, Cost of Money as an
Element of the Cost of Facilities Cap-
ital, and CAS 417—48 CFR 9904.417, Cost
of Money as an Element of the Cost of
Capital Assets Under Construction),
apply rather the allowability provi-
sions of § 200.449. In complying with
those requirements, the non-Federal
entity’s application of cost accounting
practices for estimating, accumu-
lating, and reporting costs for other
Federal awards and other cost objec-
tives under the CAS-covered contract
still must be consistent with its cost
accounting practices for the CAS-cov-
ered contracts. In all cases, only one
set of accounting records needs to be
maintained for the allocation of costs
by the non-Federal entity.
(c) Exemptions. Some nonprofit orga-
nizations, because of their size and na-
ture of operations, can be considered to
be similar to for-profit entities for pur-
pose of applicability of cost principles.
Such nonprofit organizations must op-
erate under Federal cost principles ap-
plicable to for-profit entities located at
48 CFR 31.2. A listing of these organiza-
tions is contained in appendix VIII to
this part. Other organizations, as ap-
proved by the cognizant agency for in-
direct costs, may be added from time
to time.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49562, Aug. 13, 2020]
BASIC CONSIDERATIONS
§ 200.402 Composition of costs.
Total cost. The total cost of a Federal
award is the sum of the allowable di-
rect and allocable indirect costs less
any applicable credits.
§ 200.403 Factors affecting allowability
of costs.
Except where otherwise authorized
by statute, costs must meet the fol-
lowing general criteria in order to be
allowable under Federal awards:
(a) Be necessary and reasonable for
the performance of the Federal award
and be allocable thereto under these
principles.
(b) Conform to any limitations or ex-
clusions set forth in these principles or
in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and
procedures that apply uniformly to
both federally-financed and other ac-
tivities of the non-Federal entity.
(d) Be accorded consistent treatment.
A cost may not be assigned to a Fed-
eral award as a direct cost if any other
cost incurred for the same purpose in
like circumstances has been allocated
to the Federal award as an indirect
cost.
(e) Be determined in accordance with
generally accepted accounting prin-
ciples (GAAP), except, for state and
local governments and Indian tribes
only, as otherwise provided for in this
part.
(f) Not be included as a cost or used
to meet cost sharing or matching re-
quirements of any other federally-fi-
nanced program in either the current
or a prior period. See also § 200.306(b).
(g) Be adequately documented. See
also §§ 200.300 through 200.309 of this
part.
(h) Cost must be incurred during the
approved budget period. The Federal
awarding agency is authorized, at its
discretion, to waive prior written ap-
provals to carry forward unobligated
balances to subsequent budget periods
pursuant to § 200.308(e)(3).
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49562, Aug. 13, 2020]
§ 200.404 Reasonable costs.
A cost is reasonable if, in its nature
and amount, it does not exceed that
which would be incurred by a prudent
person under the circumstances pre-
vailing at the time the decision was
made to incur the cost. The question of
reasonableness is particularly impor-
tant when the non-Federal entity is
predominantly federally-funded. In de-
termining reasonableness of a given
cost, consideration must be given to:
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17.A
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2 CFR Ch. II (1–1–21 Edition) § 200.405
(a) Whether the cost is of a type gen-
erally recognized as ordinary and nec-
essary for the operation of the non-
Federal entity or the proper and effi-
cient performance of the Federal
award.
(b) The restraints or requirements
imposed by such factors as: sound busi-
ness practices; arm’s-length bar-
gaining; Federal, state, local, tribal,
and other laws and regulations; and
terms and conditions of the Federal
award.
(c) Market prices for comparable
goods or services for the geographic
area.
(d) Whether the individuals con-
cerned acted with prudence in the cir-
cumstances considering their respon-
sibilities to the non-Federal entity, its
employees, where applicable its stu-
dents or membership, the public at
large, and the Federal Government.
(e) Whether the non-Federal entity
significantly deviates from its estab-
lished practices and policies regarding
the incurrence of costs, which may
unjustifiably increase the Federal
award’s cost.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014]
§ 200.405 Allocable costs.
(a) A cost is allocable to a particular
Federal award or other cost objective if
the goods or services involved are
chargeable or assignable to that Fed-
eral award or cost objective in accord-
ance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the
Federal award;
(2) Benefits both the Federal award
and other work of the non-Federal en-
tity and can be distributed in propor-
tions that may be approximated using
reasonable methods; and
(3) Is necessary to the overall oper-
ation of the non-Federal entity and is
assignable in part to the Federal award
in accordance with the principles in
this subpart.
(b) All activities which benefit from
the non-Federal entity’s indirect (F&A)
cost, including unallowable activities
and donated services by the non-Fed-
eral entity or third parties, will receive
an appropriate allocation of indirect
costs.
(c) Any cost allocable to a particular
Federal award under the principles pro-
vided for in this part may not be
charged to other Federal awards to
overcome fund deficiencies, to avoid re-
strictions imposed by Federal statutes,
regulations, or terms and conditions of
the Federal awards, or for other rea-
sons. However, this prohibition would
not preclude the non-Federal entity
from shifting costs that are allowable
under two or more Federal awards in
accordance with existing Federal stat-
utes, regulations, or the terms and con-
ditions of the Federal awards.
(d) Direct cost allocation principles:
If a cost benefits two or more projects
or activities in proportions that can be
determined without undue effort or
cost, the cost must be allocated to the
projects based on the proportional ben-
efit. If a cost benefits two or more
projects or activities in proportions
that cannot be determined because of
the interrelationship of the work in-
volved, then, notwithstanding para-
graph (c) of this section, the costs may
be allocated or transferred to bene-
fitted projects on any reasonable docu-
mented basis. Where the purchase of
equipment or other capital asset is spe-
cifically authorized under a Federal
award, the costs are assignable to the
Federal award regardless of the use
that may be made of the equipment or
other capital asset involved when no
longer needed for the purpose for which
it was originally required. See also
§§ 200.310 through 200.316 and 200.439.
(e) If the contract is subject to CAS,
costs must be allocated to the contract
pursuant to the Cost Accounting
Standards. To the extent that CAS is
applicable, the allocation of costs in
accordance with CAS takes precedence
over the allocation provisions in this
part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§ 200.406 Applicable credits.
(a) Applicable credits refer to those
receipts or reduction-of-expenditure-
type transactions that offset or reduce
expense items allocable to the Federal
award as direct or indirect (F&A) costs.
Examples of such transactions are: pur-
chase discounts, rebates or allowances,
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OMB Guidance § 200.409
recoveries or indemnities on losses, in-
surance refunds or rebates, and adjust-
ments of overpayments or erroneous
charges. To the extent that such cred-
its accruing to or received by the non-
Federal entity relate to allowable
costs, they must be credited to the
Federal award either as a cost reduc-
tion or cash refund, as appropriate.
(b) In some instances, the amounts
received from the Federal Government
to finance activities or service oper-
ations of the non-Federal entity should
be treated as applicable credits. Spe-
cifically, the concept of netting such
credit items (including any amounts
used to meet cost sharing or matching
requirements) must be recognized in
determining the rates or amounts to be
charged to the Federal award. (See
§§ 200.436 and 200.468, for areas of poten-
tial application in the matter of Fed-
eral financing of activities.)
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§ 200.407 Prior written approval (prior
approval).
Under any given Federal award, the
reasonableness and allocability of cer-
tain items of costs may be difficult to
determine. In order to avoid subse-
quent disallowance or dispute based on
unreasonableness or nonallocability,
the non-Federal entity may seek the
prior written approval of the cognizant
agency for indirect costs or the Federal
awarding agency in advance of the in-
currence of special or unusual costs.
Prior written approval should include
the timeframe or scope of the agree-
ment. The absence of prior written ap-
proval on any element of cost will not,
in itself, affect the reasonableness or
allocability of that element, unless
prior approval is specifically required
for allowability as described under cer-
tain circumstances in the following
sections of this part:
(a) § 200.201 Use of grant agreements
(including fixed amount awards), coop-
erative agreements, and contracts,
paragraph (b)(5);
(b) § 200.306 Cost sharing or matching;
(c) § 200.307 Program income;
(d) § 200.308 Revision of budget and
program plans;
(e) § 200.311 Real property;
(f) § 200.313 Equipment;
(g) § 200.333 Fixed amount subawards;
(h) § 200.413 Direct costs, paragraph
(c);
(i) § 200.430 Compensation—personal
services, paragraph (h);
(j) § 200.431 Compensation—fringe ben-
efits;
(k) § 200.438 Entertainment costs;
(l) § 200.439 Equipment and other cap-
ital expenditures;
(m) § 200.440 Exchange rates;
(n) § 200.441 Fines, penalties, damages
and other settlements;
(o) § 200.442 Fund raising and invest-
ment management costs;
(p) § 200.445 Goods or services for per-
sonal use;
(q) § 200.447 Insurance and indem-
nification;
(r) § 200.454 Memberships, subscrip-
tions, and professional activity costs,
paragraph (c);
(s) § 200.455 Organization costs;
(t) § 200.456 Participant support costs;
(u) § 200.458 Pre-award costs;
(v) § 200.462 Rearrangement and re-
conversion costs;
(w) § 200.467 Selling and marketing
costs;
(x) § 200.470 Taxes (including Value
Added Tax); and
(y) § 200.475 Travel costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§ 200.408 Limitation on allowance of
costs.
The Federal award may be subject to
statutory requirements that limit the
allowability of costs. When the max-
imum amount allowable under a limi-
tation is less than the total amount de-
termined in accordance with the prin-
ciples in this part, the amount not re-
coverable under the Federal award may
not be charged to the Federal award.
§ 200.409 Special considerations.
In addition to the basic consider-
ations regarding the allowability of
costs highlighted in this subtitle, other
subtitles in this part describe special
considerations and requirements appli-
cable to states, local governments, In-
dian tribes, and IHEs. In addition, cer-
tain provisions among the items of cost
in this subpart are only applicable to
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2 CFR Ch. II (1–1–21 Edition) § 200.410
certain types of non-Federal entities,
as specified in the following sections:
(a) Direct and Indirect (F&A) Costs
(§§ 200.412–200.415) of this subpart;
(b) Special Considerations for States,
Local Governments and Indian Tribes
(§§ 200.416 and 200.417) of this subpart;
and
(c) Special Considerations for Insti-
tutions of Higher Education (§§ 200.418
and 200.419) of this subpart.
[85 FR 49562, Aug. 13, 2020]
§ 200.410 Collection of unallowable
costs.
Payments made for costs determined
to be unallowable by either the Federal
awarding agency, cognizant agency for
indirect costs, or pass-through entity,
either as direct or indirect costs, must
be refunded (including interest) to the
Federal Government in accordance
with instructions from the Federal
agency that determined the costs are
unallowable unless Federal statute or
regulation directs otherwise. See also
§§ 200.300 through 200.309 in subpart D of
this part.
[85 FR 49562, Aug. 13, 2020]
§ 200.411 Adjustment of previously ne-
gotiated indirect (F&A) cost rates
containing unallowable costs.
(a) Negotiated indirect (F&A) cost
rates based on a proposal later found to
have included costs that:
(1) Are unallowable as specified by
Federal statutes, regulations or the
terms and conditions of a Federal
award; or
(2) Are unallowable because they are
not allocable to the Federal award(s),
must be adjusted, or a refund must be
made, in accordance with the require-
ments of this section. These adjust-
ments or refunds are designed to cor-
rect the proposals used to establish the
rates and do not constitute a reopening
of the rate negotiation. The adjust-
ments or refunds will be made regard-
less of the type of rate negotiated (pre-
determined, final, fixed, or provi-
sional).
(b) For rates covering a future fiscal
year of the non-Federal entity, the un-
allowable costs will be removed from
the indirect (F&A) cost pools and the
rates appropriately adjusted.
(c) For rates covering a past period,
the Federal share of the unallowable
costs will be computed for each year
involved and a cash refund (including
interest chargeable in accordance with
applicable regulations) will be made to
the Federal Government. If cash re-
funds are made for past periods covered
by provisional or fixed rates, appro-
priate adjustments will be made when
the rates are finalized to avoid dupli-
cate recovery of the unallowable costs
by the Federal Government.
(d) For rates covering the current pe-
riod, either a rate adjustment or a re-
fund, as described in paragraphs (b) and
(c) of this section, must be required by
the cognizant agency for indirect costs.
The choice of method must be at the
discretion of the cognizant agency for
indirect costs, based on its judgment as
to which method would be most prac-
tical.
(e) The amount or proportion of unal-
lowable costs included in each year’s
rate will be assumed to be the same as
the amount or proportion of unallow-
able costs included in the base year
proposal used to establish the rate.
D
IRECT AND INDIRECT (F&A) COSTS
§ 200.412 Classification of costs.
There is no universal rule for
classifying certain costs as either di-
rect or indirect (F&A) under every ac-
counting system. A cost may be direct
with respect to some specific service or
function, but indirect with respect to
the Federal award or other final cost
objective. Therefore, it is essential
that each item of cost incurred for the
same purpose be treated consistently
in like circumstances either as a direct
or an indirect (F&A) cost in order to
avoid possible double-charging of Fed-
eral awards. Guidelines for determining
direct and indirect (F&A) costs charged
to Federal awards are provided in this
subpart.
§ 200.413 Direct costs.
(a) General. Direct costs are those
costs that can be identified specifically
with a particular final cost objective,
such as a Federal award, or other inter-
nally or externally funded activity, or
that can be directly assigned to such
activities relatively easily with a high
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OMB Guidance § 200.414
degree of accuracy. Costs incurred for
the same purpose in like circumstances
must be treated consistently as either
direct or indirect (F&A) costs. See also
§ 200.405.
(b) Application to Federal awards.
Identification with the Federal award
rather than the nature of the goods and
services involved is the determining
factor in distinguishing direct from in-
direct (F&A) costs of Federal awards.
Typical costs charged directly to a
Federal award are the compensation of
employees who work on that award,
their related fringe benefit costs, the
costs of materials and other items of
expense incurred for the Federal award.
If directly related to a specific award,
certain costs that otherwise would be
treated as indirect costs may also be
considered direct costs. Examples in-
clude extraordinary utility consump-
tion, the cost of materials supplied
from stock or services rendered by spe-
cialized facilities, program evaluation
costs, or other institutional service op-
erations.
(c) The salaries of administrative and
clerical staff should normally be treat-
ed as indirect (F&A) costs. Direct
charging of these costs may be appro-
priate only if all of the following condi-
tions are met:
(1) Administrative or clerical serv-
ices are integral to a project or activ-
ity;
(2) Individuals involved can be spe-
cifically identified with the project or
activity;
(3) Such costs are explicitly included
in the budget or have the prior written
approval of the Federal awarding agen-
cy; and
(4) The costs are not also recovered
as indirect costs.
(d) Minor items. Any direct cost of
minor amount may be treated as an in-
direct (F&A) cost for reasons of practi-
cality where such accounting treat-
ment for that item of cost is consist-
ently applied to all Federal and non-
Federal cost objectives.
(e) The costs of certain activities are
not allowable as charges to Federal
awards. However, even though these
costs are unallowable for purposes of
computing charges to Federal awards,
they nonetheless must be treated as di-
rect costs for purposes of determining
indirect (F&A) cost rates and be allo-
cated their equitable share of the non-
Federal entity’s indirect costs if they
represent activities which:
(1) Include the salaries of personnel,
(2) Occupy space, and
(3) Benefit from the non-Federal enti-
ty’s indirect (F&A) costs.
(f) For nonprofit organizations, the
costs of activities performed by the
non-Federal entity primarily as a serv-
ice to members, clients, or the general
public when significant and necessary
to the non-Federal entity’s mission
must be treated as direct costs whether
or not allowable, and be allocated an
equitable share of indirect (F&A) costs.
Some examples of these types of activi-
ties include:
(1) Maintenance of membership rolls,
subscriptions, publications, and related
functions. See also § 200.454.
(2) Providing services and informa-
tion to members, legislative or admin-
istrative bodies, or the public. See also
§§ 200.454 and 200.450.
(3) Promotion, lobbying, and other
forms of public relations. See also
§§ 200.421 and 200.450.
(4) Conferences except those held to
conduct the general administration of
the non-Federal entity. See also
§ 200.432.
(5) Maintenance, protection, and in-
vestment of special funds not used in
operation of the non-Federal entity.
See also § 200.442.
(6) Administration of group benefits
on behalf of members or clients, in-
cluding life and hospital insurance, an-
nuity or retirement plans, and finan-
cial aid. See also § 200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13,
2020]
§ 200.414 Indirect (F&A) costs.
(a) Facilities and administration classi-
fication. For major Institutions of
Higher Education (IHE) and major non-
profit organizations, indirect (F&A)
costs must be classified within two
broad categories: ‘‘Facilities’’ and
‘‘Administration.’’ ‘‘Facilities’’ is de-
fined as depreciation on buildings,
equipment and capital improvement,
interest on debt associated with cer-
tain buildings, equipment and capital
improvements, and operations and
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2 CFR Ch. II (1–1–21 Edition) § 200.414
maintenance expenses. ‘‘Administra-
tion’’ is defined as general administra-
tion and general expenses such as the
director’s office, accounting, personnel
and all other types of expenditures not
listed specifically under one of the sub-
categories of ‘‘Facilities’’ (including
cross allocations from other pools,
where applicable). For nonprofit orga-
nizations, library expenses are included
in the ‘‘Administration’’ category; for
IHEs, they are included in the ‘‘Facili-
ties’’ category. Major IHEs are defined
as those required to use the Standard
Format for Submission as noted in ap-
pendix III to this part, and Rate Deter-
mination for Institutions of Higher
Education paragraph C. 11. Major non-
profit organizations are those which re-
ceive more than $10 million dollars in
direct Federal funding.
(b) Diversity of nonprofit organizations.
Because of the diverse characteristics
and accounting practices of nonprofit
organizations, it is not possible to
specify the types of cost which may be
classified as indirect (F&A) cost in all
situations. Identification with a Fed-
eral award rather than the nature of
the goods and services involved is the
determining factor in distinguishing
direct from indirect (F&A) costs of
Federal awards. However, typical ex-
amples of indirect (F&A) cost for many
nonprofit organizations may include
depreciation on buildings and equip-
ment, the costs of operating and main-
taining facilities, and general adminis-
tration and general expenses, such as
the salaries and expenses of executive
officers, personnel administration, and
accounting.
(c) Federal Agency Acceptance of Nego-
tiated Indirect Cost Rates. (See also
§ 200.306.)
(1) The negotiated rates must be ac-
cepted by all Federal awarding agen-
cies. A Federal awarding agency may
use a rate different from the negotiated
rate for a class of Federal awards or a
single Federal award only when re-
quired by Federal statute or regula-
tion, or when approved by a Federal
awarding agency head or delegate
based on documented justification as
described in paragraph (c)(3) of this
section.
(2) The Federal awarding agency head
or delegate must notify OMB of any ap-
proved deviations.
(3) The Federal awarding agency
must implement, and make publicly
available, the policies, procedures and
general decision-making criteria that
their programs will follow to seek and
justify deviations from negotiated
rates.
(4) As required under § 200.204, the
Federal awarding agency must include
in the notice of funding opportunity
the policies relating to indirect cost
rate reimbursement, matching, or cost
share as approved under paragraph
(e)(1) of this section. As appropriate,
the Federal agency should incorporate
discussion of these policies into Fed-
eral awarding agency outreach activi-
ties with non-Federal entities prior to
the posting of a notice of funding op-
portunity.
(d) Pass-through entities are subject
to the requirements in § 200.332(a)(4).
(e) Requirements for development
and submission of indirect (F&A) cost
rate proposals and cost allocation
plans are contained in Appendices III–
VII and Appendix IX as follows:
(1) Appendix III to Part 200—Indirect
(F&A) Costs Identification and Assign-
ment, and Rate Determination for In-
stitutions of Higher Education (IHEs);
(2) Appendix IV to Part 200—Indirect
(F&A) Costs Identification and Assign-
ment, and Rate Determination for Non-
profit Organizations;
(3) Appendix V to Part 200—State/
Local Governmentwide Central Service
Cost Allocation Plans;
(4) Appendix VI to Part 200—Public
Assistance Cost Allocation Plans;
(5) Appendix VII to Part 200—States
and Local Government and Indian
Tribe Indirect Cost Proposals; and
(6) Appendix IX to Part 200—Hospital
Cost Principles.
(f) In addition to the procedures out-
lined in the appendices in paragraph (e)
of this section, any non-Federal entity
that does not have a current nego-
tiated (including provisional) rate, ex-
cept for those non-Federal entities de-
scribed in appendix VII to this part,
paragraph D.1.b, may elect to charge a
de minimis rate of 10% of modified
total direct costs (MTDC) which may
be used indefinitely. No documentation
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17.A
161
OMB Guidance § 200.415
is required to justify the 10% de mini-
mis indirect cost rate. As described in
§ 200.403, costs must be consistently
charged as either indirect or direct
costs, but may not be double charged
or inconsistently charged as both. If
chosen, this methodology once elected
must be used consistently for all Fed-
eral awards until such time as a non-
Federal entity chooses to negotiate for
a rate, which the non-Federal entity
may apply to do at any time.
(g) Any non-Federal entity that has a
current federally-negotiated indirect
cost rate may apply for a one-time ex-
tension of the rates in that agreement
for a period of up to four years. This
extension will be subject to the review
and approval of the cognizant agency
for indirect costs. If an extension is
granted the non-Federal entity may
not request a rate review until the ex-
tension period ends. At the end of the
4-year extension, the non-Federal enti-
ty must re-apply to negotiate a rate.
Subsequent one-time extensions (up to
four years) are permitted if a renegoti-
ation is completed between each exten-
sion request.
(h) The federally negotiated indirect
rate, distribution base, and rate type
for a non-Federal entity (except for the
Indian tribes or tribal organizations, as
defined in the Indian Self Determina-
tion, Education and Assistance Act, 25
U.S.C. 450b(1)) must be available pub-
licly on an OMB-designated Federal
website.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13,
2020]
§ 200.415 Required certifications.
Required certifications include:
(a) To assure that expenditures are
proper and in accordance with the
terms and conditions of the Federal
award and approved project budgets,
the annual and final fiscal reports or
vouchers requesting payment under the
agreements must include a certifi-
cation, signed by an official who is au-
thorized to legally bind the non-Fed-
eral entity, which reads as follows: ‘‘By
signing this report, I certify to the best
of my knowledge and belief that the re-
port is true, complete, and accurate,
and the expenditures, disbursements
and cash receipts are for the purposes
and objectives set forth in the terms
and conditions of the Federal award. I
am aware that any false, fictitious, or
fraudulent information, or the omis-
sion of any material fact, may subject
me to criminal, civil or administrative
penalties for fraud, false statements,
false claims or otherwise. (U.S. Code
Title 18, Section 1001 and Title 31, Sec-
tions 3729–3730 and 3801–3812).’’
(b) Certification of cost allocation
plan or indirect (F&A) cost rate pro-
posal. Each cost allocation plan or in-
direct (F&A) cost rate proposal must
comply with the following:
(1) A proposal to establish a cost allo-
cation plan or an indirect (F&A) cost
rate, whether submitted to a Federal
cognizant agency for indirect costs or
maintained on file by the non-Federal
entity, must be certified by the non-
Federal entity using the Certificate of
Cost Allocation Plan or Certificate of
Indirect Costs as set forth in appen-
dices III through VII, and IX of this
part. The certificate must be signed on
behalf of the non-Federal entity by an
individual at a level no lower than vice
president or chief financial officer of
the non-Federal entity that submits
the proposal.
(2) Unless the non-Federal entity has
elected the option under § 200.414(f), the
Federal Government may either dis-
allow all indirect (F&A) costs or uni-
laterally establish such a plan or rate
when the non-Federal entity fails to
submit a certified proposal for estab-
lishing such a plan or rate in accord-
ance with the requirements. Such a
plan or rate may be based upon audited
historical data or such other data that
have been furnished to the cognizant
agency for indirect costs and for which
it can be demonstrated that all unal-
lowable costs have been excluded.
When a cost allocation plan or indirect
cost rate is unilaterally established by
the Federal Government because the
non-Federal entity failed to submit a
certified proposal, the plan or rate es-
tablished will be set to ensure that po-
tentially unallowable costs will not be
reimbursed.
(c) Certifications by nonprofit orga-
nizations as appropriate that they did
not meet the definition of a major non-
profit organization as defined in
§ 200.414(a).
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2 CFR Ch. II (1–1–21 Edition) § 200.416
(d) See also § 200.450 for another re-
quired certification.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13,
2020]
SPECIAL CONSIDERATIONS FOR STATES,
LOCAL GOVERNMENTS AND INDIAN
TRIBES
§ 200.416 Cost allocation plans and in-
direct cost proposals.
(a) For states, local governments and
Indian tribes, certain services, such as
motor pools, computer centers, pur-
chasing, accounting, etc., are provided
to operating agencies on a centralized
basis. Since Federal awards are per-
formed within the individual operating
agencies, there needs to be a process
whereby these central service costs can
be identified and assigned to benefitted
activities on a reasonable and con-
sistent basis. The central service cost
allocation plan provides that process.
(b) Individual operating agencies
(governmental department or agency),
normally charge Federal awards for in-
direct costs through an indirect cost
rate. A separate indirect cost rate(s)
proposal for each operating agency is
usually necessary to claim indirect
costs under Federal awards. Indirect
costs include:
(1) The indirect costs originating in
each department or agency of the gov-
ernmental unit carrying out Federal
awards and
(2) The costs of central governmental
services distributed through the cen-
tral service cost allocation plan and
not otherwise treated as direct costs.
(c) The requirements for development
and submission of cost allocation plans
(for central service costs and public as-
sistance programs) and indirect cost
rate proposals are contained in appen-
dices IV, V and VI to this part.
§ 200.417 Interagency service.
The cost of services provided by one
agency to another within the govern-
mental unit may include allowable di-
rect costs of the service plus a pro-
rated share of indirect costs. A stand-
ard indirect cost allowance equal to
ten percent of the direct salary and
wage cost of providing the service (ex-
cluding overtime, shift premiums, and
fringe benefits) may be used in lieu of
determining the actual indirect costs
of the service. These services do not in-
clude centralized services included in
central service cost allocation plans as
described in Appendix V to Part 200.
[85 FR 49564, Aug. 13, 2020]
SPECIAL CONSIDERATIONS FOR
INSTITUTIONS OF HIGHER EDUCATION
§ 200.418 Costs incurred by states and
local governments.
Costs incurred or paid by a state or
local government on behalf of its IHEs
for fringe benefit programs, such as
pension costs and FICA and any other
costs specifically incurred on behalf of,
and in direct benefit to, the IHEs, are
allowable costs of such IHEs whether
or not these costs are recorded in the
accounting records of the institutions,
subject to the following:
(a) The costs meet the requirements
of § 200.402–411 of this subpart;
(b) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles in this part; and
(c) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§ 200.419 Cost accounting standards
and disclosure statement.
(a) An IHE that receive an aggregate
total $50 million or more in Federal
awards and instruments subject to this
subpart (as specified in § 200.101) in its
most recently completed fiscal year
must comply with the Cost Accounting
Standards Board’s cost accounting
standards located at 48 CFR 9905.501,
9905.502, 9905.505, and 9905.506. CAS-cov-
ered contracts and subcontracts award-
ed to the IHEs are subject to the broad-
er range of CAS requirements at 48
CFR 9900 through 9999 and 48 CFR part
30 (FAR Part 30).
(b) Disclosure statement. An IHE that
receives an aggregate total $50 million
or more in Federal awards and instru-
ments subject to this subpart (as speci-
fied in § 200.101) during its most re-
cently completed fiscal year must dis-
close their cost accounting practices
by filing a Disclosure Statement (DS–
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17.A
163
OMB Guidance § 200.419
2), which is reproduced in Appendix III
to Part 200. With the approval of the
cognizant agency for indirect costs, an
IHE may meet the DS–2 submission by
submitting the DS–2 for each business
unit that received $50 million or more
in Federal awards and instruments.
(1) The DS–2 must be submitted to
the cognizant agency for indirect costs
with a copy to the IHE’s cognizant
agency for audit. The initial DS–2 and
revisions to the DS–2 must be sub-
mitted in coordination with the IHE’s
indirect (F&A) rate proposal, unless an
earlier submission is requested by the
cognizant agency for indirect costs.
IHEs with CAS-covered contracts or
subcontracts meeting the dollar
threshold in 48 CFR 9903.202–1(f) must
submit their initial DS–2 or revisions
no later than prior to the award of a
CAS-covered contract or subcontract.
(2) An IHE must maintain an accu-
rate DS–2 and comply with disclosed
cost accounting practices. An IHE
must file amendments to the DS–2 to
the cognizant agency for indirect costs
in advance of a disclosed practice being
changed to comply with a new or modi-
fied standard, or when a practice is
changed for other reasons. An IHE may
proceed with implementing the change
after it has notified the Federal cog-
nizant agency for indirect costs. If the
change represents a variation from 2
CFR part 200, the change may require
approval by the Federal cognizant
agency for indirect costs, in accordance
with § 200.102(b). Amendments of a DS–
2 may be submitted at any time. Re-
submission of a complete, updated DS–
2 is discouraged except when there are
extensive changes to disclosed prac-
tices.
(3) Cost and funding adjustments. Cost
adjustments must be made by the cog-
nizant agency for indirect costs if an
IHE fails to comply with the cost poli-
cies in this part or fails to consistently
follow its established or disclosed cost
accounting practices when estimating,
accumulating or reporting the costs of
Federal awards, and the aggregate cost
impact on Federal awards is material.
The cost adjustment must normally be
made on an aggregate basis for all af-
fected Federal awards through an ad-
justment of the IHE’s future F&A costs
rates or other means considered appro-
priate by the cognizant agency for indi-
rect costs. Under the terms of CAS cov-
ered contracts, adjustments in the
amount of funding provided may also
be required when the estimated pro-
posal costs were not determined in ac-
cordance with established cost ac-
counting practices.
(4) Overpayments. Excess amounts
paid in the aggregate by the Federal
Government under Federal awards due
to a noncompliant cost accounting
practice used to estimate, accumulate,
or report costs must be credited or re-
funded, as deemed appropriate by the
cognizant agency for indirect costs. In-
terest applicable to the excess amounts
paid in the aggregate during the period
of noncompliance must also be deter-
mined and collected in accordance with
applicable Federal agency regulations.
(5) Compliant cost accounting practice
changes. Changes from one compliant
cost accounting practice to another
compliant practice that are approved
by the cognizant agency for indirect
costs may require cost adjustments if
the change has a material effect on
Federal awards and the changes are
deemed appropriate by the cognizant
agency for indirect costs.
(6) Responsibilities. The cognizant
agency for indirect cost must:
(i) Determine cost adjustments for
all Federal awards in the aggregate on
behalf of the Federal Government. Ac-
tions of the cognizant agency for indi-
rect cost in making cost adjustment
determinations must be coordinated
with all affected Federal awarding
agencies to the extent necessary.
(ii) Prescribe guidelines and establish
internal procedures to promptly deter-
mine on behalf of the Federal Govern-
ment that a DS–2 adequately discloses
the IHE’s cost accounting practices
and that the disclosed practices are
compliant with applicable CAS and the
requirements of this part.
(iii) Distribute to all affected Federal
awarding agencies any DS–2 determina-
tion of adequacy or noncompliance.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13,
2020]
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2 CFR Ch. II (1–1–21 Edition) § 200.420
GENERAL PROVISIONS FOR SELECTED
ITEMS OF COST
§ 200.420 Considerations for selected
items of cost.
This section provides principles to be
applied in establishing the allowability
of certain items involved in deter-
mining cost, in addition to the require-
ments of Subtitle II of this subpart.
These principles apply whether or not a
particular item of cost is properly
treated as direct cost or indirect (F&A)
cost. Failure to mention a particular
item of cost is not intended to imply
that it is either allowable or unallow-
able; rather, determination as to allow-
ability in each case should be based on
the treatment provided for similar or
related items of cost, and based on the
principles described in §§ 200.402
through 200.411. In case of a discrep-
ancy between the provisions of a spe-
cific Federal award and the provisions
below, the Federal award governs. Cri-
teria outlined in § 200.403 must be ap-
plied in determining allowability. See
also § 200.102.
[85 FR 49564, Aug. 13, 2020]
§ 200.421 Advertising and public rela-
tions.
(a) The term advertising costs means
the costs of advertising media and cor-
ollary administrative costs. Adver-
tising media include magazines, news-
papers, radio and television, direct
mail, exhibits, electronic or computer
transmittals, and the like.
(b) The only allowable advertising
costs are those which are solely for:
(1) The recruitment of personnel re-
quired by the non-Federal entity for
performance of a Federal award (See
also § 200.463);
(2) The procurement of goods and
services for the performance of a Fed-
eral award;
(3) The disposal of scrap or surplus
materials acquired in the performance
of a Federal award except when non-
Federal entities are reimbursed for dis-
posal costs at a predetermined amount;
or
(4) Program outreach and other spe-
cific purposes necessary to meet the re-
quirements of the Federal award.
(c) The term ‘‘public relations’’ in-
cludes community relations and means
those activities dedicated to maintain-
ing the image of the non-Federal entity
or maintaining or promoting under-
standing and favorable relations with
the community or public at large or
any segment of the public.
(d) The only allowable public rela-
tions costs are:
(1) Costs specifically required by the
Federal award;
(2) Costs of communicating with the
public and press pertaining to specific
activities or accomplishments which
result from performance of the Federal
award (these costs are considered nec-
essary as part of the outreach effort for
the Federal award); or
(3) Costs of conducting general liai-
son with news media and government
public relations officers, to the extent
that such activities are limited to com-
munication and liaison necessary to
keep the public informed on matters of
public concern, such as notices of fund-
ing opportunities, financial matters,
etc.
(e) Unallowable advertising and pub-
lic relations costs include the fol-
lowing:
(1) All advertising and public rela-
tions costs other than as specified in
paragraphs (b) and (d) of this section;
(2) Costs of meetings, conventions,
convocations, or other events related
to other activities of the entity (see
also § 200.432), including:
(i) Costs of displays, demonstrations,
and exhibits;
(ii) Costs of meeting rooms, hospi-
tality suites, and other special facili-
ties used in conjunction with shows
and other special events; and
(iii) Salaries and wages of employees
engaged in setting up and displaying
exhibits, making demonstrations, and
providing briefings;
(3) Costs of promotional items and
memorabilia, including models, gifts,
and souvenirs;
(4) Costs of advertising and public re-
lations designed solely to promote the
non-Federal entity.
[78 FR 76808, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§ 200.422 Advisory councils.
Costs incurred by advisory councils
or committees are unallowable unless
authorized by statute, the Federal VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00176 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005Page 222 of 321
17.A
165
OMB Guidance § 200.428
awarding agency or as an indirect cost
where allocable to Federal awards. See
§ 200.444, applicable to States, local gov-
ernments, and Indian tribes.
[85 FR 49564, Aug. 13, 2020]
§ 200.423 Alcoholic beverages.
Costs of alcoholic beverages are unal-
lowable.
§ 200.424 Alumni/ae activities.
Costs incurred by IHEs for, or in sup-
port of, alumni/ae activities are unal-
lowable.
§ 200.425 Audit services.
(a) A reasonably proportionate share
of the costs of audits required by, and
performed in accordance with, the Sin-
gle Audit Act Amendments of 1996 (31
U.S.C. 7501–7507), as implemented by re-
quirements of this part, are allowable.
However, the following audit costs are
unallowable:
(1) Any costs when audits required by
the Single Audit Act and subpart F of
this part have not been conducted or
have been conducted but not in accord-
ance therewith; and
(2) Any costs of auditing a non-Fed-
eral entity that is exempted from hav-
ing an audit conducted under the Sin-
gle Audit Act and subpart F of this
part because its expenditures under
Federal awards are less than $750,000
during the non-Federal entity’s fiscal
year.
(b) The costs of a financial statement
audit of a non-Federal entity that does
not currently have a Federal award
may be included in the indirect cost
pool for a cost allocation plan or indi-
rect cost proposal.
(c) Pass-through entities may charge
Federal awards for the cost of agreed-
upon-procedures engagements to mon-
itor subrecipients (in accordance with
subpart D, §§ 200.331–333) who are ex-
empted from the requirements of the
Single Audit Act and subpart F of this
part. This cost is allowable only if the
agreed-upon-procedures engagements
are:
(1) Conducted in accordance with
GAGAS attestation standards;
(2) Paid for and arranged by the pass-
through entity; and
(3) Limited in scope to one or more of
the following types of compliance re-
quirements: activities allowed or
unallowed; allowable costs/cost prin-
ciples; eligibility; and reporting.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49564, Aug. 13, 2020]
§ 200.426 Bad debts.
Bad debts (debts which have been de-
termined to be uncollectable), includ-
ing losses (whether actual or esti-
mated) arising from uncollectable ac-
counts and other claims, are unallow-
able. Related collection costs, and re-
lated legal costs, arising from such
debts after they have been determined
to be uncollectable are also unallow-
able. See also § 200.428.
[85 FR 49565, Aug. 13, 2020]
§ 200.427 Bonding costs.
(a) Bonding costs arise when the Fed-
eral awarding agency requires assur-
ance against financial loss to itself or
others by reason of the act or default
of the non-Federal entity. They arise
also in instances where the non-Fed-
eral entity requires similar assurance,
including: bonds as bid, performance,
payment, advance payment, infringe-
ment, and fidelity bonds for employees
and officials.
(b) Costs of bonding required pursu-
ant to the terms and conditions of the
Federal award are allowable.
(c) Costs of bonding required by the
non-Federal entity in the general con-
duct of its operations are allowable as
an indirect cost to the extent that such
bonding is in accordance with sound
business practice and the rates and pre-
miums are reasonable under the cir-
cumstances.
§ 200.428 Collections of improper pay-
ments.
The costs incurred by a non-Federal
entity to recover improper payments
are allowable as either direct or indi-
rect costs, as appropriate. Amounts
collected may be used by the non-Fed-
eral entity in accordance with cash
management standards set forth in
§ 200.305.
[85 FR 49565, Aug. 13, 2020]
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2 CFR Ch. II (1–1–21 Edition) § 200.429
§ 200.429 Commencement and convoca-
tion costs.
For IHEs, costs incurred for com-
mencements and convocations are un-
allowable, except as provided for in
(B)(9) Student Administration and
Services, in appendix III to this part,
as activity costs.
[85 FR 49565, Aug. 13, 2020]
§ 200.430 Compensation—personal
services.
(a) General. Compensation for per-
sonal services includes all remunera-
tion, paid currently or accrued, for
services of employees rendered during
the period of performance under the
Federal award, including but not nec-
essarily limited to wages and salaries.
Compensation for personal services
may also include fringe benefits which
are addressed in § 200.431. Costs of com-
pensation are allowable to the extent
that they satisfy the specific require-
ments of this part, and that the total
compensation for individual employ-
ees:
(1) Is reasonable for the services ren-
dered and conforms to the established
written policy of the non-Federal enti-
ty consistently applied to both Federal
and non-Federal activities;
(2) Follows an appointment made in
accordance with a non-Federal entity’s
laws and/or rules or written policies
and meets the requirements of Federal
statute, where applicable; and
(3) Is determined and supported as
provided in paragraph (i) of this sec-
tion, when applicable.
(b) Reasonableness. Compensation for
employees engaged in work on Federal
awards will be considered reasonable to
the extent that it is consistent with
that paid for similar work in other ac-
tivities of the non-Federal entity. In
cases where the kinds of employees re-
quired for Federal awards are not found
in the other activities of the non-Fed-
eral entity, compensation will be con-
sidered reasonable to the extent that it
is comparable to that paid for similar
work in the labor market in which the
non-Federal entity competes for the
kind of employees involved.
(c) Professional activities outside the
non-Federal entity. Unless an arrange-
ment is specifically authorized by a
Federal awarding agency, a non-Fed-
eral entity must follow its written non-
Federal entity-wide policies and prac-
tices concerning the permissible extent
of professional services that can be pro-
vided outside the non-Federal entity
for non-organizational compensation.
Where such non-Federal entity-wide
written policies do not exist or do not
adequately define the permissible ex-
tent of consulting or other non-organi-
zational activities undertaken for
extra outside pay, the Federal Govern-
ment may require that the effort of
professional staff working on Federal
awards be allocated between:
(1) Non-Federal entity activities, and
(2) Non-organizational professional
activities. If the Federal awarding
agency considers the extent of non-or-
ganizational professional effort exces-
sive or inconsistent with the conflicts-
of-interest terms and conditions of the
Federal award, appropriate arrange-
ments governing compensation will be
negotiated on a case-by-case basis.
(d) Unallowable costs. (1) Costs which
are unallowable under other sections of
these principles must not be allowable
under this section solely on the basis
that they constitute personnel com-
pensation.
(2) The allowable compensation for
certain employees is subject to a ceil-
ing in accordance with statute. For the
amount of the ceiling for cost-reim-
bursement contracts, the covered com-
pensation subject to the ceiling, the
covered employees, and other relevant
provisions, see 10 U.S.C. 2324(e)(1)(P),
and 41 U.S.C. 1127 and 4304(a)(16). For
other types of Federal awards, other
statutory ceilings may apply.
(e) Special considerations. Special con-
siderations in determining allowability
of compensation will be given to any
change in a non-Federal entity’s com-
pensation policy resulting in a substan-
tial increase in its employees’ level of
compensation (particularly when the
change was concurrent with an in-
crease in the ratio of Federal awards to
other activities) or any change in the
treatment of allowability of specific
types of compensation due to changes
in Federal policy.
(f) Incentive compensation. Incentive
compensation to employees based on
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OMB Guidance § 200.430
cost reduction, or efficient perform-
ance, suggestion awards, safety awards,
etc., is allowable to the extent that the
overall compensation is determined to
be reasonable and such costs are paid
or accrued pursuant to an agreement
entered into in good faith between the
non-Federal entity and the employees
before the services were rendered, or
pursuant to an established plan fol-
lowed by the non-Federal entity so
consistently as to imply, in effect, an
agreement to make such payment.
(g) Nonprofit organizations. For com-
pensation to members of nonprofit or-
ganizations, trustees, directors, associ-
ates, officers, or the immediate fami-
lies thereof, determination must be
made that such compensation is rea-
sonable for the actual personal services
rendered rather than a distribution of
earnings in excess of costs. This may
include director’s and executive com-
mittee member’s fees, incentive
awards, allowances for off-site pay, in-
centive pay, location allowances, hard-
ship pay, and cost-of-living differen-
tials.
(h) Institutions of Higher Education
(IHEs). (1) Certain conditions require
special consideration and possible limi-
tations in determining allowable per-
sonnel compensation costs under Fed-
eral awards. Among such conditions
are the following:
(i) Allowable activities. Charges to
Federal awards may include reasonable
amounts for activities contributing
and directly related to work under an
agreement, such as delivering special
lectures about specific aspects of the
ongoing activity, writing reports and
articles, developing and maintaining
protocols (human, animals, etc.), man-
aging substances/chemicals, managing
and securing project-specific data, co-
ordinating research subjects, partici-
pating in appropriate seminars, con-
sulting with colleagues and graduate
students, and attending meetings and
conferences.
(ii) Incidental activities. Incidental
activities for which supplemental com-
pensation is allowable under written
institutional policy (at a rate not to
exceed institutional base salary) need
not be included in the records described
in paragraph (i) of this section to di-
rectly charge payments of incidental
activities, such activities must either
be specifically provided for in the Fed-
eral award budget or receive prior writ-
ten approval by the Federal awarding
agency.
(2) Salary basis. Charges for work per-
formed on Federal awards by faculty
members during the academic year are
allowable at the IBS rate. Except as
noted in paragraph (h)(1)(ii) of this sec-
tion, in no event will charges to Fed-
eral awards, irrespective of the basis of
computation, exceed the proportionate
share of the IBS for that period. This
principle applies to all members of fac-
ulty at an institution. IBS is defined as
the annual compensation paid by an
IHE for an individual’s appointment,
whether that individual’s time is spent
on research, instruction, administra-
tion, or other activities. IBS excludes
any income that an individual earns
outside of duties performed for the
IHE. Unless there is prior approval by
the Federal awarding agency, charges
of a faculty member’s salary to a Fed-
eral award must not exceed the propor-
tionate share of the IBS for the period
during which the faculty member
worked on the award.
(3) Intra-Institution of Higher Edu-
cation (IHE) consulting. Intra-IHE con-
sulting by faculty should be under-
taken as an IHE responsibility requir-
ing no compensation in addition to
IBS. However, in unusual cases where
consultation is across departmental
lines or involves a separate or remote
operation, and the work performed by
the faculty member is in addition to
his or her regular responsibilities, any
charges for such work representing ad-
ditional compensation above IBS are
allowable provided that such con-
sulting arrangements are specifically
provided for in the Federal award or
approved in writing by the Federal
awarding agency.
(4) Extra Service Pay normally rep-
resents overload compensation, subject
to institutional compensation policies
for services above and beyond IBS.
Where extra service pay is a result of
Intra-IHE consulting, it is subject to
the same requirements of paragraph (b)
above. It is allowable if all of the fol-
lowing conditions are met:
(i) The non-Federal entity estab-
lishes consistent written policies which
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2 CFR Ch. II (1–1–21 Edition) § 200.430
apply uniformly to all faculty mem-
bers, not just those working on Federal
awards.
(ii) The non-Federal entity estab-
lishes a consistent written definition of
work covered by IBS which is specific
enough to determine conclusively when
work beyond that level has occurred.
This may be described in appointment
letters or other documentations.
(iii) The supplementation amount
paid is commensurate with the IBS
rate of pay and the amount of addi-
tional work performed. See paragraph
(h)(2) of this section.
(iv) The salaries, as supplemented,
fall within the salary structure and
pay ranges established by and docu-
mented in writing or otherwise applica-
ble to the non-Federal entity.
(v) The total salaries charged to Fed-
eral awards including extra service pay
are subject to the Standards of Docu-
mentation as described in paragraph (i)
of this section.
(5) Periods outside the academic year.
(i) Except as specified for teaching ac-
tivity in paragraph (h)(5)(ii) of this sec-
tion, charges for work performed by
faculty members on Federal awards
during periods not included in the base
salary period will be at a rate not in
excess of the IBS.
(ii) Charges for teaching activities
performed by faculty members on Fed-
eral awards during periods not included
in IBS period will be based on the nor-
mal written policy of the IHE gov-
erning compensation to faculty mem-
bers for teaching assignments during
such periods.
(6) Part-time faculty. Charges for work
performed on Federal awards by fac-
ulty members having only part-time
appointments will be determined at a
rate not in excess of that regularly
paid for part-time assignments.
(7) Sabbatical leave costs. Rules for
sabbatical leave are as follow:
(i) Costs of leaves of absence by em-
ployees for performance of graduate
work or sabbatical study, travel, or re-
search are allowable provided the IHE
has a uniform written policy on sab-
batical leave for persons engaged in in-
struction and persons engaged in re-
search. Such costs will be allocated on
an equitable basis among all related
activities of the IHE.
(ii) Where sabbatical leave is in-
cluded in fringe benefits for which a
cost is determined for assessment as a
direct charge, the aggregate amount of
such assessments applicable to all
work of the institution during the base
period must be reasonable in relation
to the IHE’s actual experience under
its sabbatical leave policy.
(8) Salary rates for non-faculty mem-
bers. Non-faculty full-time professional
personnel may also earn ‘‘extra service
pay’’ in accordance with the non-Fed-
eral entity’s written policy and con-
sistent with paragraph (h)(1)(i) of this
section.
(i) Standards for Documentation of Per-
sonnel Expenses (1) Charges to Federal
awards for salaries and wages must be
based on records that accurately re-
flect the work performed. These
records must:
(i) Be supported by a system of inter-
nal control which provides reasonable
assurance that the charges are accu-
rate, allowable, and properly allocated;
(ii) Be incorporated into the official
records of the non-Federal entity;
(iii) Reasonably reflect the total ac-
tivity for which the employee is com-
pensated by the non-Federal entity,
not exceeding 100% of compensated ac-
tivities (for IHE, this per the IHE’s def-
inition of IBS);
(iv) Encompass federally-assisted and
all other activities compensated by the
non-Federal entity on an integrated
basis, but may include the use of sub-
sidiary records as defined in the non-
Federal entity’s written policy;
(v) Comply with the established ac-
counting policies and practices of the
non-Federal entity (See paragraph
(h)(1)(ii) above for treatment of inci-
dental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the
employee’s salary or wages among spe-
cific activities or cost objectives if the
employee works on more than one Fed-
eral award; a Federal award and non-
Federal award; an indirect cost activ-
ity and a direct cost activity; two or
more indirect activities which are allo-
cated using different allocation bases;
or an unallowable activity and a direct
or indirect cost activity.
(viii) Budget estimates (i.e., esti-
mates determined before the services
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17.A
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OMB Guidance § 200.430
are performed) alone do not qualify as
support for charges to Federal awards,
but may be used for interim accounting
purposes, provided that:
(A) The system for establishing the
estimates produces reasonable approxi-
mations of the activity actually per-
formed;
(B) Significant changes in the cor-
responding work activity (as defined by
the non-Federal entity’s written poli-
cies) are identified and entered into the
records in a timely manner. Short term
(such as one or two months) fluctua-
tion between workload categories need
not be considered as long as the dis-
tribution of salaries and wages is rea-
sonable over the longer term; and
(C) The non-Federal entity’s system
of internal controls includes processes
to review after-the-fact interim
charges made to a Federal award based
on budget estimates. All necessary ad-
justment must be made such that the
final amount charged to the Federal
award is accurate, allowable, and prop-
erly allocated.
(ix) Because practices vary as to the
activity constituting a full workload
(for IHEs, IBS), records may reflect
categories of activities expressed as a
percentage distribution of total activi-
ties.
(x) It is recognized that teaching, re-
search, service, and administration are
often inextricably intermingled in an
academic setting. When recording sala-
ries and wages charged to Federal
awards for IHEs, a precise assessment
of factors that contribute to costs is
therefore not always feasible, nor is it
expected.
(2) For records which meet the stand-
ards required in paragraph (i)(1) of this
section, the non-Federal entity will not
be required to provide additional sup-
port or documentation for the work
performed, other than that referenced
in paragraph (i)(3) of this section.
(3) In accordance with Department of
Labor regulations implementing the
Fair Labor Standards Act (FLSA) (29
CFR part 516), charges for the salaries
and wages of nonexempt employees, in
addition to the supporting documenta-
tion described in this section, must
also be supported by records indicating
the total number of hours worked each
day.
(4) Salaries and wages of employees
used in meeting cost sharing or match-
ing requirements on Federal awards
must be supported in the same manner
as salaries and wages claimed for reim-
bursement from Federal awards.
(5) For states, local governments and
Indian tribes, substitute processes or
systems for allocating salaries and
wages to Federal awards may be used
in place of or in addition to the records
described in paragraph (1) if approved
by the cognizant agency for indirect
cost. Such systems may include, but
are not limited to, random moment
sampling, ‘‘rolling’’ time studies, case
counts, or other quantifiable measures
of work performed.
(i) Substitute systems which use
sampling methods (primarily for Tem-
porary Assistance for Needy Families
(TANF), the Supplemental Nutrition
Assistance Program (SNAP), Medicaid,
and other public assistance programs)
must meet acceptable statistical sam-
pling standards including:
(A) The sampling universe must in-
clude all of the employees whose sala-
ries and wages are to be allocated
based on sample results except as pro-
vided in paragraph (i)(5)(iii) of this sec-
tion;
(B) The entire time period involved
must be covered by the sample; and
(C) The results must be statistically
valid and applied to the period being
sampled.
(ii) Allocating charges for the sam-
pled employees’ supervisors, clerical
and support staffs, based on the results
of the sampled employees, will be ac-
ceptable.
(iii) Less than full compliance with
the statistical sampling standards
noted in subsection (5)(i) may be ac-
cepted by the cognizant agency for in-
direct costs if it concludes that the
amounts to be allocated to Federal
awards will be minimal, or if it con-
cludes that the system proposed by the
non-Federal entity will result in lower
costs to Federal awards than a system
which complies with the standards.
(6) Cognizant agencies for indirect
costs are encouraged to approve alter-
native proposals based on outcomes
and milestones for program perform-
ance where these are clearly docu-
mented. Where approved by the Federal
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2 CFR Ch. II (1–1–21 Edition) § 200.431
cognizant agency for indirect costs,
these plans are acceptable as an alter-
native to the requirements of para-
graph (i)(1) of this section.
(7) For Federal awards of similar pur-
pose activity or instances of approved
blended funding, a non-Federal entity
may submit performance plans that in-
corporate funds from multiple Federal
awards and account for their combined
use based on performance-oriented
metrics, provided that such plans are
approved in advance by all involved
Federal awarding agencies. In these in-
stances, the non-Federal entity must
submit a request for waiver of the re-
quirements based on documentation
that describes the method of charging
costs, relates the charging of costs to
the specific activity that is applicable
to all fund sources, and is based on
quantifiable measures of the activity
in relation to time charged.
(8) For a non-Federal entity where
the records do not meet the standards
described in this section, the Federal
Government may require personnel ac-
tivity reports, including prescribed cer-
tifications, or equivalent documenta-
tion that support the records as re-
quired in this section.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13,
2020]
§ 200.431 Compensation—fringe bene-
fits.
(a) General. Fringe benefits are allow-
ances and services provided by employ-
ers to their employees as compensation
in addition to regular salaries and
wages. Fringe benefits include, but are
not limited to, the costs of leave (vaca-
tion, family-related, sick or military),
employee insurance, pensions, and un-
employment benefit plans. Except as
provided elsewhere in these principles,
the costs of fringe benefits are allow-
able provided that the benefits are rea-
sonable and are required by law, non-
Federal entity-employee agreement, or
an established policy of the non-Fed-
eral entity.
(b) Leave. The cost of fringe benefits
in the form of regular compensation
paid to employees during periods of au-
thorized absences from the job, such as
for annual leave, family-related leave,
sick leave, holidays, court leave, mili-
tary leave, administrative leave, and
other similar benefits, are allowable if
all of the following criteria are met:
(1) They are provided under estab-
lished written leave policies;
(2) The costs are equitably allocated
to all related activities, including Fed-
eral awards; and,
(3) The accounting basis (cash or ac-
crual) selected for costing each type of
leave is consistently followed by the
non-Federal entity or specified group-
ing of employees.
(i) When a non-Federal entity uses
the cash basis of accounting, the cost
of leave is recognized in the period that
the leave is taken and paid for. Pay-
ments for unused leave when an em-
ployee retires or terminates employ-
ment are allowable in the year of pay-
ment.
(ii) The accrual basis may be only
used for those types of leave for which
a liability as defined by GAAP exists
when the leave is earned. When a non-
Federal entity uses the accrual basis of
accounting, allowable leave costs are
the lesser of the amount accrued or
funded.
(c) Fringe benefits. The cost of fringe
benefits in the form of employer con-
tributions or expenses for social secu-
rity; employee life, health, unemploy-
ment, and worker’s compensation in-
surance (except as indicated in
§ 200.447); pension plan costs (see para-
graph (i) of this section); and other
similar benefits are allowable, provided
such benefits are granted under estab-
lished written policies. Such benefits,
must be allocated to Federal awards
and all other activities in a manner
consistent with the pattern of benefits
attributable to the individuals or
group(s) of employees whose salaries
and wages are chargeable to such Fed-
eral awards and other activities, and
charged as direct or indirect costs in
accordance with the non-Federal enti-
ty’s accounting practices.
(d) Cost objectives. Fringe benefits
may be assigned to cost objectives by
identifying specific benefits to specific
individual employees or by allocating
on the basis of entity-wide salaries and
wages of the employees receiving the
benefits. When the allocation method
is used, separate allocations must be
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made to selective groupings of employ-
ees, unless the non-Federal entity dem-
onstrates that costs in relationship to
salaries and wages do not differ signifi-
cantly for different groups of employ-
ees.
(e) Insurance. See also § 200.447(d)(1)
and (2).
(1) Provisions for a reserve under a
self-insurance program for unemploy-
ment compensation or workers’ com-
pensation are allowable to the extent
that the provisions represent reason-
able estimates of the liabilities for
such compensation, and the types of
coverage, extent of coverage, and rates
and premiums would have been allow-
able had insurance been purchased to
cover the risks. However, provisions for
self-insured liabilities which do not be-
come payable for more than one year
after the provision is made must not
exceed the present value of the liabil-
ity.
(2) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar responsi-
bility are allowable only to the extent
that the insurance represents addi-
tional compensation. The costs of such
insurance when the non-Federal entity
is named as beneficiary are unallow-
able.
(3) Actual claims paid to or on behalf
of employees or former employees for
workers’ compensation, unemployment
compensation, severance pay, and simi-
lar employee benefits ( e.g., post-retire-
ment health benefits), are allowable in
the year of payment provided that the
non-Federal entity follows a consistent
costing policy.
(f) Automobiles. That portion of auto-
mobile costs furnished by the non-Fed-
eral entity that relates to personal use
by employees (including transportation
to and from work) is unallowable as
fringe benefit or indirect (F&A) costs
regardless of whether the cost is re-
ported as taxable income to the em-
ployees.
(g) Pension plan costs. Pension plan
costs which are incurred in accordance
with the established policies of the
non-Federal entity are allowable, pro-
vided that:
(1) Such policies meet the test of rea-
sonableness.
(2) The methods of cost allocation are
not discriminatory.
(3) Except for State and Local Gov-
ernments, the cost assigned to each fis-
cal year should be determined in ac-
cordance with GAAP.
(4) The costs assigned to a given fis-
cal year are funded for all plan partici-
pants within six months after the end
of that year. However, increases to nor-
mal and past service pension costs
caused by a delay in funding the actu-
arial liability beyond 30 calendar days
after each quarter of the year to which
such costs are assignable are unallow-
able. Non-Federal entity may elect to
follow the ‘‘Cost Accounting Standard
for Composition and Measurement of
Pension Costs’’ (48 CFR 9904.412).
(5) Pension plan termination insur-
ance premiums paid pursuant to the
Employee Retirement Income Security
Act (ERISA) of 1974 (29 U.S.C. 1301–1461)
are allowable. Late payment charges
on such premiums are unallowable. Ex-
cise taxes on accumulated funding defi-
ciencies and other penalties imposed
under ERISA are unallowable.
(6) Pension plan costs may be com-
puted using a pay-as-you-go method or
an acceptable actuarial cost method in
accordance with established written
policies of the non-Federal entity.
(i) For pension plans financed on a
pay-as-you-go method, allowable costs
will be limited to those representing
actual payments to retirees or their
beneficiaries.
(ii) Pension costs calculated using an
actuarial cost-based method recognized
by GAAP are allowable for a given fis-
cal year if they are funded for that
year within six months after the end of
that year. Costs funded after the six-
month period (or a later period agreed
to by the cognizant agency for indirect
costs) are allowable in the year funded.
The cognizant agency for indirect costs
may agree to an extension of the six-
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursement and the non-Federal enti-
ty’s contribution to the pension fund.
Adjustments may be made by cash re-
fund or other equitable procedures to
compensate the Federal Government
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for the time value of Federal reim-
bursements in excess of contributions
to the pension fund.
(iii) Amounts funded by the non-Fed-
eral entity in excess of the actuarially
determined amount for a fiscal year
may be used as the non-Federal enti-
ty’s contribution in future periods.
(iv) When a non-Federal entity con-
verts to an acceptable actuarial cost
method, as defined by GAAP, and funds
pension costs in accordance with this
method, the unfunded liability at the
time of conversion is allowable if am-
ortized over a period of years in accord-
ance with GAAP.
(v) The Federal Government must re-
ceive an equitable share of any pre-
viously allowed pension costs (includ-
ing earnings thereon) which revert or
inure to the non-Federal entity in the
form of a refund, withdrawal, or other
credit.
(h) Post-retirement health. Post-retire-
ment health plans (PRHP) refers to
costs of health insurance or health
services not included in a pension plan
covered by paragraph (g) of this section
for retirees and their spouses, depend-
ents, and survivors. PRHP costs may
be computed using a pay-as-you-go
method or an acceptable actuarial cost
method in accordance with established
written policies of the non-Federal en-
tity.
(1) For PRHP financed on a pay-as-
you-go method, allowable costs will be
limited to those representing actual
payments to retirees or their bene-
ficiaries.
(2) PRHP costs calculated using an
actuarial cost method recognized by
GAAP are allowable if they are funded
for that year within six months after
the end of that year. Costs funded after
the six-month period (or a later period
agreed to by the cognizant agency) are
allowable in the year funded. The Fed-
eral cognizant agency for indirect costs
may agree to an extension of the six-
month period if an appropriate adjust-
ment is made to compensate for the
timing of the charges to the Federal
Government and related Federal reim-
bursements and the non-Federal enti-
ty’s contributions to the PRHP fund.
Adjustments may be made by cash re-
fund, reduction in current year’s PRHP
costs, or other equitable procedures to
compensate the Federal Government
for the time value of Federal reim-
bursements in excess of contributions
to the PRHP fund.
(3) Amounts funded in excess of the
actuarially determined amount for a
fiscal year may be used as the non-Fed-
eral entity contribution in a future pe-
riod.
(4) When a non-Federal entity con-
verts to an acceptable actuarial cost
method and funds PRHP costs in ac-
cordance with this method, the initial
unfunded liability attributable to prior
years is allowable if amortized over a
period of years in accordance with
GAAP, or, if no such GAAP period ex-
ists, over a period negotiated with the
cognizant agency for indirect costs.
(5) To be allowable in the current
year, the PRHP costs must be paid ei-
ther to:
(i) An insurer or other benefit pro-
vider as current year costs or pre-
miums, or
(ii) An insurer or trustee to maintain
a trust fund or reserve for the sole pur-
pose of providing post-retirement bene-
fits to retirees and other beneficiaries.
(6) The Federal Government must re-
ceive an equitable share of any
amounts of previously allowed post-re-
tirement benefit costs (including earn-
ings thereon) which revert or inure to
the non-Federal entity in the form of a
refund, withdrawal, or other credit.
(i) Severance pay. (1) Severance pay,
also commonly referred to as dismissal
wages, is a payment in addition to reg-
ular salaries and wages, by non-Federal
entities to workers whose employment
is being terminated. Costs of severance
pay are allowable only to the extent
that in each case, it is required by
(i) Law;
(ii) Employer-employee agreement;
(iii) Established policy that con-
stitutes, in effect, an implied agree-
ment on the non-Federal entity’s part;
or
(iv) Circumstances of the particular
employment.
(2) Costs of severance payments are
divided into two categories as follows:
(i) Actual normal turnover severance
payments must be allocated to all ac-
tivities; or, where the non-Federal en-
tity provides for a reserve for normal
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OMB Guidance § 200.432
severances, such method will be ac-
ceptable if the charge to current oper-
ations is reasonable in light of pay-
ments actually made for normal
severances over a representative past
period, and if amounts charged are al-
located to all activities of the non-Fed-
eral entity.
(ii) Measurement of costs of abnor-
mal or mass severance pay by means of
an accrual will not achieve equity to
both parties. Thus, accruals for this
purpose are not allowable. However,
the Federal Government recognizes its
responsibility to participate, to the ex-
tent of its fair share, in any specific
payment. Prior approval by the Fed-
eral awarding agency or cognizant
agency for indirect cost, as appro-
priate, is required.
(3) Costs incurred in certain sever-
ance pay packages which are in an
amount in excess of the normal sever-
ance pay paid by the non-Federal enti-
ty to an employee upon termination of
employment and are paid to the em-
ployee contingent upon a change in
management control over, or owner-
ship of, the non-Federal entity’s assets,
are unallowable.
(4) Severance payments to foreign na-
tionals employed by the non-Federal
entity outside the United States, to
the extent that the amount exceeds the
customary or prevailing practices for
the non-Federal entity in the United
States, are unallowable, unless they
are necessary for the performance of
Federal programs and approved by the
Federal awarding agency.
(5) Severance payments to foreign na-
tionals employed by the non-Federal
entity outside the United States due to
the termination of the foreign national
as a result of the closing of, or curtail-
ment of activities by, the non-Federal
entity in that country, are unallow-
able, unless they are necessary for the
performance of Federal programs and
approved by the Federal awarding
agency.
(j) For IHEs only. (1) Fringe benefits
in the form of undergraduate and grad-
uate tuition or remission of tuition for
individual employees are allowable,
provided such benefits are granted in
accordance with established non-Fed-
eral entity policies, and are distributed
to all non-Federal entity activities on
an equitable basis. Tuition benefits for
family members other than the em-
ployee are unallowable.
(2) Fringe benefits in the form of tui-
tion or remission of tuition for indi-
vidual employees not employed by
IHEs are limited to the tax-free
amount allowed per section 127 of the
Internal Revenue Code as amended.
(3) IHEs may offer employees tuition
waivers or tuition reductions, provided
that the benefit does not discriminate
in favor of highly compensated employ-
ees. Employees can exercise these ben-
efits at other institutions according to
institutional policy. See § 200.466, for
treatment of tuition remission pro-
vided to students.
(k) Fringe benefit programs and other
benefit costs. For IHEs whose costs are
paid by state or local governments,
fringe benefit programs (such as pen-
sion costs and FICA) and any other
benefits costs specifically incurred on
behalf of, and in direct benefit to, the
non-Federal entity, are allowable costs
of such non-Federal entities whether or
not these costs are recorded in the ac-
counting records of the non-Federal en-
tities, subject to the following:
(1) The costs meet the requirements
of Basic Considerations in §§ 200.402
through 200.411;
(2) The costs are properly supported
by approved cost allocation plans in ac-
cordance with applicable Federal cost
accounting principles; and
(3) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
[85 FR 49565, Aug. 13, 2020]
§ 200.432 Conferences.
A conference is defined as a meeting,
retreat, seminar, symposium, work-
shop or event whose primary purpose is
the dissemination of technical infor-
mation beyond the non-Federal entity
and is necessary and reasonable for
successful performance under the Fed-
eral award. Allowable conference costs
paid by the non-Federal entity as a
sponsor or host of the conference may
include rental of facilities, speakers’
fees, costs of meals and refreshments,
local transportation, and other items
incidental to such conferences unless
further restricted by the terms and
conditions of the Federal award. As
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2 CFR Ch. II (1–1–21 Edition) § 200.433
needed, the costs of identifying, but
not providing, locally available depend-
ent-care resources are allowable. Con-
ference hosts/sponsors must exercise
discretion and judgment in ensuring
that conference costs are appropriate,
necessary and managed in a manner
that minimizes costs to the Federal
award. The Federal awarding agency
may authorize exceptions where appro-
priate for programs including Indian
tribes, children, and the elderly. See
also §§ 200.438, 200.456, and 200.475.
[85 FR 49567, Aug. 13, 2020]
§ 200.433 Contingency provisions.
(a) Contingency is that part of a
budget estimate of future costs (typi-
cally of large construction projects, IT
systems, or other items as approved by
the Federal awarding agency) which is
associated with possible events or con-
ditions arising from causes the precise
outcome of which is indeterminable at
the time of estimate, and that experi-
ence shows will likely result, in aggre-
gate, in additional costs for the ap-
proved activity or project. Amounts for
major project scope changes, unfore-
seen risks, or extraordinary events
may not be included.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be ex-
plicitly included in budget estimates,
to the extent they are necessary to im-
prove the precision of those estimates.
Amounts must be estimated using
broadly-accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the Federal awarding
agency. As such, contingency amounts
are to be included in the Federal
award. In order for actual costs in-
curred to be allowable, they must com-
ply with the cost principles and other
requirements in this part (see also
§§ 200.300 and 200.403 of this part); be
necessary and reasonable for proper
and efficient accomplishment of
project or program objectives, and be
verifiable from the non-Federal enti-
ty’s records.
(c) Payments made by the Federal
awarding agency to the non-Federal
entity’s ‘‘contingency reserve’’ or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or inten-
sity, or with an assurance of their hap-
pening, are unallowable, except as
noted in §§ 200.431 and 200.447.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13,
2020]
§ 200.434 Contributions and donations.
(a) Costs of contributions and dona-
tions, including cash, property, and
services, from the non-Federal entity
to other entities, are unallowable.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be ex-
plicitly included in budget estimates,
to the extent they are necessary to im-
prove the precision of those estimates.
Amounts must be estimated using
broadly-accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the Federal awarding
agency. As such, contingency amounts
are to be included in the Federal
award. In order for actual costs in-
curred to be allowable, they must com-
ply with the cost principles and other
requirements in this part (see also
§§ 200.300 and 200.403 of this part); be
necessary and reasonable for proper
and efficient accomplishment of
project or program objectives, and be
verifiable from the non-Federal enti-
ty’s records.
(c) Payments made by the Federal
awarding agency to the non-Federal
entity’s ‘‘contingency reserve’’ or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or inten-
sity, or with an assurance of their hap-
pening, are unallowable, except as
noted in §§ 200.431 and 200.447.
(d) To the extent feasible, services
donated to the non-Federal entity will
be supported by the same methods used
to support the allocability of regular
personnel services.
(e) The following provisions apply to
nonprofit organizations. The value of
services donated to the nonprofit orga-
nization utilized in the performance of
a direct cost activity must be consid-
ered in the determination of the non-
Federal entity’s indirect cost rate(s)
and, accordingly, must be allocated a
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OMB Guidance § 200.435
proportionate share of applicable indi-
rect costs when the following cir-
cumstances exist:
(1) The aggregate value of the serv-
ices is material;
(2) The services are supported by a
significant amount of the indirect
costs incurred by the non-Federal enti-
ty;
(i) In those instances where there is
no basis for determining the fair mar-
ket value of the services rendered, the
non-Federal entity and the cognizant
agency for indirect costs must nego-
tiate an appropriate allocation of indi-
rect cost to the services.
(ii) Where donated services directly
benefit a project supported by the Fed-
eral award, the indirect costs allocated
to the services will be considered as a
part of the total costs of the project.
Such indirect costs may be reimbursed
under the Federal award or used to
meet cost sharing or matching require-
ments.
(f) Fair market value of donated
services must be computed as described
in § 200.306.
(g) Personal Property and Use of
Space.
(1) Donated personal property and
use of space may be furnished to a non-
Federal entity. The value of the per-
sonal property and space may not be
charged to the Federal award either as
a direct or indirect cost.
(2) The value of the donations may be
used to meet cost sharing or matching
share requirements under the condi-
tions described in § 200.300 of this part.
The value of the donations must be de-
termined in accordance with § 200.300.
Where donations are treated as indirect
costs, indirect cost rates will separate
the value of the donations so that re-
imbursement will not be made.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13,
2020]
§ 200.435 Defense and prosecution of
criminal and civil proceedings,
claims, appeals and patent infringe-
ments.
(a) Definitions for the purposes of this
section. (1) Conviction means a judgment
or conviction of a criminal offense by
any court of competent jurisdiction,
whether entered upon verdict or a plea,
including a conviction due to a plea of
nolo contendere.
(2) Costs include the services of in-
house or private counsel, accountants,
consultants, or others engaged to as-
sist the non-Federal entity before, dur-
ing, and after commencement of a judi-
cial or administrative proceeding, that
bear a direct relationship to the pro-
ceeding.
(3) Fraud means:
(i) Acts of fraud or corruption or at-
tempts to defraud the Federal Govern-
ment or to corrupt its agents,
(ii) Acts that constitute a cause for
debarment or suspension (as specified
in agency regulations), and
(iii) Acts which violate the False
Claims Act (31 U.S.C. 3729–3732) or the
Anti-kickback Act (41 U.S.C. 1320a–
7b(b)).
(4) Penalty does not include restitu-
tion, reimbursement, or compensatory
damages.
(5) Proceeding includes an investiga-
tion.
(b) Costs. (1) Except as otherwise de-
scribed herein, costs incurred in con-
nection with any criminal, civil or ad-
ministrative proceeding (including fil-
ing of a false certification) commenced
by the Federal Government, a state,
local government, or foreign govern-
ment, or joined by the Federal Govern-
ment (including a proceeding under the
False Claims Act), against the non-
Federal entity, (or commenced by third
parties or a current or former em-
ployee of the non-Federal entity who
submits a whistleblower complaint of
reprisal in accordance with 10 U.S.C.
2409 or 41 U.S.C. 4712), are not allowable
if the proceeding:
(i) Relates to a violation of, or failure
to comply with, a Federal, state, local
or foreign statute, regulation or the
terms and conditions of the Federal
award, by the non-Federal entity (in-
cluding its agents and employees); and
(ii) Results in any of the following
dispositions:
(A) In a criminal proceeding, a con-
viction.
(B) In a civil or administrative pro-
ceeding involving an allegation of
fraud or similar misconduct, a deter-
mination of non-Federal entity liabil-
ity.
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2 CFR Ch. II (1–1–21 Edition) § 200.435
(C) In the case of any civil or admin-
istrative proceeding, the disallowance
of costs or the imposition of a mone-
tary penalty, or an order issued by the
Federal awarding agency head or dele-
gate to the non-Federal entity to take
corrective action under 10 U.S.C. 2409
or 41 U.S.C. 4712.
(D) A final decision by an appropriate
Federal official to debar or suspend the
non-Federal entity, to rescind or void a
Federal award, or to terminate a Fed-
eral award by reason of a violation or
failure to comply with a statute, regu-
lation, or the terms and conditions of
the Federal award.
(E) A disposition by consent or com-
promise, if the action could have re-
sulted in any of the dispositions de-
scribed in paragraphs (b)(1)(ii)(A)
through (D) of this section.
(2) If more than one proceeding in-
volves the same alleged misconduct,
the costs of all such proceedings are
unallowable if any results in one of the
dispositions shown in paragraph (b) of
this section.
(c) If a proceeding referred to in para-
graph (b) of this section is commenced
by the Federal Government and is re-
solved by consent or compromise pur-
suant to an agreement by the non-Fed-
eral entity and the Federal Govern-
ment, then the costs incurred may be
allowed to the extent specifically pro-
vided in such agreement.
(d) If a proceeding referred to in para-
graph (b) of this section is commenced
by a state, local or foreign government,
the authorized Federal official may
allow the costs incurred if such author-
ized official determines that the costs
were incurred as a result of:
(1) A specific term or condition of the
Federal award, or
(2) Specific written direction of an
authorized official of the Federal
awarding agency.
(e) Costs incurred in connection with
proceedings described in paragraph (b)
of this section, which are not made un-
allowable by that subsection, may be
allowed but only to the extent that:
(1) The costs are reasonable and nec-
essary in relation to the administra-
tion of the Federal award and activi-
ties required to deal with the pro-
ceeding and the underlying cause of ac-
tion;
(2) Payment of the reasonable, nec-
essary, allocable and otherwise allow-
able costs incurred is not prohibited by
any other provision(s) of the Federal
award;
(3) The costs are not recovered from
the Federal Government or a third
party, either directly as a result of the
proceeding or otherwise; and,
(4) An authorized Federal official
must determine the percentage of costs
allowed considering the complexity of
litigation, generally accepted prin-
ciples governing the award of legal fees
in civil actions involving the United
States, and such other factors as may
be appropriate. Such percentage must
not exceed 80 percent. However, if an
agreement reached under paragraph (c)
of this section has explicitly consid-
ered this 80 percent limitation and per-
mitted a higher percentage, then the
full amount of costs resulting from
that agreement are allowable.
(f) Costs incurred by the non-Federal
entity in connection with the defense
of suits brought by its employees or ex-
employees under section 2 of the Major
Fraud Act of 1988 (18 U.S.C. 1031), in-
cluding the cost of all relief necessary
to make such employee whole, where
the non-Federal entity was found liable
or settled, are unallowable.
(g) Costs of prosecution of claims
against the Federal Government, in-
cluding appeals of final Federal agency
decisions, are unallowable.
(h) Costs of legal, accounting, and
consultant services, and related costs,
incurred in connection with patent in-
fringement litigation, are unallowable
unless otherwise provided for in the
Federal award.
(i) Costs which may be unallowable
under this section, including directly
associated costs, must be segregated
and accounted for separately. During
the pendency of any proceeding covered
by paragraphs (b) and (f) of this sec-
tion, the Federal Government must
generally withhold payment of such
costs. However, if in its best interests,
the Federal Government may provide
for conditional payment upon provision
of adequate security, or other adequate
assurance, and agreement to repay all
unallowable costs, plus interest, if the
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OMB Guidance § 200.436
costs are subsequently determined to
be unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§ 200.436 Depreciation.
(a) Depreciation is the method for al-
locating the cost of fixed assets to peri-
ods benefitting from asset use. The
non-Federal entity may be com-
pensated for the use of its buildings,
capital improvements, equipment, and
software projects capitalized in accord-
ance with GAAP, provided that they
are used, needed in the non-Federal en-
tity’s activities, and properly allocated
to Federal awards. Such compensation
must be made by computing deprecia-
tion.
(b) The allocation for depreciation
must be made in accordance with Ap-
pendices III through IX.
(c) Depreciation is computed apply-
ing the following rules. The computa-
tion of depreciation must be based on
the acquisition cost of the assets in-
volved. For an asset donated to the
non-Federal entity by a third party, its
fair market value at the time of the do-
nation must be considered as the acqui-
sition cost. Such assets may be depre-
ciated or claimed as matching but not
both. For the computation of deprecia-
tion, the acquisition cost will exclude:
(1) The cost of land;
(2) Any portion of the cost of build-
ings and equipment borne by or do-
nated by the Federal Government, irre-
spective of where title was originally
vested or where it is presently located;
(3) Any portion of the cost of build-
ings and equipment contributed by or
for the non-Federal entity that are al-
ready claimed as matching or where
law or agreement prohibits recovery;
(4) Any asset acquired solely for the
performance of a non-Federal award;
and
(d) When computing depreciation
charges, the following must be ob-
served:
(1) The period of useful service or
useful life established in each case for
usable capital assets must take into
consideration such factors as type of
construction, nature of the equipment,
technological developments in the par-
ticular area, historical data, and the
renewal and replacement policies fol-
lowed for the individual items or class-
es of assets involved.
(2) The depreciation method used to
charge the cost of an asset (or group of
assets) to accounting periods must re-
flect the pattern of consumption of the
asset during its useful life. In the ab-
sence of clear evidence indicating that
the expected consumption of the asset
will be significantly greater in the
early portions than in the later por-
tions of its useful life, the straight-line
method must be presumed to be the ap-
propriate method. Depreciation meth-
ods once used may not be changed un-
less approved in advance by the cog-
nizant agency. The depreciation meth-
ods used to calculate the depreciation
amounts for indirect (F&A) rate pur-
poses must be the same methods used
by the non-Federal entity for its finan-
cial statements.
(3) The entire building, including the
shell and all components, may be treat-
ed as a single asset and depreciated
over a single useful life. A building
may also be divided into multiple com-
ponents. Each component item may
then be depreciated over its estimated
useful life. The building components
must be grouped into three general
components of a building: building
shell (including construction and de-
sign costs), building services systems
(e.g., elevators, HVAC, plumbing sys-
tem and heating and air-conditioning
system) and fixed equipment (e.g.,
sterilizers, casework, fume hoods, cold
rooms and glassware/washers). In ex-
ceptional cases, a cognizant agency
may authorize a non-Federal entity to
use more than these three groupings.
When a non-Federal entity elects to de-
preciate its buildings by its compo-
nents, the same depreciation methods
must be used for indirect (F&A) pur-
poses and financial statements pur-
poses, as described in paragraphs (d)(1)
and (2) of this section.
(4) No depreciation may be allowed
on any assets that have outlived their
depreciable lives.
(5) Where the depreciation method is
introduced to replace the use allow-
ance method, depreciation must be
computed as if the asset had been de-
preciated over its entire life (i.e., from
the date the asset was acquired and
ready for use to the date of disposal or
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2 CFR Ch. II (1–1–21 Edition) § 200.437
withdrawal from service). The total
amount of use allowance and deprecia-
tion for an asset (including imputed de-
preciation applicable to periods prior
to the conversion from the use allow-
ance method as well as depreciation
after the conversion) may not exceed
the total acquisition cost of the asset.
(e) Charges for depreciation must be
supported by adequate property
records, and physical inventories must
be taken at least once every two years
to ensure that the assets exist and are
usable, used, and needed. Statistical
sampling techniques may be used in
taking these inventories. In addition,
adequate depreciation records showing
the amount of depreciation must be
maintained.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§ 200.437 Employee health and welfare
costs.
(a) Costs incurred in accordance with
the non-Federal entity’s documented
policies for the improvement of work-
ing conditions, employer-employee re-
lations, employee health, and employee
performance are allowable.
(b) Such costs will be equitably ap-
portioned to all activities of the non-
Federal entity. Income generated from
any of these activities will be credited
to the cost thereof unless such income
has been irrevocably sent to employee
welfare organizations.
(c) Losses resulting from operating
food services are allowable only if the
non-Federal entity’s objective is to op-
erate such services on a break-even
basis. Losses sustained because of oper-
ating objectives other than the above
are allowable only:
(1) Where the non-Federal entity can
demonstrate unusual circumstances;
and
(2) With the approval of the cog-
nizant agency for indirect costs.
§ 200.438 Entertainment costs.
Costs of entertainment, including
amusement, diversion, and social ac-
tivities and any associated costs are
unallowable, except where specific
costs that might otherwise be consid-
ered entertainment have a pro-
grammatic purpose and are authorized
either in the approved budget for the
Federal award or with prior written ap-
proval of the Federal awarding agency.
§ 200.439 Equipment and other capital
expenditures.
(a) See § 200.1 for the definitions of
capital expenditures, equipment, special
purpose equipment, general purpose
equipment, acquisition cost, and capital
assets.
(b) The following rules of allow-
ability must apply to equipment and
other capital expenditures:
(1) Capital expenditures for general
purpose equipment, buildings, and land
are unallowable as direct charges, ex-
cept with the prior written approval of
the Federal awarding agency or pass-
through entity.
(2) Capital expenditures for special
purpose equipment are allowable as di-
rect costs, provided that items with a
unit cost of $5,000 or more have the
prior written approval of the Federal
awarding agency or pass-through enti-
ty.
(3) Capital expenditures for improve-
ments to land, buildings, or equipment
which materially increase their value
or useful life are unallowable as a di-
rect cost except with the prior written
approval of the Federal awarding agen-
cy, or pass-through entity. See § 200.436,
for rules on the allowability of depre-
ciation on buildings, capital improve-
ments, and equipment. See also
§ 200.465.
(4) When approved as a direct charge
pursuant to paragraphs (b)(1) through
(3) of this section, capital expenditures
will be charged in the period in which
the expenditure is incurred, or as oth-
erwise determined appropriate and ne-
gotiated with the Federal awarding
agency.
(5) The unamortized portion of any
equipment written off as a result of a
change in capitalization levels may be
recovered by continuing to claim the
otherwise allowable depreciation on
the equipment, or by amortizing the
amount to be written off over a period
of years negotiated with the Federal
cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the
non-Federal entity is instructed by the
Federal awarding agency to otherwise
dispose of or transfer the equipment
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OMB Guidance § 200.443
the costs of such disposal or transfer
are allowable.
(7) Equipment and other capital ex-
penditures are unallowable as indirect
costs. See § 200.436.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§ 200.440 Exchange rates.
(a) Cost increases for fluctuations in
exchange rates are allowable costs sub-
ject to the availability of funding.
Prior approval of exchange rate fluc-
tuations is required only when the
change results in the need for addi-
tional Federal funding, or the in-
creased costs result in the need to sig-
nificantly reduce the scope of the
project. The Federal awarding agency
must however ensure that adequate
funds are available to cover currency
fluctuations in order to avoid a viola-
tion of the Anti-Deficiency Act.
(b) The non-Federal entity is re-
quired to make reviews of local cur-
rency gains to determine the need for
additional federal funding before the
expiration date of the Federal award.
Subsequent adjustments for currency
increases may be allowable only when
the non-Federal entity provides the
Federal awarding agency with ade-
quate source documentation from a
commonly used source in effect at the
time the expense was made, and to the
extent that sufficient Federal funds are
available.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014]
§ 200.441 Fines, penalties, damages
and other settlements.
Costs resulting from non-Federal en-
tity violations of, alleged violations of,
or failure to comply with, Federal,
state, tribal, local or foreign laws and
regulations are unallowable, except
when incurred as a result of compli-
ance with specific provisions of the
Federal award, or with prior written
approval of the Federal awarding agen-
cy. See also § 200.435.
[85 FR 49568, Aug. 13, 2020]
§ 200.442 Fund raising and investment
management costs.
(a) Costs of organized fund raising,
including financial campaigns, endow-
ment drives, solicitation of gifts and
bequests, and similar expenses incurred
to raise capital or obtain contributions
are unallowable. Fund raising costs for
the purposes of meeting the Federal
program objectives are allowable with
prior written approval from the Fed-
eral awarding agency. Proposal costs
are covered in § 200.460.
(b) Costs of investment counsel and
staff and similar expenses incurred to
enhance income from investments are
unallowable except when associated
with investments covering pension,
self-insurance, or other funds which in-
clude Federal participation allowed by
this part.
(c) Costs related to the physical cus-
tody and control of monies and securi-
ties are allowable.
(d) Both allowable and unallowable
fund-raising and investment activities
must be allocated as an appropriate
share of indirect costs under the condi-
tions described in § 200.413.
[85 FR 49568, Aug. 13, 2020]
§ 200.443 Gains and losses on disposi-
tion of depreciable assets.
(a) Gains and losses on the sale, re-
tirement, or other disposition of depre-
ciable property must be included in the
year in which they occur as credits or
charges to the asset cost grouping(s) in
which the property was included. The
amount of the gain or loss to be in-
cluded as a credit or charge to the ap-
propriate asset cost grouping(s) is the
difference between the amount realized
on the property and the undepreciated
basis of the property.
(b) Gains and losses from the disposi-
tion of depreciable property must not
be recognized as a separate credit or
charge under the following conditions:
(1) The gain or loss is processed
through a depreciation account and is
reflected in the depreciation allowable
under §§ 200.436 and 200.439.
(2) The property is given in exchange
as part of the purchase price of a simi-
lar item and the gain or loss is taken
into account in determining the depre-
ciation cost basis of the new item.
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2 CFR Ch. II (1–1–21 Edition) § 200.444
(3) A loss results from the failure to
maintain permissible insurance, except
as otherwise provided in § 200.447.
(4) Compensation for the use of the
property was provided through use al-
lowances in lieu of depreciation.
(5) Gains and losses arising from
mass or extraordinary sales, retire-
ments, or other dispositions must be
considered on a case-by-case basis.
(c) Gains or losses of any nature aris-
ing from the sale or exchange of prop-
erty other than the property covered in
paragraph (a) of this section, e.g., land,
must be excluded in computing Federal
award costs.
(d) When assets acquired with Fed-
eral funds, in part or wholly, are dis-
posed of, the distribution of the pro-
ceeds must be made in accordance with
§§ 200.310 through 200.316 of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§ 200.444 General costs of government.
(a) For states, local governments,
and Indian Tribes, the general costs of
government are unallowable (except as
provided in § 200.475). Unallowable costs
include:
(1) Salaries and expenses of the Office
of the Governor of a state or the chief
executive of a local government or the
chief executive of an Indian tribe;
(2) Salaries and other expenses of a
state legislature, tribal council, or
similar local governmental body, such
as a county supervisor, city council,
school board, etc., whether incurred for
purposes of legislation or executive di-
rection;
(3) Costs of the judicial branch of a
government;
(4) Costs of prosecutorial activities
unless treated as a direct cost to a spe-
cific program if authorized by statute
or regulation (however, this does not
preclude the allowability of other legal
activities of the Attorney General as
described in § 200.435); and
(5) Costs of other general types of
government services normally provided
to the general public, such as fire and
police, unless provided for as a direct
cost under a program statute or regula-
tion.
(b) For Indian tribes and Councils of
Governments (COGs) (see definition for
Local government in § 200.1 of this part),
up to 50% of salaries and expenses di-
rectly attributable to managing and
operating Federal programs by the
chief executive and his or her staff can
be included in the indirect cost cal-
culation without documentation.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13,
2020]
§ 200.445 Goods or services for per-
sonal use.
(a) Costs of goods or services for per-
sonal use of the non-Federal entity’s
employees are unallowable regardless
of whether the cost is reported as tax-
able income to the employees.
(b) Costs of housing (e.g., deprecia-
tion, maintenance, utilities, fur-
nishings, rent), housing allowances and
personal living expenses are only al-
lowable as direct costs regardless of
whether reported as taxable income to
the employees. In addition, to be allow-
able direct costs must be approved in
advance by a Federal awarding agency.
§ 200.446 Idle facilities and idle capac-
ity.
(a) As used in this section the fol-
lowing terms have the meanings set
forth in this section:
(1) Facilities means land and build-
ings or any portion thereof, equipment
individually or collectively, or any
other tangible capital asset, wherever
located, and whether owned or leased
by the non-Federal entity.
(2) Idle facilities means completely
unused facilities that are excess to the
non-Federal entity’s current needs.
(3) Idle capacity means the unused
capacity of partially used facilities. It
is the difference between:
(i) That which a facility could
achieve under 100 percent operating
time on a one-shift basis less operating
interruptions resulting from time lost
for repairs, setups, unsatisfactory ma-
terials, and other normal delays and;
(ii) The extent to which the facility
was actually used to meet demands
during the accounting period. A multi-
shift basis should be used if it can be
shown that this amount of usage would
normally be expected for the type of fa-
cility involved.
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OMB Guidance § 200.447
(4) Cost of idle facilities or idle ca-
pacity means costs such as mainte-
nance, repair, housing, rent, and other
related costs, e.g., insurance, interest,
and depreciation. These costs could in-
clude the costs of idle public safety
emergency facilities, telecommuni-
cations, or information technology sys-
tem capacity that is built to withstand
major fluctuations in load, e.g., con-
solidated data centers.
(b) The costs of idle facilities are un-
allowable except to the extent that:
(1) They are necessary to meet work-
load requirements which may fluctuate
and are allocated appropriately to all
benefiting programs; or
(2) Although not necessary to meet
fluctuations in workload, they were
necessary when acquired and are now
idle because of changes in program re-
quirements, efforts to achieve more ec-
onomical operations, reorganization,
termination, or other causes which
could not have been reasonably fore-
seen. Under the exception stated in
this subsection, costs of idle facilities
are allowable for a reasonable period of
time, ordinarily not to exceed one
year, depending on the initiative taken
to use, lease, or dispose of such facili-
ties.
(c) The costs of idle capacity are nor-
mal costs of doing business and are a
factor in the normal fluctuations of
usage or indirect cost rates from period
to period. Such costs are allowable,
provided that the capacity is reason-
ably anticipated to be necessary to
carry out the purpose of the Federal
award or was originally reasonable and
is not subject to reduction or elimi-
nation by use on other Federal awards,
subletting, renting, or sale, in accord-
ance with sound business, economic, or
security practices. Widespread idle ca-
pacity throughout an entire facility or
among a group of assets having sub-
stantially the same function may be
considered idle facilities.
§ 200.447 Insurance and indemnifica-
tion.
(a) Costs of insurance required or ap-
proved and maintained, pursuant to
the Federal award, are allowable.
(b) Costs of other insurance in con-
nection with the general conduct of ac-
tivities are allowable subject to the
following limitations:
(1) Types and extent and cost of cov-
erage are in accordance with the non-
Federal entity’s policy and sound busi-
ness practice.
(2) Costs of insurance or of contribu-
tions to any reserve covering the risk
of loss of, or damage to, Federal Gov-
ernment property are unallowable ex-
cept to the extent that the Federal
awarding agency has specifically re-
quired or approved such costs.
(3) Costs allowed for business inter-
ruption or other similar insurance
must exclude coverage of management
fees.
(4) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar respon-
sibilities are allowable only to the ex-
tent that the insurance represents ad-
ditional compensation (see § 200.431).
The cost of such insurance when the
non-Federal entity is identified as the
beneficiary is unallowable.
(5) Insurance against defects. Costs of
insurance with respect to any costs in-
curred to correct defects in the non-
Federal entity’s materials or work-
manship are unallowable.
(6) Medical liability (malpractice) in-
surance. Medical liability insurance is
an allowable cost of Federal research
programs only to the extent that the
Federal research programs involve
human subjects or training of partici-
pants in research techniques. Medical
liability insurance costs must be treat-
ed as a direct cost and must be as-
signed to individual projects based on
the manner in which the insurer allo-
cates the risk to the population cov-
ered by the insurance.
(c) Actual losses which could have
been covered by permissible insurance
(through a self-insurance program or
otherwise) are unallowable, unless ex-
pressly provided for in the Federal
award. However, costs incurred because
of losses not covered under nominal de-
ductible insurance coverage provided
in keeping with sound management
practice, and minor losses not covered
by insurance, such as spoilage, break-
age, and disappearance of small hand
tools, which occur in the ordinary
course of operations, are allowable.
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2 CFR Ch. II (1–1–21 Edition) § 200.448
(d) Contributions to a reserve for cer-
tain self-insurance programs including
workers’ compensation, unemployment
compensation, and severance pay are
allowable subject to the following pro-
visions:
(1) The type of coverage and the ex-
tent of coverage and the rates and pre-
miums would have been allowed had in-
surance (including reinsurance) been
purchased to cover the risks. However,
provision for known or reasonably esti-
mated self-insured liabilities, which do
not become payable for more than one
year after the provision is made, must
not exceed the discounted present
value of the liability. The rate used for
discounting the liability must be deter-
mined by giving consideration to such
factors as the non-Federal entity’s set-
tlement rate for those liabilities and
its investment rate of return.
(2) Earnings or investment income on
reserves must be credited to those re-
serves.
(3)(i) Contributions to reserves must
be based on sound actuarial principles
using historical experience and reason-
able assumptions. Reserve levels must
be analyzed and updated at least bien-
nially for each major risk being in-
sured and take into account any rein-
surance, coinsurance, etc. Reserve lev-
els related to employee-related cov-
erages will normally be limited to the
value of claims:
(A) Submitted and adjudicated but
not paid;
(B) Submitted but not adjudicated;
and
(C) Incurred but not submitted.
(ii) Reserve levels in excess of the
amounts based on the above must be
identified and justified in the cost allo-
cation plan or indirect cost rate pro-
posal.
(4) Accounting records, actuarial
studies, and cost allocations (or bil-
lings) must recognize any significant
differences due to types of insured risk
and losses generated by the various in-
sured activities or agencies of the non-
Federal entity. If individual depart-
ments or agencies of the non-Federal
entity experience significantly dif-
ferent levels of claims for a particular
risk, those differences are to be recog-
nized by the use of separate allocations
or other techniques resulting in an eq-
uitable allocation.
(5) Whenever funds are transferred
from a self-insurance reserve to other
accounts (e.g., general fund or unre-
stricted account), refunds must be
made to the Federal Government for
its share of funds transferred, including
earned or imputed interest from the
date of transfer and debt interest, if ap-
plicable, chargeable in accordance with
applicable Federal cognizant agency
for indirect cost, claims collection reg-
ulations.
(e) Insurance refunds must be cred-
ited against insurance costs in the year
the refund is received.
(f) Indemnification includes securing
the non-Federal entity against liabil-
ities to third persons and other losses
not compensated by insurance or oth-
erwise. The Federal Government is ob-
ligated to indemnify the non-Federal
entity only to the extent expressly pro-
vided for in the Federal award, except
as provided in paragraph (c) of this sec-
tion.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49568, Aug. 13, 2020]
§ 200.448 Intellectual property.
(a) Patent costs. (1) The following
costs related to securing patents and
copyrights are allowable:
(i) Costs of preparing disclosures, re-
ports, and other documents required by
the Federal award, and of searching the
art to the extent necessary to make
such disclosures;
(ii) Costs of preparing documents and
any other patent costs in connection
with the filing and prosecution of a
United States patent application where
title or royalty-free license is required
by the Federal Government to be con-
veyed to the Federal Government; and
(iii) General counseling services re-
lating to patent and copyright matters,
such as advice on patent and copyright
laws, regulations, clauses, and em-
ployee intellectual property agree-
ments (See also § 200.459).
(2) The following costs related to se-
curing patents and copyrights are unal-
lowable:
(i) Costs of preparing disclosures, re-
ports, and other documents, and of
searching the art to make disclosures
not required by the Federal award;
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OMB Guidance § 200.449
(ii) Costs in connection with filing
and prosecuting any foreign patent ap-
plication, or any United States patent
application, where the Federal award
does not require conveying title or a
royalty-free license to the Federal
Government.
(b) Royalties and other costs for use of
patents and copyrights. (1) Royalties on
a patent or copyright or amortization
of the cost of acquiring by purchase a
copyright, patent, or rights thereto,
necessary for the proper performance
of the Federal award are allowable un-
less:
(i) The Federal Government already
has a license or the right to free use of
the patent or copyright.
(ii) The patent or copyright has been
adjudicated to be invalid, or has been
administratively determined to be in-
valid.
(iii) The patent or copyright is con-
sidered to be unenforceable.
(iv) The patent or copyright is ex-
pired.
(2) Special care should be exercised in
determining reasonableness where the
royalties may have been arrived at as a
result of less-than-arm’s-length bar-
gaining, such as:
(i) Royalties paid to persons, includ-
ing corporations, affiliated with the
non-Federal entity.
(ii) Royalties paid to unaffiliated
parties, including corporations, under
an agreement entered into in con-
templation that a Federal award would
be made.
(iii) Royalties paid under an agree-
ment entered into after a Federal
award is made to a non-Federal entity.
(3) In any case involving a patent or
copyright formerly owned by the non-
Federal entity, the amount of royalty
allowed must not exceed the cost which
would have been allowed had the non-
Federal entity retained title thereto.
[78 FR 78608, Dec. 26, 2013, as amended at 79
FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13,
2020]
§ 200.449 Interest.
(a) General. Costs incurred for inter-
est on borrowed capital, temporary use
of endowment funds, or the use of the
non-Federal entity’s own funds, how-
ever represented, are unallowable. Fi-
nancing costs (including interest) to
acquire, construct, or replace capital
assets are allowable, subject to the
conditions in this section.
(b) Capital assets. (1) Capital assets is
defined as noted in § 200.1 of this part.
An asset cost includes (as applicable)
acquisition costs, construction costs,
and other costs capitalized in accord-
ance with GAAP.
(2) For non-Federal entity fiscal
years beginning on or after January 1,
2016, intangible assets include patents
and computer software. For software
development projects, only interest at-
tributable to the portion of the project
costs capitalized in accordance with
GAAP is allowable.
(c) Conditions for all non-Federal enti-
ties. (1) The non-Federal entity uses the
capital assets in support of Federal
awards;
(2) The allowable asset costs to ac-
quire facilities and equipment are lim-
ited to a fair market value available to
the non-Federal entity from an unre-
lated (arm’s length) third party.
(3) The non-Federal entity obtains
the financing via an arm’s-length
transaction (that is, a transaction with
an unrelated third party); or claims re-
imbursement of actual interest cost at
a rate available via such a transaction.
(4) The non-Federal entity limits
claims for Federal reimbursement of
interest costs to the least expensive al-
ternative. For example, a lease con-
tract that transfers ownership by the
end of the contract may be determined
less costly than purchasing through
other types of debt financing, in which
case reimbursement must be limited to
the amount of interest determined if
leasing had been used.
(5) The non-Federal entity expenses
or capitalizes allowable interest cost in
accordance with GAAP.
(6) Earnings generated by the invest-
ment of borrowed funds pending their
disbursement for the asset costs are
used to offset the current period’s al-
lowable interest cost, whether that
cost is expensed or capitalized. Earn-
ings subject to being reported to the
Federal Internal Revenue Service
under arbitrage requirements are ex-
cludable.
(7) The following conditions must
apply to debt arrangements over $1
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184
2 CFR Ch. II (1–1–21 Edition) § 200.450
million to purchase or construct facili-
ties, unless the non-Federal entity
makes an initial equity contribution to
the purchase of 25 percent or more. For
this purpose, ‘‘initial equity contribu-
tion’’ means the amount or value of
contributions made by the non-Federal
entity for the acquisition of facilities
prior to occupancy.
(i) The non-Federal entity must re-
duce claims for reimbursement of in-
terest cost by an amount equal to im-
puted interest earnings on excess cash
flow attributable to the portion of the
facility used for Federal awards.
(ii) The non-Federal entity must im-
pute interest on excess cash flow as fol-
lows:
(A) Annually, the non-Federal entity
must prepare a cumulative (from the
inception of the project) report of
monthly cash inflows and outflows, re-
gardless of the funding source. For this
purpose, inflows consist of Federal re-
imbursement for depreciation, amorti-
zation of capitalized construction in-
terest, and annual interest cost. Out-
flows consist of initial equity contribu-
tions, debt principal payments (less the
pro-rata share attributable to the cost
of land), and interest payments.
(B) To compute monthly cash inflows
and outflows, the non-Federal entity
must divide the annual amounts deter-
mined in step (i) by the number of
months in the year (usually 12) that
the building is in service.
(C) For any month in which cumu-
lative cash inflows exceed cumulative
outflows, interest must be calculated
on the excess inflows for that month
and be treated as a reduction to allow-
able interest cost. The rate of interest
to be used must be the three-month
Treasury bill closing rate as of the last
business day of that month.
(8) Interest attributable to a fully de-
preciated asset is unallowable.
(d) Additional conditions for states,
local governments and Indian tribes.
For costs to be allowable, the non-Fed-
eral entity must have incurred the in-
terest costs for buildings after October
1, 1980, or for land and equipment after
September 1, 1995.
(1) The requirement to offset interest
earned on borrowed funds against cur-
rent allowable interest cost (paragraph
(c)(5), above) also applies to earnings
on debt service reserve funds.
(2) The non-Federal entity will nego-
tiate the amount of allowable interest
cost related to the acquisition of facili-
ties with asset costs of $1 million or
more, as outlined in paragraph (c)(7) of
this section. For this purpose, a non-
Federal entity must consider only cash
inflows and outflows attributable to
that portion of the real property used
for Federal awards.
(e) Additional conditions for IHEs.
For costs to be allowable, the IHE
must have incurred the interest costs
after July 1, 1982, in connection with
acquisitions of capital assets that oc-
curred after that date.
(f) Additional condition for nonprofit
organizations. For costs to be allow-
able, the nonprofit organization in-
curred the interest costs after Sep-
tember 29, 1995, in connection with ac-
quisitions of capital assets that oc-
curred after that date.
(g) The interest allowability provi-
sions of this section do not apply to a
nonprofit organization subject to ‘‘full
coverage’’ under the Cost Accounting
Standards (CAS), as defined at 48 CFR
9903.201–2(a). The non-Federal entity’s
Federal awards are instead subject to
CAS 414 (48 CFR 9904.414), ‘‘Cost of
Money as an Element of the Cost of Fa-
cilities Capital’’, and CAS 417 (48 CFR
9904.417), ‘‘Cost of Money as an Element
of the Cost of Capital Assets Under
Construction’’.
[78 FR 78608, Dec. 26, 2013, as amended at 80
FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13,
2020]
§ 200.450 Lobbying.
(a) The cost of certain influencing ac-
tivities associated with obtaining
grants, contracts, or cooperative agree-
ments, or loans is an unallowable cost.
Lobbying with respect to certain
grants, contracts, cooperative agree-
ments, and loans is governed by rel-
evant statutes, including among oth-
ers, the provisions of 31 U.S.C. 1352, as
well as the common rule, ‘‘New Re-
strictions on Lobbying’’ published on
February 26, 1990, including definitions,
and the Office of Management and
Budget ‘‘Governmentwide Guidance for
New Restrictions on Lobbying’’ and no-
tices published on December 20, 1989,
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17.A
185
OMB Guidance § 200.450
June 15, 1990, January 15, 1992, and Jan-
uary 19, 1996.
(b) Executive lobbying costs. Costs in-
curred in attempting to improperly in-
fluence either directly or indirectly, an
employee or officer of the executive
branch of the Federal Government to
give consideration or to act regarding a
Federal award or a regulatory matter
are unallowable. Improper influence
means any influence that induces or
tends to induce a Federal employee or
officer to give consideration or to act
regarding a Federal award or regu-
latory matter on any basis other than
the merits of the matter.
(c) In addition to the above, the fol-
lowing restrictions are applicable to
nonprofit organizations and IHEs:
(1) Costs associated with the fol-
lowing activities are unallowable:
(i) Attempts to influence the out-
comes of any Federal, state, or local
election, referendum, initiative, or
similar procedure, through in-kind or
cash contributions, endorsements, pub-
licity, or similar activity;
(ii) Establishing, administering, con-
tributing to, or paying the expenses of
a political party, campaign, political
action committee, or other organiza-
tion established for the purpose of in-
fluencing the outcomes of elections in
the United States;
(iii) Any attempt to influence:
(A) The introduction of Federal or
state legislation;
(B) The enactment or modification of
any pending Federal or state legisla-
tion through communication with any
member or employee of the Congress or
state legislature (including efforts to
influence state or local officials to en-
gage in similar lobbying activity);
(C) The enactment or modification of
any pending Federal or state legisla-
tion by preparing, distributing, or
using publicity or propaganda, or by
urging members of the general public,
or any segment thereof, to contribute
to or participate in any mass dem-
onstration, march, rally, fund raising
drive, lobbying campaign or letter
writing or telephone campaign; or
(D) Any government official or em-
ployee in connection with a decision to
sign or veto enrolled legislation;
(iv) Legislative liaison activities, in-
cluding attendance at legislative ses-
sions or committee hearings, gathering
information regarding legislation, and
analyzing the effect of legislation,
when such activities are carried on in
support of or in knowing preparation
for an effort to engage in unallowable
lobbying.
(2) The following activities are ex-
cepted from the coverage of paragraph
(c)(1) of this section:
(i) Technical and factual presen-
tations on topics directly related to
the performance of a grant, contract,
or other agreement (through hearing
testimony, statements, or letters to
the Congress or a state legislature, or
subdivision, member, or cognizant staff
member thereof), in response to a docu-
mented request (including a Congres-
sional Record notice requesting testi-
mony or statements for the record at a
regularly scheduled hearing) made by
the non-Federal entity’s member of
congress, legislative body or a subdivi-
sion, or a cognizant staff member
thereof, provided such information is
readily obtainable and can be readily
put in deliverable form, and further
provided that costs under this section
for travel, lodging or meals are unal-
lowable unless incurred to offer testi-
mony at a regularly scheduled Congres-
sional hearing pursuant to a written
request for such presentation made by
the Chairman or Ranking Minority
Member of the Committee or Sub-
committee conducting such hearings;
(ii) Any lobbying made unallowable
by paragraph (c)(1)(iii) of this section
to influence state legislation in order
to directly reduce the cost, or to avoid
material impairment of the non-Fed-
eral entity’s authority to perform the
grant, contract, or other agreement; or
(iii) Any activity specifically author-
ized by statute to be undertaken with
funds from the Federal award.
(iv) Any activity excepted from the
definitions of ‘‘lobbying’’ or ‘‘influ-
encing legislation’’ by the Internal
Revenue Code provisions that require
nonprofit organizations to limit their
participation in direct and ‘‘grass
roots’’ lobbying activities in order to
retain their charitable deduction sta-
tus and avoid punitive excise taxes,
I.R.C. §§ 501(c)(3), 501(h), 4911(a), includ-
ing:
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186
2 CFR Ch. II (1–1–21 Edition) § 200.451
(A) Nonpartisan analysis, study, or
research reports;
(B) Examinations and discussions of
broad social, economic, and similar
problems; and
(C) Information provided upon re-
quest by a legislator for technical ad-
vice and assistance, as defined by I.R.C.
§ 4911(d)(2) and 26 CFR 56.4911–2(c)(1)–
(c)(3).
(v) When a non-Federal entity seeks
reimbursement for indirect (F&A)
costs, total lobbying costs must be sep-
arately identified in the indirect (F&A)
cost rate proposal, and thereafter
treated as other unallowable activity
costs in accordance with the proce-
dures of § 200.413.
(vi) The non-Federal entity must sub-
mit as part of its annual indirect
(F&A) cost rate proposal a certification
that the requirements and standards of
this section have been complied with.
(See also § 200.415.)
(vii)(A) Time logs, calendars, or simi-
lar records are not required to be cre-
ated for purposes of complying with
the record keeping requirements in
§ 200.302 with respect to lobbying costs
during any particular calendar month
when:
(1) The employee engages in lobbying
(as defined in paragraphs (c)(1) and
(c)(2) of this section) 25 percent or less
of the employee’s compensated hours of
employment during that calendar
month; and
(2) Within the preceding five-year pe-
riod, the non-Federal entity has not
materially misstated allowable or un-
allowable costs of any nature, includ-
ing legislative lobbying costs.
(B) When conditions in paragraph
(c)(2)(vii)(A)(1) and ( 2) of this section
are met, non-Federal entities are not
required to establish records to support
the allowability of claimed costs in ad-
dition to records already required or
maintained. Also, when conditions in
paragraphs (c)(2)(vii)(A)( 1) and ( 2) of
this section are met, the absence of
time logs, calendars, or similar records
will not serve as a basis for disallowing
costs by contesting estimates of lob-
bying time spent by employees during
a calendar month.
(viii) The Federal awarding agency
must establish procedures for resolving
in advance, in consultation with OMB,
any significant questions or disagree-
ments concerning the interpretation or
application of this section. Any such
advance resolutions must be binding in
any subsequent settlements, audits, or
investigations with respect to that
grant or contract for purposes of inter-
pretation of this part, provided, how-
ever, that this must not be construed
to prevent a contractor or non-Federal
entity from contesting the lawfulness
of such a determination.
[78 FR 78608, Dec. 26, 2013, as amended at 85
FR 49569, Aug. 13, 2020]
§ 200.451 Losses on other awards or
contracts.
Any excess of costs over income
under any other award or contract of
any nature is unallowable. This in-
cludes, but is not limited to, the non-
Federal entity’s contributed portion by
reason of cost-sharing agreements or
any under-recoveries through negotia-
tion of flat amounts for indirect (F&A)
costs. Also, any excess of costs over au-
thorized funding levels transferred
from any award or contract to another
award or contract is unallowable. All
losses are not allowable indirect (F&A)
costs and are required to be included in
the appropriate indirect cost rate base
for allocation of indirect costs.
§ 200.452 Maintenance and repair
costs.
Costs incurred for utilities, insur-
ance, security, necessary maintenance,
janitorial services, repair, or upkeep of
buildings and equipment (including
Federal property unless otherwise pro-
vided for) which neither add to the per-
manent value of the property nor ap-
preciably prolong its intended life, but
keep it in an efficient operating condi-
tion, are allowable. Costs incurred for
improvements which add to the perma-
nent value of the buildings and equip-
ment or appreciably prolong their in-
tended life must be treated as capital
expenditures (see § 200.439). These costs
are only allowable to the extent not
paid through rental or other agree-
ments.
[85 FR 49569, Aug. 13, 2020]
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17.A